By Dr. James M. Dahle, WCI Founder
One of the more interesting surveys out there for physicians interested in personal finance is the annual Medscape Physician Net Worth and Debt Survey. Now I can't promise that this survey is scientifically and statistically rigorous, but it's about all that is out there on this topic.
One of the questions they always ask is “What is your Net Worth?” Many focus on physician salary, but net worth is the most important measuring tool in personal finance. Net worth is “everything you own minus everything you owe.” On the asset side, you count your bank accounts, your investments, your retirement accounts, your home, your cars, your practice, and your stuff. On the liability side, you count all of your debts like student loans, credit cards, auto loans, practice loans, and mortgages.
Total it all up and that's your net worth. I think it's a good idea to calculate your net worth once a year and compare it to where you were at last year and to your financial goals. (Remember personal finance and investing is an individual sport, where you play against your own goals and not each other.)
How Many Doctors Are Millionaires?
A millionaire is somebody with a net worth of $1 Million, not an income of $1 Million. It's important to know the difference. The Medscape survey tells us how many doctors are millionaires. Take a look:
51% of doctors are millionaires. That's good, I guess. I mean, residents are doctors but you don't expect any of them to be millionaires, right? So of course, not all doctors are going to be millionaires.
Doctor Net Worth by Age
The data gets really interesting when you start dividing up the doctors by age. Here is the 2019 data:
I actually prefer the way they used to display the answer to this question, so here's the data from 2016:
The data is similar, they just used to include a < $500K category that I find interesting. The most impressive data from this chart in my opinion is from doctors in their 60s. 1/4 of them aren't millionaires and 11-12% of them aren't even worth $500K. Remember that includes their house, bank accounts, cars, stuff, investments….everything. That's a serious tragedy to presumably earn 20-30 years of physician-level paychecks and have less than $500K to show for it. But today, let's go through every age category and discuss the physician millionaires.
Under Age 28
I never really understood these docs. I mean, I started residency at 28. How is it that 4% of doctors are already millionaires at that age? I can only think of two explanations. First, they received a serious inheritance or second, they are married to an older, much wealthier doc. Most docs in this category have (and should have) a negative net worth! The 2019 data is particularly weird in this group. 4% of docs have $5M+ but none have $1M+? Sounds like a few jokesters responding to the survey to me.
Most doctors spent at least part of this period in training, and maybe all of it. If you were a non-traditional student, you might not have been out of training by 34. Certainly, I would not expect to see very many physician millionaires in this category, at least among those who earned the money to become so themselves. And that's what the data shows. 8% in one survey and 4% in the other. Not too much to say here, but I am encouraged by the 2016 data that shows that 16% of docs have a net worth of at least $500K.
Here is a category that is near and dear to my heart, since I was 38 and Katie was 35 when we became millionaires 7 years out of residency. We're still pretty unusual in that respect, but at least we have company, about 16-17% of you. By this time 39% of doctors are worth at least $500K.
Here is the category we are in now. Let's be honest. It would be VERY hard for a physician to be worth $5M at this age based solely on their physician earnings. Even a doctor who came out of residency at 30, made $500K/year, saved 40% of it every year, and earned 8%/year on it would only have a nest egg of $4.8M at age 44. Not very many docs doing that, so even with home equity and “stuff”, there just aren't very many worth $5M+. Most of those in this category are probably successful entrepreneurs of some sort. However, lots of doctors are becoming millionaires by this age, 30-36%. A majority (57%) now have a net worth of $500K.
Still only 2% in the $5M+ category here, but lots and lots of millionaires, 44-50%. 70% are worth at least $500K and 17% are now multimillionaires.
This is the first age at which you start seeing significant numbers of early retirees. I mean, there might be a few in their 40s like The Physician on FIRE, but most docs who stop working before 50 are becoming stay at home parents or changing careers, not really stopping work altogether. You can see why 50+ is such a significant age. Now the majority of doctors, 55-61% are millionaires. I love the fact that the more recent data looks so much better. That's a 6% increase in just 3 years. How much of that is due to inflation versus nice market returns versus higher salaries versus increased financial literacy? I don't know, but I'm personally taking credit for 1% of it! If you're not already worth $500K by the time you're 54, you are behind your colleagues. Over 3/4 of your peers are wealthier than you are.
Lots of doctors retiring at this age. It's still an early retirement technically, but not unusually early. 84% are worth > $500K, 65-71% are millionaires, 36% are multimillionaires, and 8-11% are worth $5M+.
Now we're getting into the traditional retirement years. I think it's safe to assume that many doctors are retiring with the net worths displayed in this age group. 88% have $500K+, 72-75% are millionaires, 43% are multimillionaires, and 11% have $5M+. That last number hasn't budged in the last 3 years, which is kind of a bummer.
Here is the last half of the 60s and this period includes the current average physician retirement age of 65 (it's 63 for Americans in general). Presumably, some of the people in this category have already been retired for 1-15 years at this point, so maybe it isn't a huge surprise that the numbers aren't really different from those in their early 60s. 89% with $500K, 74-75% (actually dropping from 2016 to 2019) millionaires, 48% multimillionaires, and 14-15% with $5M+.
I find this data depressing. I mean, this number is not just their nest egg, it includes EVERYTHING, especially their house. The average doctor these days is making $275K and the vast majority are making at least $150K. But if you assume these doctors have $500K-$1M tied up in their house and stuff, 1/4 of doctors are basically retiring on just Social Security and (using the 4% rule) a majority are likely retiring on less than $80K in income in addition to Social Security.
Now I'm not saying you can't have a comfortable retirement on $100K or so a year, but it seems a shame to me given what most docs should have. I mean, if you assume a doc comes out of training and starts saving at 35 and works to age 65 and saves $50K/year at 8%, they should have $5.7M by retirement in addition to their house and stuff. Multiply by 4% and add in $40K in Social Security and that's $268K gross. Even if you make a few bad decisions along the way and only end up with half that nest egg, you should still have a retirement income of $154K. Lots of work still to do here. I guess I can't quit blogging yet.
The rich get richer and the poor get poorer. If you had lots of assets in your 60s, you likely have more now. If you had fewer assets in your 60s, you likely have less now because you're spending them faster than they're growing. That's not necessarily bad (none of us live forever) but it is an interesting bit of data. The greater than $5M crew goes up from 17-22%, but the less than $1 Million crew also goes up slightly.
I think the biggest lesson to learn from all this is that the process of becoming wealthy is not automatic, even for high earners. While very few of us went to medical school to try to get rich, it would be dishonest if we didn't say that most of us still expected it to happen thanks to our high income. But some of us never build significant wealth. Sometimes this is due to tragedy, but certainly not the 25+ percent of time that it happens.
Lots of that tragedy, at least the financial tragedy, can be prevented, anyway, with things like disability and life insurance. More likely the story behind all these non-millionaire physician retirees involves spending too much, lack of investment discipline, lack of any sort of coherent financial plan, and maybe a divorce or two. Make plans now to ensure you're not in that category when you retire.
What do you think? Why do you think 11-12% of doctors in their 60s are not worth $500K and 1/4 of them aren't millionaires? What can be done to help our peers build a secure retirement? Comment below!