What I Have Learned In 22 Years Of Working With Physicians



By Jeffrey J. Brown, MD, MBA, CFA®, CFP®


When people think of well-compensated occupations, being a physician is usually one that comes to mind. Combine that with the opportunity to save lives and have a positive influence on the world, and it is not surprising that many bright young people choose a career in medicine.


While a career in medicine offers many rewards, there are also some financial challenges that most physicians face.


The Doctors’ Disadvantage

Medical school graduates have more educational debt, on average, than other graduate students, including law school and business school graduates. According to AAMC, the average educational debt burden for medical school graduates was $207,003 (1) in 2020. That much debt is definitely going to eat away at the resources available for investing in retirement.


Another (arguably greater) hurdle is that physicians typically do not finish their residency and fellowship training until their late 20s or early 30s, and therefore have a shorter time window during which to save for retirement than the typical American worker. This makes it more difficult to harness the power of compound interest over time, which is critical to growing a retirement nest egg.


Financial Priorities

One way to get a jump start on your retirement savings is to “live like a resident.” This means living frugally while you are in residency and then continuing to live frugally for a few years after finishing your training to pay down debt and save for a house down payment.


Another useful concept is the idea of “paying yourself first.” This involves making your investment account contribution the first “bill” you pay each month rather than the last. This helps to emphasize the importance of saving and investing and ensures that you are building your nest egg steadily over time.


Another useful strategy for physicians is to contribute to three different “buckets” of money for retirement savings: 1) traditional retirement accounts (401(k), 403(b), IRA); 2) Roth accounts; and 3) taxable accounts. Having all three buckets helps to diversify your future tax liabilities and hopefully minimize your taxes during retirement.


We also recommend using retirement planning software models, such as Monte Carlo analysis, to periodically monitor your retirement savings trajectory and make any needed course corrections to help ensure a comfortable retirement.


Dodging Dangers

Avoiding financial mistakes is also important in planning a successful retirement savings road map. Here are some of the more common financial pitfalls to avoid:

  • Job hopping. The grass may look greener, but there are frictional costs to changing jobs, not to mention that you can lose the employer-matching funds in your 401(k) or 403(b) account if you switch jobs before becoming fully vested.

  • Real estate mistakes. The real estate market is hot now, but committing too much of your financial resources to real estate, whether a primary residence, vacation home, or rental property, can wreak havoc in a future downturn.

  • Investing in your cousin Sal’s new tech business. Angel investing, venture capital, and private equity are enticing and exciting; however, it is difficult to achieve adequate diversification, there is no liquidity, and the likelihood of success tends to be low for a single investment.

  • Failure to save. This may be the most common pitfall of all. Getting in the savings habit is critical to retirement planning success. Slow and steady wins the race.

Call In The Cavalry

If you are a physician or physician-in-training looking for help with investing or comprehensive financial planning, Shearwater Capital, LLC specializes in working with physicians.


Schedule an introductory phone call online or contact us today at (314) 434-4750 or contact@shearwatercapital.com to get started.


About Jeff

Jeffrey Brown is principal and chief investment officer at Shearwater Capital, LLC, a fee-only fiduciary financial advisory firm helping physicians and their families attain financial security using a scientific, evidence-based approach. Jeff has been a practicing radiologist for over 30 years and is currently chair of the Department of Radiology at Saint Louis University School of Medicine. He earned his bachelor’s degree from the University of California, Irvine, and his medical degree from the University of California, San Diego. He has been named one of St. Louis’s Top Doctors every year since 2011 in St. Louis Magazine. Jeff saw a need for physician-tailored financial services and earned an MBA from Washington University in St. Louis, going on to found Shearwater Capital, LLC with fellow MBA classmate and radiologist, Eric Malden. Jeff is a Chartered Financial Analyst (CFA®) and CERTIFIED FINANCIAL PLANNER® (CFP®) practitioner. Learn more about Jeff by connecting with him on LinkedIn.

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(1) https://store.aamc.org/downloadable/download/sample/sample_id/374/

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