By Dr. Jim Dahle, WCI Founder
Internal medicine physicians have a reputation in the House of Medicine for being very smart. Unfortunately, that doesn't mean they are any better at managing finances than the rest of us.
The American College of Physicians (ACP) came out with a survey of its membership, and it contains a lot of interesting data. Just so you're aware, there is a thinly veiled conflict of interest behind the survey, but it's relatively easy to see it and look past it.
The data in the survey still provides some important learning points. Let's go through some of it and analyze what it means.
Too Many Residents Don't Have Disability Insurance
Let's start with this point from the resident/fellow section of the survey.
This is not a complicated matter. If you have disability insurance, you're prepared. Maybe you wish you could afford a little more so you have to check “prepared” and not “very prepared,” but it's about as black and white as personal finance gets. What this data tells me is that at least 71% of resident physicians don't have disability insurance. Disability insurance is important for you, but it is also important for those who depend on you, especially since 47% of these surveyed residents are married and 17% have children. Do you think maybe you have some responsibility to them? Go buy disability insurance today.
More information here:
A Pain in the Butt – My Dental Disability Story
The Student Loan Situation Is Barbell-Shaped and Getting Worse
The percentage of doctors graduating from medical school debt-free has actually been increasing for years. In this survey of internist residents and fellows, it was 34%. Almost 50% owe less than $50,000. However, the percentage of doctors with massive amounts of student loans is also rapidly increasing, forming a “barbell” when you look at the charts.
At the lower end, I think Internal Medicine looks better than most specialties because there is such a high proportion of foreign medical graduates in the field who often do not have student loans at all, thanks to inexpensive and government-subsidized medical schools. I don't think a lot of US grads understand that many of their peers don't owe the $300,000-$400,000+ that they owe for their medical education. It might be common, and it might be the only way for you to become a doctor. But it's not normal, and you will need to take some extreme measures to get rid of it.
Retirees Are Mostly Fine
The annual Medscape survey has shown that 25% of doctors in their 60s are not millionaires. However, when you actually survey physician retirees, like this survey did, that number drops to just 9%.
Presumably, those who aren't millionaires in their 60s aren't retired. I view that as good news. In fact, 53% of internist retirees have at least $3 million just in retirement savings. Want the bad news? Here it is.
These three charts are for early-career, mid-career, and late-career doctors. This is clearly not the FIRE crowd. Only 0%-17% plan to retire before 60. Even among the millennials, the majority are expecting to work beyond age 65. Yes, these internists do eventually have enough money to retire comfortably but only because they have 40-year careers. When you look at it that way, a mere $5 million is kind of pathetic. How much do you have to invest each year for 40 years to retire with $5 million if you average 8% returns? The answer: $19,300. That's less than 10% of an internist's salary these days. My interpretation of this data? Too many internists are still broke at mid-career, and they HAVE to work until they are 70+.
More information here:
How Much Money Do Doctors Make a Year? The Average Salary Is Dropping
Intraspecialty Income Variation Dwarfs Interspecialty Income Variation
I say this all the time, but it's true and the data bears it out repeatedly. Here is what internists are making:
This shows that 6%-14% make less than $150,000, and 11%-17% make more than $500,000. That's a huge variation. Some internists are getting paid more than three times as much as others. To be fair, there are some subspecialists in this survey who are maintaining their ACP membership, but I don't think that explains much of this variation.
Know your worth. The harder you work and the better you negotiate, the more income you will have. It's dramatically easier to become financially successful with an income of $400,000 than an income of $200,000, especially if you're digging out from under a pile of student loans.
Doctors Are Dumb About Debt
People argue with me all the time when I talk to them about consumer debt. They think their car loan is making them rich or that any car without a lane departure warning system is a death trap. It's amazing how well people can justify debt, so I guess it's no surprise that they have so much of it.
Yup, that's right—21%-44% of internists have car loans. Remember, this doesn't count the ones that are leasing. Those late-career docs are, on average, about 60 years old. So, they've been making a physician-level income for three decades at this point, and they still can't buy a car with cash. Heck, 23%-29% of them are carrying balances on a credit card. Newsflash! Credit cards aren't for credit.
I understand why 71% of early-career doctors have a mortgage. But at what point were you going to pay that off? Instead of paying off their mortgages, doctors are using them as ATMs with HELOCs and cash-out refinances. Just because other Americans are using car loans and HELOCs doesn't mean that you should. You're making $15,000-$60,000 a month. How long does it really take to save up for a car, even a brand-new one? Buy a brand new $60,000 car every four years, trading in the old one for $40,000. You should be capable of saving up for the $20,000 difference in, what, 1-3 months? Have a little patience.
More information here:
Should You Pay Off Debt or Invest?
Doctors Are Dumb About Insurance
The insurance picture doesn't look much better than the debt picture.
A smart insurance philosophy involves insuring against financial catastrophe, but since insurance is (on average) a losing proposition, you shouldn't buy it against trivial risks that you can self-insure against. I don't know how many of those early-career docs have someone else depending on their income, but I bet it's more than 77%. So, why don't more of them have some cheap term life insurance in place?
Only 70%-79% have malpractice insurance? Seriously? Thirty-two percent of internists have been sued. 32% × 30% = 9.6% of early-career internists will be involved in a lawsuit without malpractice insurance coverage. That's nuts to not have that coverage. It isn't even that expensive for internists.
Meanwhile, only 52%-79% have disability coverage. That's probably fine for lots of those late-career docs, but only 75% of early-career docs? The only good news there is that a whole bunch of docs bought disability insurance after they got out of residency.Only 32%-65% of doctors have umbrella insurance coverage. So, you drive an $80,000 car but think $50,000 of auto liability coverage is adequate, huh? Seem like a bit of a disconnect.
Now that we've talked about the essential types of insurance, let's talk about the dumb types, like accidental death and dismemberment insurance. Between 22%-32% of doctors have been sold this coverage despite the fact that regular life and regular disability insurance takes care of all that. It's like cancer insurance. You know your life insurance, disability, and health insurance policies all cover cancer, right? It's not like it's an excluded condition or something. People treat it like it's flood or earthquake insurance that isn't covered by your homeowner's coverage.
How about long-term care insurance? This survey shows that 29% of late-career docs have less than $2 million. Thirty percent of them having long-term care insurance actually seems about right to me, but I just wonder if it's the right 30%. I suspect it isn't. I bet the ones who don't need it are buying it, and those who do need it aren't buying it.
Compare Yourself!
Everyone likes to secretly compare themselves to others. Well, I might as well include those charts so you can.
Early-career (0-16 years in practice; 30s and 40s)
Mid-career (17-30 years in practice; 40s, 50s, 60s)
Late-career (31+ years in practice; 60s, 70s, 80s)
Nope. They didn't publish this chart. Not sure why not. See the retiree chart above, I guess. But if you've got more than $2 million-$3 million by mid- to late-career, you're clearly ahead.
If You Feel Behind, You're Not Alone
A huge percentage of doctors feel they are behind when it comes to retirement savings.
Most people catch up eventually, though.
Most People Work with Their Partner
But not very often.
If you're meeting once a month with your partner to talk money, you're ahead of two-thirds of your peers. But the more frequently you do so, the more likely you are to be on track or ahead of where you need to be.
The Sandwich Generation Is Real
Check out this question, posed to late-career docs.
Remember, these are docs in practice for 30+ years. Their adult kids are still at home, and grandpa is moving in!
I Know It All but I Still Want Help
I found this combination of questions, again posed to late-career docs, interesting.
Three-fourths of them are using financial advisors despite 78% of them feeling knowledgeable about personal finance. There are lots of reasons people use advisors, so don't feel guilty if you want one. Just make sure you're getting good advice at a fair price.
More information here:
The Perfect Financial Advisor
Nobody Owns Their Practice Anymore
If you haven't sold out to private equity or the hospital yet, you probably will soon.
This is a real shame in my opinion. Only 32% of late-career doctors own their practice or group, but that's a whole lot better than the 19% of early-career docs, only 2% (one-ninth as many as late-career docs) of which are in solo practice.
Physicians Are Marrying Each Other More and More
This is a trend in our society that high earners marry other high earners and increase household income and wealth disparities dramatically.
We Don't Start Out Very Good with Money, But We Can Learn This Stuff
Financial literacy and confidence go up over the course of our careers—or at least we think they do.
Many of Us Are Doing Retirement Accounts Wrong
As a general rule, solo 401(k)s and Roth IRAs are right, and traditional IRAs and SEP-IRAs are wrong.
But lots of people have them. Fewer and fewer pensions are out there as you look at younger doctors. Check out that annuity percentage among the late-career docs, and I imagine most of those aren't competitively priced SPIAs. I have to wonder about the people putting together this quiz who felt mutual funds and stocks should be in the same category but mutual funds and ETFs should not be.
Overall, I thought the survey was pretty interesting. Some of that data is new to me, but most of it reinforces other physician surveys I have seen and my own anecdotal experience of interacting with thousands of doctors over the years.
What do you think? What surprised you the most in this survey? Comment below!
