I'm Financially Strapped -- on $175,000 a Year!

Dennis Murray, MA


May 01, 2014

In This Article

Is $175,000 Really Not Enough?

According to Medscape's 2014 Compensation Report, the average family physician earns roughly $176,000 annually after expenses, but before taxes. To most folks, that kind of money is pretty enviable. But for many doctors, it's simply not enough.

How is it possible to have trouble paying bills on $175,000 a year?

Young MDs and DOs, especially, may be weighed down by medical school debt: Graduates of the class of 2013 owe $169,900 on average, according to the Association of American Medical Colleges. Add to this a mortgage, property taxes, car loans, and the cost of raising a couple of kids, and you can see where a 6-figure salary can get stretched thin in a hurry.

"You combine long hours with the fact that many doctors aren't paying close attention to their finances, and all of a sudden their paychecks aren't covering their expenses," says Albert J. Zdenek, Jr., President and CEO of Traust Sollus Wealth Management, with offices in New York City and Princeton, New Jersey.

The struggle to stay afloat is often complicated by feelings of burnout. Some 40% of doctors report feeling burned out, with family physicians and internists ranking in the top 5 of the 25 specialties we examined.

Burnout, we found, tends to peak in doctors aged 46-55 years, a period during which many physicians still have sizable financial obligations (eg, a mortgage, kids' educations). Moreover, 31% of frazzled doctors consider themselves to have minimal savings for their age group and stage of their career, compared with 21% of their less-stressed peers.

Where's the Money Going?

A recent Fidelity Investments analysis of physicians' retirement-savings habits shows that even though doctors earn good money, they're on track to replace only 56% of their income in retirement.[1] That's significantly off the rate of 71% that Fidelity recommends for those earning more than $120,000 annually, a figure that includes the vast majority of MDs and DOs.

What's contributing to the income-replacement gap? Fidelity cites those heavy amounts of med-school debt, as well as the fact that physicians in general tend to start saving later in life than many other types of professionals.

"There's also a strong sense of delayed gratification among doctors," says Kathy Stepp, a principal with Stepp & Rothwell, a financial planning firm based in Overland Park, Kansas. "After residency, they go from '0 to 60' in terms of earnings, whereas other professionals see their salaries increase more steadily over the years."

That, she says, can lead to spending binges, high-rate debt, and lower amounts directed to retirement savings.

The key to living within your means entails taking a hard look at what expenses you can eliminate or take a smarter approach to. We're talking about shooting elephants here, not worrying about how skipping your morning latte will improve your financial picture (it really won't).


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