Investing Roadmap

Here is a general investing roadmap for high-income W2 individuals. Some components within the roadmap may differ for your specific situation, so it’s important to evaluate all pertinent factors.

Below, I also touch upon some other considerations specific to physicians.

Physician Considerations:

1. Disability Insurance

The best investment you can make is in yourself. Unexpected events can happen to anyone at any time, including yourself. Protect yourself and your family now—Do NOT take any risks. Get individual disability insurance (DI) that at the bare minimum includes the “own occupation” or “specialty-specific” policy.

Note: If you risk getting denied for DI due to significant pre-existing conditions, consider getting a Guaranteed Standard Issue (GSI) disability insurance plan first.

2. Emergency Fund

A 3-6 month emergency fund is recommended for normal-income jobs that can be quickly acquired after a layoff, termination, or resignation. On the other hand, the job-seeking process for physicians may take, at the very least, a few months. However, the on-boarding process typically takes closer to 6 months. Therefore, a minimum of a 6-12 month emergency fund is recommended for physicians. These funds may be stored in a high-yield savings account (HYSA).

3. Student Loan Planning

Decide how you want to pay off your student loans (slowly or aggressively). Consider your career in the context of several factors:

  1. Training length
    Longer residency training programs at a non-profit institution mean you will be closer to satisfying ten years of student loan payments for PSLF eligibility.

  2. Specialty-specific job opportunities
    Some specialties are typically more private-practice-based, so seeking loan forgiveness through PSLF may be difficult if you do not work at a non-profit institution.

  3. Personal comfort
    Some people do not like the thought of student loans sitting open for 10+ years, even if it comes with the potential for loan forgiveness. If this is you, perhaps aggressively paying it down is the only option that works for you.

  4. Income Potential

    • High-income earners out of residency training (> 400k/year) may consider PAYE as there is a monthly payment cap. Under PAYE, the monthly payments are capped at the Standard 10-year Repayment Plan amount. Please note that the discretionary income limit under the PAYE plan is 150% above the poverty line, which is lower than the SAVE plan. Additionally, unpaid interest under the PAYE plan accrues monthly.

    • Lower-income earners out of residency training may consider the SAVE plan as unpaid interest does not accrue as long as monthly interest payments are regularly made. There is no monthly payment cap under the SAVE plan, so you will always pay 10% of your discretionary income, regardless of how much money you make. Discretionary income under the SAVE plan is 225% above the poverty line (different from the PAYE plan) and therefore offers more savings.

    • There is nuance to choosing PAYE vs. the SAVE plan, especially concerning filing taxes if you’re single or married, so there is no one-size-fits-all.

4. Financial Advisors

Most people do not need a financial advisor. If you plan to work a W2 job, invest in tax-advantaged accounts and the stock market, and live within your means, you may not need a financial advisor. A common pitfall is believing that paying for a financial advisor to actively manage your investments will result in significantly better returns than passively managed funds—that is not true.

On the other hand, a financial advisor/planner or tax strategist may benefit you if you want to leverage the tax code for tax deductions for your business or contracting job (1099), create a student loan repayment plan, or devise tax planning strategies. Because physicians can generate significant savings for retirement, a financial advisor/planner would be able to help you create a strategy that would optimize your investment growth rate while minimizing the tax burden during retirement. Please see the tax section for more details.

Types of financial advisor payment schedules:
Financial advisors who are “fee-based” charge a commission (%) plus a fee, which may significantly reduce your lifetime earnings, especially when compounded over time. Financial advisors who are “fee-only” charge a flat fee. If you choose to get a financial advisor, then fee-only is preferred. You may also hear of another fee-only method called “advice only” where the advisor only gives you advice but provides no other services.

5. Contract Negotiation

Before coming to the table, evaluate your career values and non-negotiables. Consider patient care environment, work-life balance, pay structure (base salary, hourly, profit-sharing, productivity bonus, RVU expectations, other bonuses), career advancement opportunities, and research opportunities.

Here are some areas of negotiation:
- base salary
- signing bonus
- incentive bonus 
- relocation reimbursement 
- insurances (health, malpractice) 
- loan forgiveness 
- CME allowance 
- academic time 
- "administrative" time 
- vacation
- retirement benefits, pension
- deferred compensation plans (401k match, ESPP, does employer allow 401k after-tax contributions for mega backdoor roth?)

Other topics of consideration

  • Is there a non-compete clause? If yes, what are the terms? (Location, duration, required facilities or employees).

  • What are the schedule expectations?

  • Is call coverage required? If yes, what are the specifics?

    Summary: Verbal agreements mean nothing! Ensure that all negotiated details are included within the contract.