An Investing Playbook for Physicians: Part 1

The average physician earns $350,000+ annually but many still struggle to build wealth. Turns out the problem isn't income, it's a poor investment strategy (or lack thereof).

While you spent years mastering medicine, Wall Street didn't wait.

Below we present a prescription for building wealth, whether you're a resident with $200 to invest or an attending ready to accelerate toward financial independence.

The Physician's Investment Paradox

Why Smart Doctors Make Poor Investors

Despite high incomes, many physicians lag behind in wealth building.

A 2023 Medscape survey revealed that 35% of doctors feel behind on retirement savings, and 28% have less than $500,000 saved by age 45.

The culprits?

• Late start: Physicians begin earning serious money in their 30s

• Lifestyle inflation: Income jumps from $65K to $300K+ overnight once you’ve “graduated” to attendinghood

• Time scarcity: 60-hour weeks leave little time for financial education

• Risk-averse mindset: Medical training emphasizes avoiding mistakes over taking calculated risks

The Compound Interest Opportunity Cost

Dr. Chen learned this the hard way. As a new attending making $280,000, she kept $100,000 in a savings account "until I figure out investing."

Two years later, that same money in the S&P 500 would have grown to $140,000. Her conservative approach cost her $40,000 in gains.

Remember the power of starting early, otherwise stated in the proverb: “Time in the market beats timing the market.”

Even a few hundred or thousand dollars invested as a med student or resident will snowball into compounding gains later.

The Physician Investment Framework

Stage 1: Medical Student & Resident (The Foundation Years)

Action items to focus on included (but are not limited to):

1. Open a Roth IRA immediately - Up to $150k in salary, you can contribute to a Roth IRA, meaning your investments grow tax-free because you pay taxes prior to putting money in.

2. Start with target-date funds - Vanguard's Target Retirement 2060 offers instant diversification of stocks, bonds and funds.

3. Automate everything - Set up automatic transfers on paydays. Ask ChatGPT how to do this:

   1. “I want to set up automatic transfers from my checking account to [insert investment app here]. Provide step-by-step instructions.”

4. Learn while you earn - Build your knowledge over time with free resources on YouTube or podcasts, or keep reading The MD!

Stage 2: Early Attending (The Acceleration Phase)

A priority sequence could look like:

1. Max out 401(k): $23,000 annual contribution (2024 limit)

2. Backdoor Roth IRA: $7,000 annual contribution

3. Taxable brokerage account: For additional investments beyond retirement limits

Asset Allocation for Young Attendings:

• 90% Stocks (60% US, 30% International)

• 10% Bonds

• Focus on low-cost index funds (Expense ratios under 0.1%)

Advanced Strategies for Established Physicians

There’s conservative approaches and aggressive ones.

When outlaying your financial goals, try to map it to your retirement targets: What retirement amount can you set that will feel rewarding once you hit it?

An additional strategy to consider is Dollar-Cost Averaging vs. Lump Sum.

Lump sum is self-explanatory. You take a lump sum of cash and put it into your broker account all at once.

For physicians receiving large bonuses or facing irregular income:

• Lump sum historically outperforms (67% of the time over 12-month periods)

• Dollar-cost averaging reduces emotional stress and timing risk

• A hybrid approach could mean investing 50% immediately, then spreading the remaining 50% over 6 months

Bonus: Physician-Specific Investment Vehicles

1. Backdoor Roth IRA Strategy 

Most attendings exceed the Roth IRA income limits pretty quickly (income limits for a single person are $150k per year in 2025), but the backdoor strategy allows tax-free growth:

• Contribute $7,000 to a traditional IRA (non-deductible)

• Immediately convert to Roth IRA in your platform

• Pay taxes on any gains during conversion (ideal to convert it quickly)

• Result: $7,000 in tax-free growth space annually

2. Health Savings Account (HSA) Triple Tax Advantage

• Tax-deductible contributions and tax-free growth

• Tax-free withdrawals for medical expenses

• After age 65, functions like traditional IRA for non-medical expenses

Summary

We outlined a few of the problems physicians face when it comes to investing. Depending on which phase you’re at in your investing journey, the actions you take can look very different.

In Part 2, we’ll discuss some common investing mistakes, how to make your first million and more.

If you walk away with anything from this article, it’s this:

Compounding interest is the eighth wonder of the world 

(who remembers the first seven anyways?).

Meme of the Week

Best,

M&H