Do Doctors Complain About Money?
Those of you who read the blog regularly have probably noticed that I am an avid reader of Sam Dogen of Financial Samurai. Sam retired from Wall Street in his early 30s and was one of the pioneers of the FIRE movement. He rapidly built a nest egg using his high income and living below his means. He negotiated a hefty severance package, retired, and created the Financial Samurai. To be clear, I am paraphrasing his story, but you get the gist. Hardworking young individual, generates a great income, saves, lives below his means, and lands a great severance package.
Now, over a decade later, despite generating great income through his blog and investments, he is returning to work. He created a massive stream of passive income, but given a growing family, two retired parents, and a high cost of living, he feels he is only scraping by. He recently published an article called Scraping By On $500,000 A Year. This article garnered a lot of angry comments and spicy feedback. It also got me thinking. This is a common dual-physician household income. So, do doctors complain about money, too?
Table of Contents
Before We Begin
Let us start by clarifying a few things before we go any further. This blog writes at the intersection of personal finance and physician finance. That means, overwhelmingly, we discuss the personal finances of a profession whose baseline income is mainly in the top 5% of household incomes in the United States.
Second, if we do not clarify that the purpose of these articles is to shed some light on unique monetary issues of our profession, then it just sounds like a lot of 1% gripes. True. However, with all that said, there are many pain points that physicians, like many other high-income earners, have to navigate. Beyond this, many realizations occur as one navigates the intricacies of their hard-earned income.
OK, with that out of the way, let’s dive in.
Physician Incomes
Physicians make great incomes. Plain and simple. We could argue the intra-specialty variability in reimbursement all day. But, in general, if you are a physician in the United States, by all intents and purposes, you make a good living.
According to the most recent Medscape Physician Compensation Report, in 2023 Physicians averaged $352,000. Primary Care Physicians (PCPs) averaged $265,000, while Specialists averaged $382,000. Many things impact these numbers, i.e., are they employed, do they own a practice, do they include moonlighting income, geographic variability, etc. At the end of the day, though, physicians make great money.
According to Investopedia, the average wage of individuals/households in 2021 that constituted the top 5% was $335,891. So, according to the Medscape data, the average physician is in the top 5% of household incomes. So now let’s go a step further and determine which physicians (on average) make half a million dollars (before taxes) annually.
What Doctors Make $500,000?
In his article, Sam Dogen of Financial Samurai argued that he still felt financially constrained with an annual pre-tax income of $500,000. By comparison, he listed several household earner combinations that would amount to half a million dollars. He included lawyer couples, private equity administrators, Chief Marketing Officers (CMOs), online marketing consultants, etc. For the sake of this article, let’s talk about physicians or dual-physician households who, too, can likely bring home >$500,000.
Again, we can review the average annual compensation by specialty using the Medscape data. Again, these are averages, but they are helpful for this exercise nonetheless. Here is a short list I came up with:
- A plastic surgeon and a stay-at-home significant other
- An orthopedic surgeon and a stay-at-home significant other
- A urologist and a stay-at-home significant other
- A neurosurgeon and a stay-at-home significant other
- Two academic hospitalists
- A private practice emergency medicine physician and their nurse spouse
- Two family medicine physicians
- Two pediatricians
As you can see, pretty much no matter the subspecialty, if you are a surgeon, you statistically are close to making half a million before taxes. There are few ways for two physicians to have a combined income of less than 500K. The exceptions are primarily some pediatric subspecialties and lower-paying academic subspecialties.
How Can Half a Million Be Tight?
$500,000 is a lot of money. So how can a household making this amount still feel like they are struggling? Sam summarized his household spending for the world in his blog post. I don’t want to steal any graphics from his post, so I will do my best to describe how his money is spent, but a picture is worth a thousand words, and I always recommend you see it at the source (and given Financial Samurai credit in the process)
For starters, they put a lot toward their 401K contributions. $18,000 per spouse ($36,000 total each year). Following pre-tax retirement contributions, what remains of their salary is $464,000. They are then subjected to a 40% effective tax rate. This means they pay approximately $185,600 in taxes, leaving a net salary of $278,400.
Next, Sam breaks down his household expenses. They have two children and spend $42,000 in childcare expenses. They spend roughly $23,000 in grocery and restaurant expenses. Their mortgage payment is $60,000; their property taxes are $20,000, they have $9,600 in car payments, insurance premiums, clothing expenses, children’s activities, charitable giving, and, of course, undergraduate and graduate debt.
We could discuss many details about how the Dogen family spends their money, but they total their annual expenses to be roughly $271,100. If their net salary (after taxes and retirement contributions) is $278,400, and their expenses are $271,100, then what remains is only $7,300 (1.5% of their gross income). So, how can this be? And do physicians feel the same financial pressures?
The Doctor’s Dilemma
If you take the time to sit down and meticulously go through Sam’s household budget, some things would likely catch your eye. For starters, the spend $18,000 across three vacations annually. They own a BMW 5 Series and a Toyota Land Cruiser and make car payments. They must have a comfortable home if their property taxes and mortgage combined total $80,000. They also donate nearly $18,000 to charity and are still tackling student loans.
To the rest of the world, this looks gluttonous. How can half a freaking million dollars not be enough? Surprisingly, I think Sam’s lifestyle and budget would be pretty common amongst many physician households. Here is what I see when I look at his budget through the lens of a physician.
For starters, he is doing a lot of the right stuff, right? He is paying himself first by contributing to his retirement savings. He is also subject to a massive effective tax rate. Many actively practicing physicians will be subject to either 35-40% depending on their gross salary and their spouse’s income. This takes a massive bite out of one’s take-home pay. After retirement savings and taxes, nearly half of that $500,000 is gone.
Next, the majority of his money is spent where most of our money is spent: childcare, food, housing, car payments, asset protection, vacations, and debt. Now, could one argue that his expenses are exorbitant? Probably. Not everyone needs a BMW 5 Series or a McMansion, right? Yet, this starts to sound all too familiar in the physician finance world. Tack on the fact that, according to the Education Data Initiative (EDI), the average medical school graduate owes $250,995 in total (including undergraduate and graduate) student debt to this mix, our delayed gratification, lack of formal financial education, and rampant lifestyle creep when we complete training, and a physician budget looks nearly exactly like Sam’s budget.
Golden Handcuffs
This is why many physicians, even plastic surgeons, become beholden to their jobs. Physicians owe a lot of debt and feel societal pressure to drive a nice car, own a nice home, take expensive vacations, and send their kids to private education. And all these things cost a lot of money! Further, if you are not pursuing Public Student Loan Forgiveness (PSLF) and are working to pay down your debt aggressively early in your career (like us) then you may be putting $100,000 annually towards your loans or more!
These expenses and lifestyles keep us shackled to our careers. This is where the term ‘golden handcuffs’ comes from. These are also the very same pressures that helped create the FIRE movement. The very movement that Sam helped popularize!
Do Doctors Complain About Money?
So, do doctors complain about money? Yes, yes, they do.
I have fewer data points to back this up, but according to the most recent Medscape Physician Wealth & Debt Report from 2023, as many as 31% of doctors in a given specialty are still paying off their student loans. The top three expenses or debts physicians pay actively are mortgage payments, car payments, and credit card debt.
That’s right, physicians who are overwhelmingly in the top 5% are also paying off credit card debt on top of educational debt. Lastly, 41% of physicians in this survey have a net worth of less than one million dollars, with 25% having a net worth of less than $500,000.
This data would point to the fact that professionals with the vast majority of incomes in the top 5% are still purchasing large homes, paying off debt, paying off cars, and likely not saving as much as they should for retirement. Akin to the Financial Samurai, many physicians complete training, make ‘doctor money’, and are forced to balance societal expectations with the need to pay down debt and build a nest egg, all in a profession that largely does not reach their true earning potential until their early to mid-thirties. Doctors do indeed complain about money.
Take Home Points
Whether you agree or disagree with how the Financial Samurai budgets his money (or many of our physician colleges, for that matter), you have to agree our profession is subject to some interesting financial situations. Also, I do not wish for this article to be a judgment on how individuals spend their money.
I understand where Sam of the Financial Samurai is coming from. Life is expensive, and balancing healthy financial habits while enjoying some luxuries (like a comfortable home or automobile) is difficult. Now, do all that within the confines of a high-cost-of-living area, and half a million dollars can be spent quickly. Finding the right balance for your family can be difficult and takes a solid financial foundation, self-control, and an understanding of your priorities.
Doctors complain about money, some rightfully so, some… well not so much. Navigating finances and societal expectations is challenging and emotional. Take some time to check out some of our other posts, including Achieving Financial Independence in Medicine: The Ultimate Guide, and make sure you are on the right track towards financial freedom! As always…
Stay Motivated!
The Motivated M.D.
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Do you think this article is ridiculous and that $500,000 is just too much money? Do you ever find yourself scraping by on your physician income? In the comments below, let us know about Do Doctors Complain About Money! We love to hear from you.
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Thanks for writing and highlighting my post. Taxes are a killer, and so is inflation.
I could get by on $380,000 a year in passive income or $400,000 a year in active income. But I blew up my passive income in my financial independence by buying a nicer house in the fourth Q of 2023.
As a result, I need to do some part-time consulting again. That’s life! Actions have consequences. Back to the grind for 3-5 years.
Sam
Really great post Sam, and I appreciate you allowing me to share it here too. It takes a lot to be so transparent with your finances. It is a huge educational opportunity for all in the personal finance community, and given your effective tax bracket, seemed applicable to physicians as well given their baseline high incomes. Keep up the great work!
I think it is human nature to compare our situations to others, and I am not unique. There are pearls we can all take from one another.
As as an employed primary care doc in the Midwest, I clear $300K per year. This is what we live on. When I still followed my own patients in the hospital, I cleared $400 K one year. This was unsustainable in terms of lifestyle, thanks to the electronic health record that entered our lives in 2010, so I sadly had to give up that part of my practice 5 years ago.
You are right about the pain points. Mainly quality of life. Now I only do outpatient medicine and I am still at the office 12+ hours a day, (7 hours on my “afternoon off” and I usually see less than 20 patients a day. The amount of clicking and scrolling keeps mounting despite “upgrades” that promise to simplify charting. And that’s with a virtual scribe. Add to that the patients complaining that their expectations aren’t met with tons of prior authorizations for meds that we are told to reach for to help patients control their chronic conditions, which basically translates into moral injury. So, I spent 8-9 hours a day face to face with patients and 3 hours a day, or more, charting and doing free medicine: phone calls, patient portals, refills, faxing back stupid forms from the third party payors questioning why I am prescribing sulfonylureas for my patients who can’t afford the copays for the recommended alternatives(I can’t help myself–I scribble on the forms “make the good stuff affordable!!!), etc,
The risk of being sued is in the back of my mind; I don’t lose sleep over it because I do my best to provide compassionate quality care and document carefully (thus spending more time charting)
Now I am looking at reducing my hours in part because I want to spend more time with my husband and I can afford it financially, but also because I’m am tired of dealing with the pain of the overuse injuries that are piling up from spending so much time on the computer, despite an ergonomic setup and a careful home exercise program.
My husband brings in very little income less than 10K/year so I am the breadwinner. No children (spent 18K trying to start a family years ago)
We live very well, although very modestly compared to over physicians. Not counting taxes, giving, and retirement contributions, we live on 90K or less per year. Geographic arbitrage helps.
It helped that I sold my 4 years of my life to the state where I practice which subsidized my educational costs so I had relatively little debt upon graduating 20 some yrs ago. And I married the right person, who is frugal as I am and shares the same values. We have no debt, not even a mortgage, and I could walk away tomorrow if I had to.
This is probably more than anyone wants to read. Pain points really puts things into context.
Thanks for sharing that! I read all of it and it made me cry inside a bit. Hang in there! I don’t have much to suggest to help, but you can and should start charging for the time you spend on electronic work. The evisit codes (not the same as Telehealth) work very smoothly for this if you have an EMR set up for it. I have had very little patient push back. It is a bit tricky to balance (I don’t want patients not to call or message me back/update me on progress but I also don’t want them to think the work I am doing on their behalf is free). I hope that helps you get some sanity back! Also, my two cents is don’t beat yourself up feeding the electronic beast. Make sure your documentation meets billing requirements and you can automate a lot of notes to make your life more efficient. Good luck!
We absolutely live paycheck to paycheck on a physician salary. We live in a 1700 square foot home, have two cars that no one would consider fancy, hardly give to charity (even though I want to and find this important), haven’t been on vacation in more than a year, haven’t started saving for our kids’ college, and don’t put anywhere near what we should be into the retirement account. I have a crushing amount of debt between medical school loans, personal loans, car payments, and a mortgage. Add to that childcare, food, and clothing expenses, utilities, and the expense of hiring help for household tasks so that we don’t live in a dump, and there is not much left over.
You find the lifestyle you want to live. That’s all up to you. Prioritize what is important to you. When I was making $500K as a full time dentist, we lived on $120K. We live in the Midwest, so our cost of living is considered low to moderate. We live a simple, modest lifestyle and are truly happy. We accumulated enough to be financially independent at 45 and I decidedly to cut back to part-time and really have enjoyed the pace. We still live on $120K, but now have a lot of free time to spend with family and travel more.
It all comes down to what you think is important and what makes you happy. If you choose to live a more luxurious lifestyle, just be prepared to become financially independent later in life. There is no right or wrong. There is only what is right for you.
You mention it, but you don’t fully drive home the point on taxes. Physicians get hammered on the tax rate, but just as importantly, and even more important from a budgetary standpoint is the fact that physicians (and other professionals at that income level) get ZERO tax breaks. No help for dependent children, no help on student loans, substantially zero help for childcare, and zero help for education expenses (a la FAFSA). $500,000 income isn’t enough after taxes and normal living expenses (especially given inflation) to just write a check for major life expenses like college, yet there are also no grants or federal loans available at that level.
The above leaves such professional families working for their own student debt during the first part of their career, then working for their children’s education during the later part of their careers, then scrambling to try to have enough to retire…and given the landscape of the financial markets over the recent past, say since 2000, these professionals are not getting the help from appreciation of assets that previous generations enjoyed. So this elusive “retirement” may never come.
So call it 1% complaints all you want, but there is absolutely an argument to be made that this class of professional is being robbed of the American dream by our current system.
Precisely. Although I started working in the era before all of the “giveaways”, the reality is that many physicians move into positive cash flow late in life, frequently with large student loan obligations. Roth IRA’s did not exist when I went into practice and our income as physicians was considerably less than it was today. We lived frugally, drove used cars, had a modest home in a subdivision with mid-level professionals (community college teachers, etc.) and tried to save as much as possible. Add in three significant market downturns, high tax burdens, rampant inflation, sky high medical insurance costs and I find myself in my early sixties contemplating a retirement which will be less favorable than that of my mother who was a school teacher and enjoyed a pension and life-time health care benefits.
As mentioned in my comment above, you choose a lifestyle that you are happy with. No right or wrong. But I do think a $500k income should afford a very luxurious lifestyle.
When we were making $500k, we were living on $120k and were extremely happy. Again, no right or wrong. But, you can choose to adjust your lifestyle or can choose to work more and make more income.
Agreed! The no tax breaks is what gets me! Tax me higher percentages on my expendable income if you want, but $5500 a month to student loans and childcare alone before the rest of life really drops the real income.
You might want to double check these numbers for 2024.
“For starters, they max out their 401K contributions. That is $18,000 per spouse ($36,000 total each year).”
If you are a follower of the various discussions appearing on LinkedIn alone the answer has to be a resounding yes.
The article itself as well as several commentators point out that it is human nature to compare oneself to others when determining satisfaction with position, status, income etc. But though this is human nature this does not mean we cannot and should not strive for better.
For starters, let’s assume physicians earn in the top 5 percent of US earners. How about comparing oneself to.those in the 95 percent.
How about comparing to physicians in other countries.How about comparing to others with equal or longer and more rigorous eduction and training like my friend Joe who has a PhD in chemistry from Northwestern, post docs at IU and Yale and 25 years as full professor who is certainly not in the top 5 percent. Why are physicians a group that seem to be and act in such an entitled manner?
Let’s compare to physicians in other countries. Sure. Lower pay. Fewer hours. No 400k student loans (the average is 250k – sure b/c some people have 0) . No saving for kids college. Minimal healthcare expense. Fewer years education often required. Most retire earlier, and guess what? Do not have to save 50k / year their working life to avoid eating Alpo in retirement. If physicians here have it so great, where are all the French & Danish doctors fleeing the yoke of socialism to work in the USA?
PS a friend of mine is a biochemist, makes 250k/ year at 50yo and gets flown to Europe 4X / year. Are you sure your pal Joe isn’t in the top 5%?
Hmm. Retired ortho here. Women in surgery are underpaid by about 28% compared to the men, just FYI. Sucks because that’s for full time work, too, before anyone dare suggest it’s only a part-timer problem.
But I agree with one of the commenters above that our situation is what we make of it. In my case, had to retire before the age of 45 due to a serious illness that began when I was not yet 5 years into practice. That was scary; I was still paying back loans, just getting into my professional groove. Thankfully the first rounds of illness were enough to scare me ‘straight’—I started seriously thinking beyond funding my retirement accounts, started cutting expenses, paid off the student loans, and lived on less than half of my take home after that (a still quite generous amount), putting the rest into brokerage accounts.
Before then, I had never really invested—just retirement account target date funds because they’re easy. I thought I’d just keep getting to make great money, doing what I loved, and it didn’t matter if I saved a ton early or invested well, could just save here and there as I went along. I always maxed my retirement accounts, at least; even as a resident, earning a pittance, I put in the full amount. Matching funds are free money.
But I probably wouldn’t have changed my saving habits, if I hadn’t gotten sick. I loved my work and could see myself doing it until age 60+, even with the hassles. Becoming seriously ill, rather acutely, helped me realize that it could all be gone in an instant. I got better for a while, but I knew it wouldn’t last; at least it was long enough for me to change my spendy ways and make serious plans to protect my future.
Seven and a half years later, I had to retire, when things got worse all over again. I was scared, but not unprepared. I don’t consider it FIRE, though that’s kind of what it ended up being like. Different when it’s not what you wanted to do. I still miss my work, miss getting to do what I spent so long training for.
As for taxes, try being an unmarried surgeon, and then whine to me about your tax rate. I paid far more than any married colleagues ever had to, by percentage of income, even when I made so much less as a woman. Buying a bigger house wouldn’t protect my assets like it does when you’re married. And I couldn’t use 529s and the other tax shelters that are afforded to those who have kids… but who really thinks they’re going home with every penny of their salary, anyway?
Oh, and a reality check on retirement contributions—most high earners in either private practice or academic settings have access to high earner excess contribution accounts. I remember my first job was set up so I could put away close to $50k/yr pre-tax. Too bad I was being paid peanuts, but I did it anyway, maxed those out. And every other job I held, private or academic, all had some form of ‘high earner’ accounts where you could put in more, like 457b and 457f, and even fancier 401ks with high earner carve-outs. In the private setting, we were set up as independent contractors, so you could structure your own SELF IRA and contribute an obscene amount. In academic jobs, it was the extra 457 type accounts that gave us a boost.
Though I still miss being a surgeon, badly, I am at least glad I had enough time to find a way to protect my future. It would have been terrible to only have retirement accounts, to have to navigate the bureaucracy of persuading the IRS that withdrawals before 65 were necessary and legitimate, to see that money dwindling each year, long before intended. I won’t say I’m easy just yet about finances, am too young to say that, even with my preparations. Life is unpredictable, messy, and expensive, it seems. But I’m not living on ramen and going back to having roommates, so… it’s going to be fine.
I did not realize female surgeons are paid less/ RVU than male surgeons.
Sorry you had to give up practice.
As mentioned in my comment above, you choose a lifestyle that you are happy with. No right or wrong. But I do think a $500k income should afford a very luxurious lifestyle.
When we were making $500k, we were living on $120k and were extremely happy. Again, no right or wrong. But, you can choose to adjust your lifestyle or can choose to work more and make more income.
Good post!
There is one point that I think we generally don’t understand about taxes. I didn’t understand this until “MyRichBFF” explained it to me. Tax brackets work by taxing each chunk of money you make. So according to 2024 numbers the total taxes on $464,000 would be about $134,742.75. I am not implying that isn’t a hefty tax, but it is a $50,000 difference from what is reported in this post.
I only bring it up because misinformation about tax brackets and how they work sometimes results in people choosing to make less money because they don’t want to go into the next tax bracket thinking their net income will decrease. This is a fallacy that everyone who understands taxes should work to eliminate even if the real math is a little tricky.
No one pays 40% on all of their income – the tax numbers proposed here are far too high. We have a tiered tax system where you pay a certain rate for the sum of money in that tier. With the Trump tax cuts $500,000 doesn’t even get you into the top tax rate (37%) for 2024. His blended tax rate (at least for federal taxes) is likely closer to 25%.