The majority of physicians pursue and maintain their careers because of the satisfaction they receive in caring for their patients and finding answers to complex problems, not necessarily for the compensation they receive. Nevertheless, a physician’s financial planning, complicated by debt and delays in savings, requires specialized expertise to maximize their goals.
The average physician annual income varies depending on which area of medicine he or she practices. A 2021 survey conducted by Medscape revealed that primary care physicians earned approximately $229,000 per year while specialty physicians brought in closer to $381,000 annually. Although all physicians have a high earning potential when compared to the national average, the study highlights the fact that physicians’ salaries correspond to the type of medicine they practice.
A physician’s earnings are also affected by less obvious factors. Not only is the cost of medical school a substantial burden, but the years of unearned and reduced income during training delay investments and savings, resulting in further disadvantages for the young physician. Regardless of whether they attended a public or private university, more than seven out of ten physicians begin their careers carrying an average of over $200,000 in student loan debt. This study approximates the total cost of medical school, including the lost opportunity earnings, at $800,000.
Repayment can take more than a decade, but fortunately, physicians do have high potential lifetime earnings. Although the future of physician compensation is uncertain and multiple factors can affect its accurate prediction, it is safe to assume that a lifetime earnings average could be in the tens of millions.
Over the course of their careers, the average physician lifetime earnings total varies widely among specialties. Primary care physicians will likely earn a lower lifetime amount than a specialty physician. According to the survey, plastic surgery was the highest paying area of medicine, with an average income per year of $526,000. The specialty with the next highest average earned income, at $511,000 annually, was orthopedics and orthopedic surgery. OB/GYN and women’s health falls in the middle with an average of $312,000, and on the low end of the scale, doctors who choose pediatrics can expect annual earnings of approximately $221,000.
Other factors will affect annual and lifetime salaries, most significantly the location and type of practice a physician joins. Certain cities and states average higher salaries for physicians, and state laws vary on physician-owned hospitals, a potentially significant source of income. A physician employed by a large hospital system or an academic institution will typically earn less than a self-employed physician in a private practice. While self-employed physicians also enjoy greater autonomy within their practice, employed physicians can defer the costs and complications of human resources, billing, collections, and other logistical matters to their employer.
Some fields of practice require more hours per week, which does not necessarily coincide with a higher salary. This 2018 analysis observed general surgeons and OB/GYN physicians both working an average of 56.5 hours per week, but the surgeon earned an average of $136.30 per hour while the OB/GYN earned 18% less at $111.72 per hour. A family practice physician worked an average of 55.5 hours per week yet earned only $86.71 per hour. Such discrepancies could potentially lead to burn out, and a young physician entering into practice should consider all of these factors when deciding which career path to pursue.
Regardless of location, type of practice, specialty, or income, all doctors would be wise to engage in financial planning customized to their unique career. A financial advisor who has experience investing for physicians can help maximize income and achieve both short-term and long-term goals.
Working with an Advisor
Investing with an advisor who has an understanding of the physician path is imperative. Objectives such as paying student debt, neutralizing lost opportunity earnings, purchasing a home, engaging in tax deferral strategies, and investing for retirement are parts of a well-rounded financial plan, which is best undertaken with the help of a qualified financial team.
Using both potential annual income and lifetime earnings, the financial advisors at Blankinship & Foster will help you develop a strategy and timeline to meet your goals and dreams. Since we offer fee-only financial planning services, you can be confident that we are 100% focused on your best interests.