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We have all heard that specialists in the medical field typically earn more than the generalists (a wage gap).
According to the 2018 Medscape Physician Compensation Report the varying compensations are as follows:
A typical generalist residency (such as pediatrics or internal medicine) is 3 years in length.
Residency training in the medical specialties typically adds 1-2 years more to this (Orthopedics and Radiology for example are 5 year long residencies).
So can a generalist make up some financial ground with this “time arbitrage?”
Assumptions in the following calculations:
- The physician and his family will continue to “Live like A Resident” which I made out to be $50,000 gross income/yr ($46,500 after taxes)
- For tax purposes all individuals were filing under married filing jointly.
- Used $497k gross for Specialist Salary (Orthopedics)
- Tax burden $139,237
- Used $212k gross for Generalist Salary (Pediatrics)
- Tax burden $40,000
- Used $497k gross for Specialist Salary (Orthopedics)
- Total investable income (Gross – Tax – Net “Live Like A Resident” Salary) was divided by 12 and invested in monthly increments.
- Specialist could invest $25,900/mo
- Generalist could invest $10,500/mo
- Assumed a 7% rate of return compounded monthly
- Physicians were debt free at time of finishing residency (I know a highly unlikely scenario, but I did not want to add more complexity to the calculations).
Physician Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Generalist $130k $270k $419k $580k $752k $936k $1.13m
Specialist $0 $0 $321k $665k $1.03m $1.43m $1.86m
There you have it. Even with a 2 year handicap in investing, the specialist quickly catches up by the second attending year salary (4 years after the generalist starts).
It does pay to have a big shovel to dig with.
An interesting point is that even the generalist can accumulate a million dollar portfolio 7 years out of residency if they continue to live like a resident for that long (which is definitely a tough ask)
Superpower Take-home Points:
Living like a resident can have a huge impact on how quickly your portfolio can grow, regardless of specialty- Due to differences in salary, despite a later start, the specialist can quickly surpass the “break-even”point by year 2 of being an attending.
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Interesting… and I had no idea plastic surgeons did that well. I guess those Hollywood folks do have some big bucks to dish out ?
Another benefit plastic surgeons often have (and likely why they are at the top of the list) is they typically get upfront cash for service. So what they charge is what they get. Unlike other physician practices where you put give a charge and likely get 40% or less back due to insurance reimbursements etc (plus chance that patient will not pay his or her component and you either have to write it off (happens a lot) or send to collections and have to lose a percentage of money collected to fees
This is an interesting analysis. You know how the stereotype of FIRE folks is white male software engineer?
It would be interesting to see how long it takes a generalist and a specialist to catch up to a software engineer making $120k (sounds reasonable) right after college at 22 years old…
Doctors are fast runners, but our starting point is so far behind I feel like other fields lap us before we even get started…
Hey DMF. Might have missed it on an early grand rounds: https://xrayvsn.com/2018/07/12/grand-rounds-07-12-18/
First one by My Curiosity lab directly addresses time difference between 3 specialties (it’s engineer but not sure if much difference in salary between that and software engineer)
You’re right. I did miss it. It’s a shame that Dr. Curious doesn’t write anymore. I miss reading his articles. In addition to PIMD and PoF, his blog was one of the ones that inspired me to start one too!
No worries. Yeah he is a great writer (and actually I have accidentally crossed his path in facebook and he said that he is considering starting back up (which would be awesome)
Except software engineers in bay area start at 180K not 120K for sure. FB and Goog psy 180k to 200K to start for 4 year degree.
Wow. That salary range makes them higher paid than some specialty averages like pediatrics. Of course those jobs are probably highly competitive
That makes sense. Two years of foregone lower salary (relatively speaking for a specialist vs. generalist) in exchange for a lifetime of higher salary is a very worthwhile sacrifice. Sure, you’re delaying gratification for an additional two years after already attending medical school and a generalist residency, but the wait is so worth it. I do enjoy your advice of “living like a resident” for two years after finishing. That will set aside real income for repaying student loans (or if you’re lucky enough to have no debt) or investing. However, that additional income from specializing really overcomes the lower… Read more »
Really appreciate your always great comments. I wish I could take credit for “living like a resident,” that really belongs to the godfather of physician blogs, Jim Dahle of White Coat Investor. That is probably the best advice anyone could listen to coming out of residency and getting that first big paycheck as an attending. It is incredibly tempting to spend it all since you have been delaying gratification for years by this point (and trust me I fell for it as I made every bad financial mistake you can (which hopefully you read the “I Made Every Mistake In… Read more »
The wage gap is a perennial frustration for those in fields in the lower end of the valued reimbursement ladder. It is good that these figures are out there as they help people make decisions that are good for them. I’m sure the numbers will change as beurocrats concoct new payment schemes over time and then a different group of us will share the frustration. That all being said I usually thank my lucky stars that I am fortunate enough to do work I largely enjoy, pays incredibly well if viewed in a broader context and is rewarding. We all… Read more »
Thanks for the comment, and guess what? You were the 999th comment on my site which means that this is the 1000th! 🙂 Of course a little less than 1/2 was mine, but still 🙂 I agree that some of the specialties are getting hit hard and will continue to get hit hard in the future. Radiology has had some big cuts recently in terms of reimbursement per RVU. So basically I am forced to read more to make the same amount as I did last year (and quicken the path to burnout if I do so). Glad you are… Read more »
I pretty much disagree with this analysis. Ortho and Plastics are typically PGY 6 or 7 year specialties usually including a 1 or 2 year fellowship. Those specialties get sued a lot so have higher malpractice often a LOT higher. Their office cost is higher since they have special equipment some including MRI and xray which has it’s own special overheadand they have pretty significant staff requirements often including PA’s etc. Your analysis just looks at a list of salaries and then you do a simple minded projection. Consider the cardiac surgeon, that guy did PGY 7 at a minimum… Read more »
I may have made a wrong assumption then looking at the salaries provided in the list. I would have thought the salaries given were take home salaries net of office costs, etc (which would factor out the equipment/malpractice cost). That’s how I had been viewing salary ranges in the various specialties listed on medscape etc that come out with their reports. Otherwise I would think they would have reported it as gross charges and not average salary/specialty.
Money is fungible. What gets reported as a “salary” depends on what you make that salary to be. My ortho buddies had a yearly company car rental allowance of like $1000 a month built into the reimbursement package. It depends on what write-offs you can claim, what class of corporation you are, how smart your accountant is etc.
great point. Well I will have to look at this yearly reports more analytical then. What I usually have done in the past is look at my specialty’s salary and see where I am in comparison to it.
Specialist generally earn more in Canada as well. That is simply because procedures and surgery pay better.
But a family doctor who is energetic and hustles can easily make more than their specialist colleagues. They also maintain their autonomy without having to deal with any hospital issues if they want. (Especially in the urban centres)
I really do chuckle when you attribute “live like a resident” to WCI. I tend to think it’s just good ole common sense. I think everyone knows that that is prudent. Just no one wants to do it that’s all.
I agree that within a medical specialty there are ranges of salary all over the place depending on how busy or not a physician wants to be. Live like a resident should be common sense for sure. I first came across it via White Coat when it was way too late for me to follow it 🙂
I agree with the WCI comment. He is nothing if not a master marketer.
This is an interesting comparison. I still sometimes wonder if specializing is worth it. The hospitalist who work 14 days a week in my area picked up extra shifts and are now making more than me. And i work 2o days a month and one insane weekend. This is my first year though. So we shall see if I catch up. The consolation is that I actually love pccm
Appreciate the comment. As long as you love what you do there is nothing wrong with making less (or more) than colleagues in other specialties who may not share that feeling. Your lifetime career earnings will be higher if you can lost longer in your career than someone who hates his or her job and quits because of it despite making a higher salary.
Great post! I never realized how much more certain specialties earned than others. I worked for many physicians over the years and the Pediatric Pulmonologist I worked for worked super hard. I think they should be a tad higher on that list for all they deal with everyday. You are so right about living on what they were making previously. Doing this for a few years this could make a huge difference in their finances.
Appreciate the comment Andrea. It’s actually a changing list for some specialties especially at the top. A few years ago radiology was at the very top (or top 2 I believe) then there were various reimbursement cuts and it fell some. Gastroenterology has been climbing up the ranks recently.
Interesting… I wonder where general dentists and dental specialists fit into all of this?
Also, this definitely contributes to the whole conversation on “good debt” — can debt be good? Where’s the line that makes it worth it? It’s something I haven’t formed a super strong opinion on yet, and would love your input.
Debt can definitely be used as a tool to accelerate financial gains but it can be a double edged sword so you have to be careful. In real estate people use debt to leverage an asset and thus magnify a return. Say you put $20k down on a $100k property with bank mortgage on the rest. If that property returns $10k in profit, your return is 50% since you only put $20k of your capital. Say instead you bought that property outright and got $10k in profit, your return is only 10%. Educational debt is considered good debt to a… Read more »
I agree. I get annoyed with these wide-cast posts that try to say all-in that there’s NO such thing as good debt, or a post on the complete flip side of that. There’s just so much context to take into consideration with each individual and situation. Thanks for the quick reply — now get some sleep!
Very interesting and great post. I think it is important to note that these salaries are averages according to Medscape. It is tough to live like a resident for so long as with time you obtain more expenses, but physicians don’t have to go overboard. This article is great because it shows regardless of your specialty, you can still invest and save a lot of money and achieve FI relatively quickly, especially in a bull market like the one today. Again, great article!!
Thank you for the kind words and really do appreciate the comment. You are definitely preaching to the choir about regards to living like a resident when you first become an attending (if you havn’t read it already, may I direct you to my example of not following this rule: https://xrayvsn.com/2018/05/08/i-have-pretty-much-made-every-mistake-in-the-book-part-iii/) I could have really set myself up quicker if I had followed the live like a resident mantra for even 2 or 3 years after graduating (to my defense there was no physician blogosphere at that point in 2003) but even with all the mistakes I was able to… Read more »
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