Investing for Healthcare Professionals
Long stressful hours and increased workloads due to staffing shortages and budget cuts make burnout a real hazard for healthcare professionals. Having a solid investment plan can relieve some of that stress. A well-planned investment strategy doesn’t have to be a drain on your time or attention, either.
INVESTMENT CHALLENGES FOR NON-PHYSICIANS
Healthcare professionals face more challenges than the average worker. In addition to housing, food, and rising costs of living, there are student loan payments and licensing and certification expenses.
Healthcare professionals’ frenetic careers can leave little time to think about things like investments and retirement. But these important subjects should be addressed now rather than later. If you’re new to investing, your first priority is your financial education.
INVESTMENT CHALLENGES FOR PHYSICIANS
Unfortunately, these investment difficulties are compounded for doctors. Doctors have investment challenges that are common for highly paid professionals while still dealing with the stress and expenses inherent in a medical career. These can include:
- Taxes, especially if in a private practice;
- Employee salaries for healthcare professionals and staff;
- Student loan debts (averaging $275,000, including medical school);
- Malpractice and health insurance; and
- The large sums of money needed to maintain their standard of living during retirement.
When it comes to investing, doctors face competing social pressures. The social stigma of being referred to as "a rich doctor" by non-physicians coexists with peer pressure and FOMO while discussing investments with other doctors, who may want to outdo one another in a group setting.
In any event, most doctors are too busy with their jobs to take the time to actively manage their finances. Because of this, hiring a financial expert is practically required. Other medical professionals who wish to diversify their financial options should do the same.
A doctor is advised to assemble a group of financial experts due to the substantial sums of money they will invest. This team should consist of a financial planner as well as a wealth planner, an investment advisor, and a tax expert.
CHOOSING A FINANCIAL ADVISOR
An important consideration when choosing financial experts is how they get paid. Fee-only advisors are preferable to those who receive commissions for recommending products to their clients. The most crucial factor to take into account when selecting financial advisors is whether or not they are chartered or licensed fiduciaries. Fiduciaries are required by law to prioritize your interests over their own. They must avoid conflicts of interest and let you know if one does occur.
INVESTMENT GOALS FOR HEALTHCARE WORKERS
The investment goals for healthcare workers are broadly the same as nearly everyone: putting their money to work to provide themselves with a better future. However, the highly stressful nature of a medical career can provide an impetus for funding an early retirement before they’re burned out.
It is not unheard of for healthcare workers who began maximizing their investments in their twenties to be able to retire in their forties. The key is knowing how much you can invest without causing undue hardship.
“Retiring comfortably” can mean something far different for doctors. Most financial experts recommend that physicians have at least $3 million in assets by age 65. This can increase to up to $5 million, depending on the lifestyle they wish to pursue in retirement.
INVESTING TIPS FOR HEALTHCARE PROFESSIONALS
The stress and long hours inherent in a healthcare career can foster poor financial habits. Indulging in “retail therapy” can feel well-deserved, but it adds increased credit card debt to the financial burden of student loans that many healthcare professionals must contend with. Paying off that debt will eliminate a financial drain and free up more money for investing.
Before they begin investing, physicians and non-physicians both should make a workable budget to determine how much money they can invest. The next step is building an emergency fund. Aim to save enough to cover between 6 and 12 months of essential expenses. Keep these funds in a safe place, such as a high-yield savings account or a money market mutual fund, where they are easily accessible.
Take full advantage of the tax-advantaged investing options available. Build a long-term investment base with 401(k)s and IRAs. Investing in an index fund through a 401(k) will give you a good foundation while taking advantage of matching contributions by your employer.
Nursing professionals can continue their education to move into higher-paying positions. The median salary for a CNA is $38,200. Becoming an LPN requires completing a one-year practical nursing program. The median salary of an LPN is $59,730. An Associate’s or Bachelor’s degree is necessary to become a Registered Nurse, but the median salary is $86,070 - more than twice that of a CNA.
Additional investment opportunities open to physicians can range from buying into an existing private practice to investing in medically-adjacent businesses. Some options for additional revenue streams are imaging labs, dialysis or endoscopy centers, or outpatient surgery centers. These investments will continue producing income for physicians even after they retire.
