What’s unique about the two physician/two high-earner couple?

In short, why did I start this blog? What makes the two physician couple unique?

Extra debt
The average graduating medical student in 2015 had a debt load of $207,000, according to the AAMC.  Assuming a tuition increase of about six percent per year (our medical school averaged eight percent per year), in 2017 this would be $233,000. If this medical student, like us, deferred her loan repayment through a four year residency, she would finish residency with an average debt load of $308,000 (assuming a 7% average interest rate). Given that some medical students graduate with zero debt (or close to zero debt) because of family support or military or other service obligations that pay their tuition/living expenses, this is probably a misleadingly low number. I couldn’t find the number, but I would assume the median figure is considerably higher than this.

One could logically deduce then that the average two physician household would then carry a debt of about $616,000 per year upon finishing residency (or potentially considerably higher, as noted above). This is a staggering debt load – and sadly is only increasing with time. As noted in an earlier post, when my wife and I met with our financial advisor (who meets with most physicians in my 200 plus-person physician owned practice) coming out of residency he had never met a couple with more debt than we had. Next time I see him I’ll have to ask if that is still the case.

Extra income
If the hole that we start with is indeed twice as big, at least we have large shovels with which to dig ourselves out, as the White Coat Investor is fond of saying. Of the thirteen physicians at my hospital in my practice I am the only one with a working spouse and certainly the only one making in excess of $250,000 per year.  As I plan to outline in a future post about our financial plan and how we manage paying down debt, saving for retirement and lifestyle, currently a lot of our gross income goes to paying down debt – $17,000 per month ($13,000 of which goes to student loans). Eventually, this extra income will pay off our house (and all outstanding debt) by age 40 and should fund a comfortable retirement (and college/postgraduate education for our kids) by age 50 if we choose to retire early.

Keeping our eye on the big picture

We also have a lot more pretax retirement savings available. I fully fund a $54,000 per year corporate profit sharing plan through my group practice and my wife has a standard 401(k) that she funds to the $18,000 limit. Because we bring home more money we pay for medical expenses out of pocket and can use our HSA as a stealth IRA.  We have the capital to do annual Backdoor Roth conversions to the maximum allowable $5,500 each. Rather than wasting time trying to beat the market, because we have a high savings rate and stable income (and a long time horizon) we can invest 100% in equity index funds using a simple investment allocation as espoused here.

Tax issues
Of course this extra income comes with (disproportionately) higher taxes. The marriage penalty (also explained well by one of  my favorite sites Financial Samurai) cost my wife and I a painful $29,000 last year. We have paid AMT each of the past three years.

Our combined federal and state effective tax rate was 37% in 2016. Our marginal tax rate was a staggering 49% – a decision that really comes in to play when deciding if it is worthwhile to pick up that extra call in December.

Childcare issues
Because we both have busy practices with the requisite demanding schedules we require a nanny for childcare (yes, again a subject of a future post). This is a luxury that we think is not only beneficial for our children, but also necessary given our hours. It also means that we have certain obligations as a household employer. We must file all applicable federal and state nanny tax forms (and register as an employer). We pay payroll taxes, FUTA tax, and workers compensation taxes – all of which cost us thousands of dollars per year. But after a massive daycare failure when we first started working as attendings (and no family in town), we quickly realized a nanny was the only feasible way for us to work full-time. We have been lucky enough to find two outstanding and experienced nannies and our kids have benefitted but it is certainly costly and burdensome.

Emergency fund
Two physician households probably do not need to follow the conventional wisdom in regards to having an emergency fund equivalent to six months of living expenses, given the high earning potential and stable income that each partner provides. We currently have three months of expenses set aside in a high yield (at 1.2% this seems like an oxymoron) savings account. Since at this point the majority of our expenses go to debt repayment, this number will go down over time allowing us to have more money invested in our brokerage account and less sitting in a savings account that doesn’t even keep up with inflation. More important than this small sum of money is the stability that having two breadwinner incomes provides. An unforeseen medical leave or prolonged maternity leave is easily weathered versus a household totally dependent on one income.

Life insurance/disability insurance
Likewise, the two high earner household with two breadwinners is inherently less dependent on one income and therefore can reasonably have smaller life and disability insurance policies – and drop or reduce those policies at a younger age. I will cover our disability and life insurance coverage (and experience with our excellent agent) in a future post in more detail.

What are your thoughts? Any other key differences between the two physician household and everyone else?

7 Replies to “What’s unique about the two physician/two high-earner couple?”

  1. That’s a great big shovel between the two of you, but when more than one of every three shovelfuls goes to taxes, it takes a bit longer to dig out than it might otherwise seem it should.

    I like the plan that you’ve laid out, and when you set goals and publicly track your progress, you may find you reach them even more quickly than you had anticipated.

    Best of luck on the journey!

    1. Thanks POF. We struggle somewhat with lifestyle vs putting everything to debt/investing but since we are still 32/33 we have a lot of time on our side too. From reading your blog I’m not sure we are nearly as frugal.

  2. Excellent summary. One thing that’s not finance-related is the ability to talk to each other and vent about work. Having a spouse who’s in the same career (albeit in different specialties) means your spouse completely understands the stresses you are going through.

    1. Thanks for reading my site. You are absolutely right. The fact we each understand the stress of the job (call, hard days, etc) is so important. Nobody else truly gets it.

  3. My husband and I are both physicians and I am the moderator of a large private group on fb of dual physician families. Send me a message if you are interested in joining! There has been a lot of interest in your blog and this topic in particular.

  4. Your post is informative and applies well to high earning couples (in my case I am the MD, husband in non medical field). I don’t think many appreciate the factor that childcare plays with demanding careers. It may seem “elitist” to have a nanny to others not in the same situation, but with the hours we work there is no other option. You cannot take off work when child care centers close , and no one person will work the hours necessary (with call/travel schedules) so it is often a struggle. Childcare costs for physicians can be almost twice what it is for the average family. As a female physician in OB/GYN most of my colleagues have working spouses and we are in the same boat. Interesting that not many in your practice are in similar situation. Is this driven by gender or are there many stay at home Dad’s?

    1. Thanks for reading and your thoughtful reply. I totally agree that there is a misperception that having a nanny is classist. We could not have the jobs we have and perform our necessary call responsibilities without a nanny.

      There are stay at home mom and dad spouses in my group (more stay at home moms because I have more male partners). Maybe it’s just a small sample size because the number of physicians from my group at my hospital is relatively small (13) or perhaps it’s because I am fortunate enough to be in a well paid specialty and that supports the one income household better. We are unique here – but clearly not everywhere!

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