The decision to pursue a fellowship as a doctor can be a complicated one. There are a ton of factors to consider. However, not is often the financial considerations of doing a fellowship that worries most who are thinking about a fellowship.
And this is not wrong. Financial considerations of doing a fellowship are important to think about. I wouldn’t say they should be the predominating factors. But to ignore them is also dangerous.
So, let’s try to examine the financial considerations of pursuing a fellowship from all angles.
Absolute reasons to pursue a fellowship
Ultimately, there are some absolute reasons for some doctors to choose to do a fellowship. If these are your reasons, then financial considerations really don’t even come into play.
In my mind, these reasons are:
- You need specialized training to practice the field of medicine that you are passionate about
- You do not feel ready to practice autonomously at the end of your residency
If you find yourself in these situations, then doing a fellowship is the way to go.
However, many of us find ourselves in a grey area where these absolute reasons do not exactly apply. There are of course still clinical and non-clinical advantages to doing a fellowship that are, let’s say, relative indications. And those matter as well.
Take me for example…
I finished my 6 years of plastic surgery residency in 2019. And I had a decision to make. Would I pursue a fellowship? Or just go out into practice?
I knew that I wanted to focus on microsurgery in my practice. And microsurgery fellowship is one of the many post-residency fellowships offered in plastic surgery.
I was fortunate that I had a ton of microsurgery experience in my residency training. I felt comfortable doing microsurgery without additional training.
But…there is always more to learn and I felt that this extra year would benefit me.
So I had a tough decision to make.
And yes, the financial considerations in doing fellowship worried me. Remember, at this point, I was still financially clueless and about a year away from my financial awakening brought on by feelings of burnout.
Let’s get into those financial considerations…
Financial disadvantages in doing a fellowship
1. Lost opportunity cost
This is the biggest concern of most physicians considering a fellowship. Most fellowships range between 1-3 years in length. In general, medicine-type fellowships are longer due to a shorter preceding residency length compared to surgical fellowships. But not always the case.
Regardless, in pursuing a fellowship, you lock in 1-3 more years of residency salary rather than attending salary. So this is a lost opportunity cost of anywhere from $100-400k/year for 1-3 years. In my case, the difference between my fellow and attending pay was >$350k. That’s not nothing!
There’s no way around it. This lost opportunity cost is the biggest short term financial implication in doing a fellowship. But the key words are…short term.
2. Lifestyle creep
Lifestyle creep is an issue regardless if physicians pursue fellowship or not. But I have anecdotally observed more of an issue with lifestyle creep in doctors who do fellowship.
Because, anything that prolongs the training period of delayed gratification can decrease our resistance to lifestyle creep when we finally do see our salary increase.
So this is a big behavioral component within the financial considerations of pursuing a fellowship. And the antidote is intentional spending.
3. Delay in flipping the script on compound interest
Another year of resident/fellows salary means another year of either:
- Not paying off student loans or paying off less debt than you would with a higher salary
- Not investing or investing less than you would with a higher salary
Put simply, the name of the game in building wealth is to stop having compound interest work against you and getting it to work for you. This is the formula.
Even if you are good about paying off some debt or investing a bit as a trainee, you will be able to flip this script even more with a higher salary. So another year of lower salary will impede your ability to do so.
Ok, so those are the main downsides when it comes to financial considerations in pursuing a fellowship as a doctor.
Financial advantages in doing a fellowship
But, what about the upsides?
1. Another year to get your sh*t together
This is by far the thing that helped me the most financially by doing a fellowship. And you’ll notice that I list it even ahead of the obvious salary benefits that will be discussed later on.
If I took a job after I finished my 6 years of training without a fellowship, I would have in completely different state of mind. I was financially clueless and burned out. Even more, I knew nothing about contracts, how to find the perfect job, or how to manage my personal finances.
I would have fell into common traps like lifestyle creep, buying too much house, looking for a job to fit into rather than the other way around, and taking on more debt.
An extra year allowed me to take some time to improve my financial well-being and make the right decisions as I transitioned into being an attending. This single-handedly helped me to increase my net worth by $250,000 before my first attending contract and near $1,000,000 in less than 18 months. It’s so important that I put together a whole course to help others find the same success called Graduating to Success!
This may seem somewhat serendipitous. How many of us will just so happen to have such an awakening during this one year period? I have no idea! But, you are reading this blog. Which means you are interested in improving your personal finance, no matter what stage you are at. Maybe some of you are near the end of your training and could benefit from another year in this way like I did?
2. Higher salaries for specialized physicians
This is the next most important of the positive financial considerations or doing a fellowship.
Specialized, fellowship trained physicians make more money than non-specialized, non-fellowship trained physicians. On average, a cardiologist gets paid more than an internal medicine doc. On average, a plastic surgeon gets paid more than a general surgeon.
Now I will mention as an aside that this does not mean that general surgeons or internal medicine doctors can’t get paid more than plastic surgeons or cardiologists. They can. And if these non-fellowship trained specialities are your passion, follow them! And use other techniques to increase your compensation both clinically and non-clinically!
But again, in general, fellowship trained docs are more specialized and get paid more.
This increase in yearly salary is usually enough to overcome the short term lost opportunity cost of 1-3 years during fellowship. For example, a $100k yearly salary increase over 20 years of practice is worth way more than the lost salary over 1-3 years of additional training.
Now, in my case, I probably could have gotten the same job at the same salary with or without a fellowship. So this argument does not actually support what I did.
However, going back to my first point above, I never would have found or selected this job (which I absolutely love) without the complete mindset shift that an additional year allowed me.
3. Loan management
Wait a second!
Didn’t I say in the disadvantages of doing a fellowship that an extra year of low salary will hurt our ability to pay off loans? I did! And I still stand by that.
But, if you are pursuing Public Service Loan Forgiveness, an additional 1-3 years of low income with low income based loan payments combined with less years of higher attending income and higher income based payments before your 10 years of payments are up is a good thing!
This can be a bit of a risk unless you are sure that you want a job at a qualifying institution post-training. But if you have a high debt amount and know you are pursuing PSLF, adding a fellowship can make sense.
I didn’t take advantage of PSLF (because I was ignorant of it), but if I did, adding a year of fellowship would have decreased the years of payments on a post-training attending salary from 4 to 3. That equals a good chunk of change given my loan burden that started near $500k.
Instead, I now just pay off debt aggressively based on my loan management plan to be debt free within 5 years after training.
4. Use the Roth to your advantage
This is the least of the financial considerations related to fellowship. It’s even more of just a suggestion or piece of advice from those who do additional training.
By doing a fellowship, you now have more years in the lowest tax bracket that you will ever be in. This means you will likely qualify for a Roth IRA (without needing the backdoor). You also could make Roth 401k or 457 contributions if available to you. By doing this, you can contribute post-tax money (in your low tax bracket) that will grow tax free and never be taxed again. That’s awesome!
The converse side to this is, again, you are making a lower salary and less likely to have spare cash to invest. But, if you can, this is how you likely want to do it.
Also, you can even contribute to a Roth IRA as an attending through the backdoor (for now at least). So this isn’t an exclusive financial feature of your training years.
So, what should you do?
Like anything else, this is such a personal decision.
In my case, I knew that I was ready to move into practice after residency from a medical standpoint. But from a mindset standpoint, I intuitively knew that I needed another year to figure things out. And that extra year benefitted me a ton both clinically and non-clinically!
Your reasons for doing or not doing a fellowship may be very different. But the financial considerations of this decision should not be ignored. They should be considered and at the very least accounted for as this important decision is being made!
Don’t forget to check out my free masterclass webinar on The 12 Steps to Financial Freedom for Physicians!
What do you think? What are the financial considerations for doing a fellowship? Did you pursue a fellowship? What were the financial consequences – good or bad? Let me know in the comments below!