Doctors are high income earners, by definition. But we are often not high net worth individuals. So why doesn't high income always convert to wealth? There are a ton of reasons. Long education and training pathways with limited income before making a high income lead to a stunted start to wealth building. Meanwhile external expectations, lifestyle creep, and delayed gratification can lead to poor spending decisions. Unfortunately it is not uncommon for late career doctors to reach their 50s or 60s with limited wealth.

So, what are doctors in this situation to do? Is it too late?

Absolutely not! There is still plenty of time to build meaningful wealth and reach financial freedom to practice medicine on your own terms or retire altogether. But the strategies you use must be tweaked.

Here, I'll share actionable strategies that late career doctors can use to accelerate their wealth building and reach financial freedom, even with a shorter time horizon.

A Quick Note on Mindset

For late career doctors who are behind in their wealth building to make the changes necessary to reach financial freedom, mindset is the first, and most important, step.

A few quick notes on this:

• What's in the past is in the past. We all wish we could go back in time and change something. But we can't. It doesn't matter how you got here. The only thing that matters is what you do moving forward!
• Avoid comparisons to others. Why? See above.
• You are in control. Not of everything. But of a lot of things. Take action on what is in your power. That is what the strategies below will teach you to do. Don't sweat the rest.
• Get started. You may be behind but there is still time. Don't waste it. Don't get stuck in analysis paralysis. Get started today.
• Build a support system. You are not in this alone. It might feel that way (it did for me), but you aren't. Find like-minded individuals and share your experiences to learn from each other. A great first place to start is our private Facebook group!

5 Important Wealth Building Strategies for Late Career Doctors

Strategy #1: Supercharge Your Savings Rate

It all starts with the basic formula to build wealth. Create a margin between what your earn and what you spend. Then, invest that margin so your money makes you money.

Let's break this down into 2 parts:

Part 1: Create a savings rate
Part 2: Invest your money and reap the long run benefits of compound interest

Unfortunately, part 2 of this formula is no longer to your advantage as your time horizon to retirement is shorter. No worries. File this away under the factors that you cannot control.

Thankfully, the first part of the equation – your savings rate – is under your control. Even if it doesn't necessary feel like it.

My general rule of thumb is to create a savings rate of at least 20% of your pre tax (gross) income. However, late career physicians need to supercharge this to at least 40-50% of gross income. Your savings rate is going to be the main driver of your ability to reach financial freedom, not time. So optimize it.

Is this drastic? Yes. But being able to retire on your schedule is worth it

To be successful you will need to carefully examine your spending. Define what are truly “needs” versus “wants” in your life, and follow a budget. Dramatic cuts to lifestyle spending will likely be necessary. You may even need to live like a resident again. These trade offs are hard but worth it.

Once you create your savings rate, use what you save to pay off debt. Maximize tax advantaged retirement accounts like your 401k or 403b and backdoor Roth account. Finally, contribute whatever is leftover to your taxable investment accounts.

Strategy #2: Invest Aggressively—but Smartly

Ok, back to the second part of our wealth building equation: investing our savings rate.

Sure, time is no longer on our side. But now is not the time to invest wildly via day trading or swing for the fences on some alternative investment. Remember, timing the market and stock picking simply do not work. Investing broadly and via low cost index funds while staying in the market still wins the day.

So, what can you do to help maximize your returns?

Well, you need to be a bit more aggressive in your portfolio of diversified funds. This is largely managed via your asset allocation, namely your portfolio's stock:bond ratio.

Bonds, being more conservative investments that preserve rather than grow wealth, tend to weigh more highly in a late career doctor's portfolio. However, if you are behind, you will need to maintain an asset allocation with a greater proportion of stock index funds. Stocks are riskier investments than bonds, which mean they also offer greater potential returns in the long run in exchange for this risk. In this situation, you should consider taking on a bit more of this risk to be more aggressive.

Now, this can backfire if your risk tolerance doesn't align with your portfolio's asset allocation and the first market downturn causes you to sell your stock investments. (Remember, market downturns and even bear markets are a normal cyclical aspect of the stock market.) If you feel that your risk tolerance won't support a more aggressive portfolio, gradually increase your risk (via your portfolio's percentage of stocks) over time. You can't avoid risk if you want to get to financial freedom, but you can manage it.

The biggest thing is that you don't have time to waste. Avoid create your savings rate and then sitting on a large sum of cash rather than investing it.

Strategy #3: Delay Retirement Strategically

Ok, I understand that the whole point of what we are doing here is working to get you into retirement. However, strategically delaying your retirement date can greatly accelerate your ability to build wealth into retirement.

How?

• Extra years of high income which fuels your savings rate AKA your wealth building engine
• Delaying withdrawals from your retirement accounts so they can compound more
• Greater Social Security benefits

This is also where a healthy mindset can come in. Retirement does not necessarily mean a binary working full time or not working full time. You can partially retire by taking off more time and working fewer hours while still making a high income and contributing to your nest egg. You could even work locum tenens with potential for higher pay and less stressful work.

There are tons of great options out there! Even with a yearly income of $200,000, an extra 5 years working gives you $1 million in potential dollars to accelerate your nest egg and get you to retirement.

Strategy #4: Use Your Assets to Create Passive Income

Your income in retirement will come largely from two broad sources: withdrawals from your retirement accounts or passive income from income producing assets.

So, one way to accelerate your wealth building in your later career if you are behind is to use your savings rate to buy income producing assets that will generate passive income during your retirement in perpetuity.

My favorite income producing asset is cash-flowing real estate, whether done via an active or passive investing approach. Another cash flowing option is to invest in oil & gas via mineral rights and/or working interest. Both of these options are also very tax friendly. Investing in real estate also gives you the opportunity to use advanced strategies like cost segregation, bonus depreciation, and real estate professional tax status (especially if you are working less hours clinically) to maximize tax efficiency.

As a doctor you also possess a different kind of asset, your knowledge and experience in medicine. There are tons of ways to use your expertise to generate income via physician side gigs like these. Is it 100% passive? No. But the work:income ratio is skewed way more in your favor compared to clinical work.

A word of caution

All of these options listed have the potential to really help you get to financial independence quicker. However, because of this, there are bad actors in this space. You need to vet any and all opportunities very carefully. Remember, time is less on your side. There is less room for error. You cannot lose it all betting on a “get rich quick” scheme. All of these options work, but they still take time, education, and effort over the long run. There is no silver bullet.

Strategy #5: Plan with Purpose and Maybe Professional Help

Investing early in your career comes with the benefit of being able to make mistakes and recovery relatively easily. However, for late career doctors, mistakes are more costly and can delay things by many years or significantly impact the comport of your well deserved retirement.

As such, your next moves need to be well planned and thought out. Now is not the time to experiment with different strategies and see what works or to go in willy-nilly. You need a plan that is personalized to your goals and your situation.

The first step is to develop your personal written financial plan. Write out your financial goals and timelines along with your resulting financial priorities. Then write out exactly how you will build your wealth – your savings rate, your asset allocation, your method of investing (where, how much, how often). As importantly, write out what you will not do investing (actively pick stocks, sell during a downturn, etc). Lastly, write out a system to monitor your progress and check in. You can even use my written financial plan here as a template.

This is certainly a task that one can DIY. However, if this feels like a roadblock or too daunting, you can work with a fiduciary financial advisor on a fee-only basis to help you craft your plan!

Start Today, Stay the Course

Building wealth as a late career physician is 100% doable in any situation. That is the most important message here. Don't fret. Educate yourself (hopefully this post helps!) and get started.

However, it does take discipline, focus, and intentional effort. There is no magic wand that can get you to financial freedom in one stroke. Nor is time as much of a benefit as it could be. But, as shown here, there are small, consistent actions and habits that you can build and enact that will lead to outsized results, perhaps even building your nest egg more than you expected.

So, whatever your situation is, whether you are fresh out of residency or 10 years from retirement, the best time to build wealth is right now!

How can you get started today? These calculators and tools can help right now:

• 5 Step Retirement Calculator for Doctors
• How Doctors Can Calculate Their Expected Net Worth
• How Much Do You Need to Save for a $5 Million Nest Egg?
• Are All Doctors Truly Capable of Achieving FIRE?

What do you think? How can late career doctors best build their wealth? What strategies are you using today? Let me know in the comments below!