The Doctor’s Financial Lifecycle Part 1: Medical Residency

The Doctor’s Financial Lifecycle Part 1: Medical Residency

We know that anyone embarking on a career as a self-employed physician has lots to think about. While retirement might seem light years away, it isn’t too soon to start thinking about financial planning for your future. This article should serve as a starter kit on how you might want to save and protect some of your hard-earned money.

Repaying Medical Student Loans

Too many residents transition to self-employment with no plan to repay medical student debt. That’s a mistake. Up until now, the debt has been interest free, but when the interest kicks in, the debt starts to soar. For some, this is big money. We see residents carrying student loans ranging from $60,000 to more than $200,000. Many take advantage of the tax savings from their tuition credits during their resident year and reduce their debt by using some of those savings to pay down their loan. This is a smart move.

Take advantage of the tax savings from your tuition credits during your resident year and reduce your debt by using some of those savings to pay down your loan. This is a smart move.

Donna Ho-Faloon, Head of Health Professional Practice

RRSP Contributions

Paying off personal debt is common sense. If you pay down your debt with excess cash, waiting to invest in RRSPs won’t harm your eventual bottom line. Once your personal taxable income reaches over $106,000, your RRSP contributions will save you over 40%. Deferring RRSP deductions until your taxable income increases can generate much higher tax savings. You should consider having at least $35,000 in your and your spouse’s RRSP account available to use towards a Home Buyers Plan. Not only would you get an RRSP deduction, you could borrow up to $35,000 to purchase your first house.

Financial Health Warning: As a physician, the bank will happily offer you a large line of credit and/or mortgage because they know your earning potential. But this can be a financial trap because it encourages some doctors to live large too early. Get the debt monkey off your back. If you don’t, the financial repercussions can bite hard.

Insurance Coverage

As you transition into practice, there are several types of insurance that you should consider. Each has a role for ensuring a solid financial future. Here is an overview:

If you would like to learn more and discuss your plans with a professional advisor, please contact our Health Professionals Team that specializes in providing tax guidance for medical professionals, including doctors and dentists.

You can also review the OMA website for information on programs and insurance provided to OMA members.

Whatever route you choose, this is the bottom line: It’s never too early to get a handle on your finances.

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