Your First Attending Paycheck: Exactly What to Do With It

That first paycheck after orientation for newly minted internal medicine residents who just finished training is a big one; you've earned it. Starting pay is $250,000 compared to $68,000. Surgeons of orthopedics start at $550,000 after residency compared to $70,000. Emergency physicians earn $350,000 in their first year. Direct deposit of this money is not just money; it's the end of financial struggles. Important decisions are looming ahead in the next 90 days though. Here are steps to handle this. Before That Check Even Hits: Fix Your Tax Withholding New W2 employees generally have taxes withheld based on income. But many new doctors find out in April that they have underpaid by quite a lot. Check W4 elections immediately if you're an employee. For any income that is not W2, such as moonlighting or locum work, you will have to pay estimated taxes four times a year. These are due in April, June, September and January. Special tax points for doctors: Federal income tax rates are 32% to 37% for income over roughly $191,000 (single) or $383,000 (married filing jointly) in 2024. State income tax rates range from zero to 13. 3 percent depending on the state. Social Security tax stops phasing out at $168,600. You stop paying Social Security tax at this amount but Medicare tax continues and there is a surcharge above $200,000 for singles or $250,000 for joint filers. Act fast: Login payroll for the first week and confirm withholding is right; if you will have income reported on 1099 forms this year, you must pay estimated tax by April 15. Your First Check Priority Order New physicians often make the same mistake: they wait six months for their finances to settle and then do nothing. Don't do that. Here's a sequence for decision making that works whether your income is $15000 or $35000 per month. Priority 1: Build Your Emergency Fund (If You Haven't Already) First, save 3 to 6 months of living costs in a high interest savings account (APY is currently 4. 5 to 5%). Those who neglect this and invest or take out loans for everything often turn to credit cards when an emergency strikes. Living costs vary from $5, 000 to $15, 000 per month depending on lifestyle. Goal: Deposit $20, 000 to $50, 000 into that high interest savings account before starting active investing. For salaries like that this should take 2 to 4 months not years. Priority 2: Max Out Your 401(k) Employer Match — Always If your employer matches contributions to your 401(k) get 100% of that match before any other investments. That is essentially 50 to 100 percent return on investment compared to paying off any loan or investing anywhere else. For W2 employees at health systems: contribute at least enough to get matching contributions, typically 3 to 6 percent of your pay. The contribution limit for 2024 is $23,000 for individual contributions plus $69,000 for total including employer contributions if your plan has profit sharing. Contributions also reduce your tax burden significantly. Saving $23,000 at a 37 percent marginal rate saves $8,510 in federal taxes. Priority 3: Student Loan Strategy — Stick to Your Plan You should have made decisions about your loan plan during residency rather than your first month as attending. If you hope to use PAYE and PSLF, keep making income-driven payments and submit your annual Employment Certification. If you had planned to aggressively reduce debt, start doing that now. Don't let the sudden influx of new income derail your strategy for loan repayment. A common error: Attendees new to PSLF often receive a large influx of money and get tempted to aggressively pay down debt. But doctors with $250, 000 in debt working for a nonprofit for three years and then switching to aggressive payoff means losing about $150, 000 in forgiveness that they were on track to get. Stick to it. k with the plan. Before you do anything different, model your specific situation using MedDebt Calculator. If you are aggressively paying down debt, your income as an attending lets you pay off $200,000 to $300,000 in three to five years if disciplined. Treat this student loan payment as a second mortgage: fixed, monthly and unchangeable. Priority 4: Max Out Tax-Advantaged Accounts Fill tax advantaged accounts first after you've built your emergency fund and have employer match. Order of operations: HSA: $4150 for singles and $8300 for families in 2024. Contributions are pre-tax and withdrawals for medical expenses are also tax free. This is best for most physicians. Backdoor to Roth IRA: You can contribute $7000 annually and $8000 if over 50. Most physicians cannot directly contribute to Roth due to income limits around $146000. So contribute to a traditional IRA and convert to Roth in January. 403(b) or 457(b) if your employer is non-profit: This is another $46000 of deferred tax space. Max out both if you can. Mega Backdoor Roth: Some plans allow after tax contributions and Roth conversions in service. This could add up to an additional $46000 to Roth. Ask HR or benefits team if your plan offers this. Priority 5: Taxable Investing and Extra Loan Payoff You should only consider taxable brokerage accounts with broad index funds or extra loan payments after you've done everything else above. This is where you consider whether to invest or pay down loans. Here's a brief guideline: Loan rate > 7%: If loan rate is above 7% think of making extra payments together with investing. Loan rate < 6%: If loan rate is below 6%, invest more heavily since expected market returns usually exceed guaranteed savings from low interest loan repayment. PSLF path: For PSLF path take loan payments almost out of existence and invest as much as you can. Checklist of 20 specific tasks from Day 1 to Year 1 is available at /checklist/new attending. Bookmark that for anything left undone. The Lifestyle Creep Problem Your biggest financial risk at your first paycheck as an attending physician is not taxes or student loans. It's lifestyle inflation. Spending habits go from $3,500 to $5,000 per month to $10,000 to $20,000 per month within a year and this completely negates any advantage from your income rise. Things to Watch Out For: Buying a house: Buying with mortgage using five times your salary is a big risk especially if still paying off medical school debt. Many financial advisors recommend waiting two years after residency to buy. Others advise that if you know you will stay put, go ahead. Just check that the numbers are right comparing renting to buying, including what you forego financially. Buying a car: Buying a fancy car right after you start your new doctor job is a classic. Buying a $60,000 car in your first month means that for 30 years that money won't grow. Disability Insurance: This is one area where it is important to spend money. Being able to earn income is your biggest asset. For doctors, coverage that pays out while you remain in your occupation costs $3,000 to $6,000 a year and protects $200,000 to $500,000 in annual income. Get it right away and look for a rider that guarantees you can increase coverage as income goes up. The 90-Day Checklist Here's what to do during your first three months of working and earning income: Month 1 Check your W4 withholding and start making estimated tax payments if quarterly. Open an account at high yield savings and start building an emergency fund for 3 months. Sign up for your 401(k) and take full employer match. Get disability insurance quotes and get coverage as residency ends without group insurance. Confirm your plan for student loans if you are pursuing PSLF and set up overpayments for aggressive payoff. Month 2 Build up your emergency fund to $20,000 to $30,000. Open Health Savings Account if you have a qualified high deductible health plan. Make a contribution to Roth IRA for this tax year using a back door method. Review disability and term life insurance coverage. Month 3 Complete building your emergency fund to 3 to 6 months of spending. Start investing in taxable accounts or increase loan payments with any extra cash. Set up net worth tracking using a spreadsheet, Personal Capital or something similar. Have a CPA review your tax projection. Tax filing for this year is complex; you should consult a CPA if you file. Frequently Asked Questions Whether to pay off student loans first or invest as a first year attending doctor depends on your loan interest rate and whether you qualify for Public Service Loan Forgiveness Program (PSLF). If PSLF is available, keep making payments and invest aggressively. If you want to pay off high interest loans, you get a guaranteed after tax return by paying them. Historically investing in index funds yields 7 to 10 percent but there is risk. Most doctors benefit by combining loan payments and taxable investments. What is the biggest financial mistake new attending doctors make? Signing up for a $12,000 mortgage in the second month of attending income when they still have $250, 000 in student loans and no emergency fund. Housing ties up cash and limits flexibility. Liquid assets are needed before buying. Should you see a financial advisor right away? Not immediately but want one by first year. A fiduciary advisor (looking for CFP with experience specific to physicians) fees $3, 000 to $8, 000 for a full plan first year; worth it because of tax complications and debt interaction. Avoid advisors who sell products or work on commission. When should you do a backdoor Roth IRA? It should be done each January to simplify Pro Rata Rule (this rule can be complicated with pre-tax IRA money at year end) and not to wait until April. Can I contribute to a 401(k) AND pay back student loans in the same month? Yes, you can do both. These two things are not exclusive. Most people try to do both: take advantage of matching contributions for a 401(k) and also pay their student loans (and maybe a little extra). Then they use leftover money for investments or further reductions of debt depending on loan interest rates and tax situation. Run Your Own Numbers Every doctor has a unique level of medical debt and the MedDebt Calculator at https://www.medschooldebtcalculator.com can help you figure out your best repayment plan. You can test different strategies such as Forgivable Loans (PSLF), aggressive payoff or refinancing. Just enter your actual loan balance, specialty and income. It is free and takes only two minutes; it shows you year by year how much your net worth will grow.

This article is for informational purposes only and does not constitute financial, legal, or tax advice. Every borrower's situation is unique — consult a certified student loan advisor or fee-only financial planner before making repayment decisions.

Disclosure: This article is for informational purposes only and does not constitute financial, legal, or tax advice. Loan program details change — always verify current rules on studentaid.gov. MedDebt may earn a referral commission if you refinance through links on this site.