The Case for Ranking Residency Programs with Retirement Matches in Mind
By Dr. Josh Daily, WCI Columnist
As a medical student entering the final stages of training, financial considerations can often mingle with career choices. One question that has emerged notably among fourth-year students is whether to prioritize residency programs that offer a retirement match.
Understanding Residency Retirement Matches
In recent years, the trend of residency programs providing retirement benefits, such as a matching contribution plan, has gained traction. While a retirement match was virtually unheard of during my residency, it’s now becoming a more frequent consideration among applicants. Despite this growth, programs that offer such benefits remain the exception rather than the rule.
The Financial Significance of a Residency Retirement Match
Imagine your residency offers a 10% employer match on an annual salary of approximately $67,000 for a first-year resident (PGY-1). At first glance, this may seem negligible, but the potential for this contribution to grow over time is substantial.
The Compounding Effect of Early Contributions
To illustrate this, I analyzed the future value of employer contributions by retirement age (67). Utilizing the AAMC resident salary figures and conservative investment return assumptions, I created projections based on training durations of three, five, and seven years. The findings are enlightening:
- Three-Year Residency: With a 5% return, the match can grow to about $132,375.
- Five-Year Fellowship: This amount increases to approximately $219,869.
- Seven-Year Program: The potential value exceeds $305,752 at a 5% return and can exceed $600,000 at a 7% return.
Notably, if residents also contribute 10% of their own salary, the total could surpass $1.2 million by retirement.
Maximizing Retirement Contributions via Roth Accounts
Most medical residents find themselves in their lowest tax bracket, making employer-sponsored Roth retirement plans particularly advantageous. Here’s why:
- Tax-Free Growth: Contributions to Roth accounts grow tax-free, translating into significant long-term benefits.
- Strategic Contributions: Even small contributions during residency can lead to substantial wealth accumulation over decades.
Should You Prioritize Residency Based on Retirement Matches?
Now comes the essential question: Should a retirement match influence your program rankings?
The Short Answer: Yes, especially if other factors are equal. However, it’s crucial to note that “all else” is rarely equal.
As a fellowship program director, I encourage candidates to evaluate several factors:
- Quality of Training: The depth and breadth of educational offerings are paramount.
- Cultural Fit: Choose a program that aligns with your professional values and goals.
- Support System: Proximity to family or close friends can make the rigorous training more manageable.
Beyond Financial Impacts: Behavioral Benefits
While the financial calculations reveal compelling benefits, the behavioral aspects of having a retirement match are equally significant:
- Encouragement of Early Savings: A retirement match signifies a commitment to developing long-term financial habits and helps instill the value of saving early.
- Investment Education: Engaging with retirement saving during training provides valuable lessons in compounding and dollar-cost averaging.
The Takeaway
In an ideal world, all residency programs would offer the same retirement benefits as attending physicians. The investment is modest for institutions, yet the potential benefits for trainees are immense.
For medical students refining their residency rank lists, a retirement match is not just a benefit—it’s a meaningful opportunity for future wealth building. While it shouldn’t overshadow the importance of education quality, mentorship, and overall experience, it certainly ranks as a solid consideration in your decision-making process.
Your Thoughts
Did you receive a retirement match during your residency? How did it impact your training choices and your financial trajectory? Share your experiences and insights.
Focus Keyword: Residency Retirement Match
Meta Description: Discover the financial benefits of ranking residency programs based on retirement matches. Learn how early contributions and Roth accounts can affect your future.
SEO Title: Why a Residency Retirement Match Should Influence Your Ranking Decisions
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- Understanding Residency Retirement Matches
- The Financial Significance of a Residency Retirement Match
- Maximizing Retirement Contributions via Roth Accounts
- Should You Prioritize Residency Based on Retirement Matches?
- Beyond Financial Impacts: Behavioral Benefits
- The Takeaway
- Your Thoughts
By optimizing your understanding of financial wellness during your medical training, you set yourself up not just for a successful career, but a financially stable future.
