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Determinations Using Rules-of-Thumb

[By Staff Reporters]fp-book1

Once the value of all personal assets and liabilities is known, physician net worth can be determined with the following formula: Net worth – assets minus liabilities. Obviously, higher is better.

And, although eschewed in the past, rule-of-thumb determinations are making a comeback because of the recent financial implosion and stock market meltdown.


In The Millionaire Next Door, Thomas H. Stanley, Ph.D., and William H. Danko gave the following benchmark for net worth accumulation. Although conservative for physicians of a past generation, it may again be more applicable in the future because of the current managed care environment and political turmoil.

Here is the guide: Multiple your age by your annual pre-tax income from all sources, except inheritances; and then divide by ten.


As an HMO pediatrician, Dr. Curtis earned $60,000 last year. So, if she is 35, her net worth should be at least $210,000. How do you get to that point? In a word, consume less and save more. Stanley and Danko found that the typical millionaire set aside 15 percent of earned income annually and has enough invested to survive 10 years, at current income levels if he stopped working. If Dr. Curtis lost her job tomorrow, how long could she pay herself the same salary?



In one non-medical but stark example of inattentiveness to net-worth, John McAfee, the entrepreneur who founded the antivirus software company that bears his name, is now worth about $4 million, down from a peak of more than $100 million, according to the New York Times.


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19 Responses

  1. ME-P,

    You have written about this topic before, and I thank you for different points of view. It is an important one.



  2. Finance experts say healthcare reform could put doctors out of work

    Six out of 10 corporate renewal professionals think the healthcare reform law will have a negative impact on economic recovery, according to a new poll. While reducing the deficit, they said, it could toss physicians and other healthcare providers out of work.

    Are you on your Way to $5.5 Million … I don’t think so!

    No work … no money … no net worth.



  3. Did you know that researchers at Duke University recently modeled the earning potential of cardiologists and primary care physicians between the ages of 22 and 65, taking into account medical school debt, earning potential and the age at which doctors begin earning an income?

    They then conducted similar analyses for the average B-school, physician assistant and college graduate. Here is the full article on primary care vs. specialist career earnings.

    Source for chart: Health Affairs (gated, but with abstract)

    Ann Miller RN, MHA
    [Executive Director]


  4. It seems that this rule of thumb proposed by Stanley and Danko over-estimates the expected net worth of a young physician, and under-estimates the net worth a physician should accumulate by the age of retirement.

    Consider these situations:

    According to the guide, a 35 year old doctor earning $150,000 per year should have a net worth of $525,000. There are very few physicians who have accumulated this amount just a short time after graduating from residency.

    A 65 year old doctor earning $200,000 should have a net worth of $1.3 MM. This amount of assets will not come close to providing the physician with a similar lifestyle during retirement.

    The rule of thumb to save 15% of earned income is more appropriate for the practicing physician to follow. The physician who saves and invests this amount consistently during his working years will likely be able to retire comfortably at a traditional retirement age. If you wish to retire – or reach financial independence earlier – then save 20% along the way!

    Brian J. Knabe MD CMP™ FAAFP
    Savant Capital Management, Inc®.
    190 Buckley Drive
    Rockford, IL 61107
    Tel 815-227-0300
    Fax 815-226-2195


  5. Physician Net Worth

    This is considerably less than the $5.5-M derived from the study below.

    Then again – there are statistics, outliers and lies.

    Hope Rachel Hetico RN, MHA
    [Managing Editor]


  6. More on Doctor Pay

    The pay per hour numbers are revealing, aren’t they?



  7. Are doctors really making between $60 to $130 per hour?

    Now, you decide?



  8. Dollars for Docs: Who’s On Pharma’s Top-Paid List?

    A review of the highest-earning physicians in ProPublica’s Dollars for Docs database offers insight into why some medical professionals are drawn to the lucrative sideline of public speaking to promote favored drugs.



  9. The Old Normal Wasn’t So Normal

    Buying a house with no financial documentation, little income or job, to flip but not live? – Negative savings rate or personal net worth? – How about three billion credit-card solicitations in one year to children and animals? – Or, medical school students driving European automobiles with $250,000 in debt in an era of declining reimbursement?

    So, what was so normal about the old normal?
    Or, what’s old is new again!

    Dr. David Edward Marcinko; MBA CMP™


  10. A Physician Net Worth Study

    Almost a decade ago, Fortune magazine carried the headline “When Six Figured Incomes Aren’t Enough. Now Doctors Want a Union.”

    To the man in the street, it was just a matter of the rich getting richer. The sentiment was more precisely quantified, according to health economist, financial advisor and editor Dr. David E. Marcinko MBA, in the March 31, 2005 issue of Physician’s Money Digest, who with Editor Gregory Kelly reported that a 47-year-old doctor with $184,000 in annual income would need about $5.5 million dollars for retirement at age 65.

    Of course, physicians were not complaining back then under the traditional fee-for-service system; the imbroglio only began when managed care adversely impacted income and the stock market crashed in 2008.


    Ann Miller RN MHA
    [Managing Editor]


  11. A Real Life Example of Medical School Debt

    Ann Miller RN MHA
    [Executive Director]


  12. More on Doctors and Salary / Income

    Dr. Marcinko – Please tell your ME-P readers that they better think about medical school tuition debt before becoming a doctor!



  13. “Physicians have a significantly low propensity to accumulate substantial wealth.”

    Thomas Stanley
    [The Millionaire Next Door]


  14. Emergency, Primary Care Docs See Increase in Income

    Primary care physicians saw modest increases in their 2010 compensation, while some of their better-paid specialist colleagues lost ground, according to a new survey of almost 60,000 physicians around the United States from the Medical Group Management Association (MGMA).



  15. High Cost of Healthcare Due to Higher Fees Paid to US Docs

    Medicare and private insurers pay U.S. physicians more for their services than public and private insurers pay for the same services in other countries; in some cases American doctors are paid double for the same services.

    To better characterize the physician services component of health spending, the researchers compared payment and practice patterns, and medical education costs in the U.S., Australia, Canada, France, Germany, and the U.K.



  16. Pay Stubs

    The average doctor makes about 5.8 X the average US worker.

    Crunching the broad numbers:
    5.8 X $52,000 = $301,600/year

    Any thoughts?



  17. Herman,

    I forgot where I read the ratio is now only 3.6 times.



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