physician debt and net worth medscape- 2015.

[deleted310399]

http://www.medscape.com/features/slideshow/compensation/2015/debt-and-net-worth#page=1

What do you guys think ?

I was surprised by a few results -

- It seems like Orthopedics , Plastic surgery , GI docs have overall accumulated the largest net worths . All of these have about 10 % physicians over 5 million $. This is obviously expected since they all earn quite a bit. Even single earning households can be in the much reviled " 1 percenters " in terms of household income .
Considering that, I would have expected this percentage to be higher especially since ( according to my guess ) , almost all of those in the > 5 million $ category would be > 60 y/o or even close to retirement.

- Even in the lower earning PC fields , the percentage of > 5 million $ net worth is quite low ( about 1-2 % ). Considering a 30 year career with an average salary of 200,00 $, it should not be too difficult to accumulate that kind of net worth when you are close to retirement.

Are physicians overall gross " under accumulators of wealth " ....?

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[CliveStaples]

Are physicians overall gross " under accumulators of wealth " ....?

Yes. This is a well documented phenomena. Still disparaging to see these kinds of statistics, even if it is to be expected. To me, this just goes to show that many physicians have a misplaced emphasis on income (how often have you heard physicians worried about their financial futures because of changing reimbursement rates?) when really they need to "search within" so to speak about their financial decisions.

 

[Smart Money MD]

Sad but true. We do eventually earn a high salary, albeit in a somewhat stressful career path. For most doctors I've met, I suspect the UAW phenomenon results from a decade of no/low income during medical school and residency, high debt level, and the expectation that doctors have a certain lifestyle to maintain. The decreasing reimbursement rates aren't helping either.

 

[TexasPhysician]

Many physicians spend too much, save too little, and invest poorly.

 

[NICUfello]

Many physicians spend too much, save too little, and invest poorly.

7 of the NICU friends of mine that finished with me, 5 bought a house, the day they signed their contract. Every one of them spent 800k+

One is still living in her apartment.

And I spent 350K.

You are right on the money.

 

[mgdsh]

7 of the NICU friends of mine that finished with me, 5 bought a house, the day they signed their contract. Every one of them spent 800k+

One is still living in her apartment.

And I spent 350K.

You are right on the money.

It's also possible to spend too little on a home.

Suppose housing appreciation continues at a similar rate and one day you want a larger house, well now that larger home will be more expensive for you (than if you purchased that in the first place). In addition, real estate gains up to $500k are tax free.

 

[TexasPhysician]

It's also possible to spend too little on a home.

Suppose housing appreciation continues at a similar rate and one day you want a larger house, well now that larger home will be more expensive for you (than if you purchased that in the first place). In addition, real estate gains up to $500k are tax free.

Rarely does real estate gains continuously outpace the stock market.

Person #1: purchases a home with monthly payment of $4,000

Person #2: purchases a home with monthly payment of $2,000 and invests $2,000/month in stock market.

In 7 years when person #2 wants a bigger house, a home equal to person #1 can be purchased with 99% chance of coming out well ahead from 7 years of compounded gains.

The 1% odds of real estate outpacing the market would only be in large cities undergoing significant appreciation.

 

[mgdsh]

Rarely does real estate gains continuously outpace the stock market.

Person #1: purchases a home with monthly payment of $4,000

Person #2: purchases a home with monthly payment of $2,000 and invests $2,000/month in stock market.

In 7 years when person #2 wants a bigger house, a home equal to person #1 can be purchased with 99% chance of coming out well ahead from 7 years of compounded gains.

The 1% odds of real estate outpacing the market would only be in large cities undergoing significant appreciation.

That actually happens quite often in desired parts of California. I can't speak for the rest of the country. Also its very important to take into account that owner occupied homes can defer up to the first $500k (if married) of capital gains to be tax free when a home is involved. It's hands down one of the best tax advantages out there. Regardless of what you make in the market, you still are at the least paying long term capital gain taxes.

To give you a personal example, when I bought our first house coming out of residency... I hadn't even finished residency yet when my wife and I were alerted to a home that had a significant price drop (into our range). I was on call that weekend and couldn't come back to the Bay Area so my wife had to cancel her dinner plans. Pictures online looked good and my wife confirmed everything in person with the agent. We bought that house for $840k and 3 years later that same house is worth $1.25M possibly 1.3M. You're telling me If I would have say purchased a smaller home or town home (which we would have grown out of very quickly) and invested the difference in monthly payments + down payments, we'd have made more after taxes? Your scenario wouldn't happen very often in desired parts of CA.

I've had a number of friends who have had similar situations and have had varying purchase times etc. If you're able or willing to do some home improvements/fixes you can get an even greater rate of return (We spent $1500 installing some LED lights and putting in speaker wiring on the first house, ie no real improvements).

 

[Mman]

That actually happens quite often in desired parts of California. I can't speak for the rest of the country. Also its very important to take into account that owner occupied homes can defer up to the first $500k (if married) of capital gains to be tax free when a home is involved. It's hands down one of the best tax advantages out there. Regardless of what you make in the market, you still are at the least paying long term capital gain taxes.

No. You say it happens quite often. What you mean to say is that in the recent past it has happened in several cities in California. It's quite unlikely to persist. As the state of California continues to suffer natural disasters (drought, fires, earthquakes, etc) it is quite likely that real estate prices well not continue to increase as they have in the past.

If something cannot go on forever, it will stop. California real estate prices are no different.

 

[TexasPhysician]

No. You say it happens quite often. What you mean to say is that in the recent past it has happened in several cities in California. It's quite unlikely to persist. As the state of California continues to suffer natural disasters (drought, fires, earthquakes, etc) it is quite likely that real estate prices well not continue to increase as they have in the past.

If something cannot go on forever, it will stop. California real estate prices are no different.

Exactly. A physician friend I know bought a California rental around 2006. He's still at a loss.

 

[Plastikos]

The bay area is an extreme outlier in the real estate market, it is highly non representative for almost all other locations.

 

[sazerac]

It's also possible to spend too little on a home.

Suppose housing appreciation continues at a similar rate and one day you want a larger house, well now that larger home will be more expensive for you (than if you purchased that in the first place). In addition, real estate gains up to $500k are tax free.

If housing prices continue to appreciate at a similar rate, then houses will be worth zero dollars in a few more years. I bought a house a decade ago from a desperate seller for $950,000. The next year the similar house next to mine sold for $1.25 million. When I tried to sell my house in 2012 for $800,000, it sat on the market for two years until the damn thing finally sold in the high $600s. And believe me, you can't write off a loss on personal property so there aren't any tax advantages either.


Of course, if housing continues to appreciate at its historical norms, then housing will appreciate at 3-4% a year, which is basically the rate of inflation.

 

[mgdsh]

The bay area is an extreme outlier in the real estate market, it is highly non representative for almost all other locations.

It's the only real estate market I really know

In the end I'd say that 99% chance vs 1% chance @TexasPhysician talked about is probably a bit overstated. It really is a case by case basis. The market has appreciated quite a bit for sometime now with out a correction to price.

Everyone also has their preferences for investment types, risk, etc.

 

[NICUfello]

It's also possible to spend too little on a home.

Suppose housing appreciation continues at a similar rate and one day you want a larger house, well now that larger home will be more expensive for you (than if you purchased that in the first place). In addition, real estate gains up to $500k are tax free.

I live in an area where your 250K houses in a short time is worth 500k

My parents have a few houses that have appreciated like that.

However, currently the prices are the highest they have ever been (my locale).

If I buy something bigger, I would like to buy it when market I smuch lower than it is now

On of our friends bought a townhome for 550K (height of market). It is worth 300k now. It is rented, but they are upside down. However,when market tanked they bought a bigger house for 800K which is worth almost 1.5M now. So I guess since their income can support both houses (townhjome rented), they bought one high and one low, I suppose it evens out in the long run.

Personally the American dream of big home isn't my thing (I grew up in one). I like living among middle class people instead of upper class people. I also want to have the rental properties (multiple units) for retirement and travel and spend my money elsewhere.

However, as you said, different people have different priorities

 

[Plastikos]

FWIW, I think the bay area will stay that way until the highly skilled jobs that bring in high wages decline, which could be a long while. There are certainly areas that do better consistently due to factors like opportunity and average wages.

Im doing similar to you NICU, currently waiting to see if my offer is accepted on a smallish sized middle class (not too cheap, but not the upper affluent area, good schools) area house. Plan is to live there a year, make some minor cosmetic changes and rent it out while moving on to something similar. Hopefully will have several rental properties in the next 5 years. If a rate increase comes soon and the expected drop in demand or price contracture occurs I will snatch some things up as well.

 

[NICUfello]

^
My goal is similar to yours. I can rent my townhome for $2500. My mortgage with tax is $1535.

As soon as the prices come down, I am willing to buy another house (slightly bigger, no McMansion for me), rent the townhome out, or live in the townhome and buy a few properties.

That is the only reason I am trying to stay cash/liquid heavy, so that I can do the higher downpayments (30%+) on the properties.

 

[Plastikos]

Good plan, 30% down is about perfect for maximizing cash flow right off the bat. Lets hope it all works out.

 

[NICUfello]

^^
You mean lets hope a RE CA crash/correction happens soon

I lived through the one in the early 90s, the 08, and the 12..changes.....

The townhome I purchased.....I grew up across from it. My parents had bought 3 of them at 80K each. I paid 350K (cant believe it). My new neighbor just paid 421K for it last month.

Across the street from me, there are some attached houses. They are 2+2 (800 sq feet) or 3+2 (1051 sq feet).Built in 1979-1984. There are total 200 of them scattered in a neighborhood of 1000 homes (single family ranges from 500-700). These attached homes just have garage wall shared with next house, has front yard and back yard, otherwise looks like single family.

At one time they were all 150K. Today for the 800 sq feet ones people are asking 430-450k. Avg day on market is 8 days. RE is crazy again. Make great rentals due the school (blue ribbon CA 10, access to highway and mall).

Lots of Asian money in the neighborhood turning all homes into rental properties.

 

[Plastikos]

Those prices are crazy. Wages simply cant support that. If the fed ever does raise rates, even nominally, there will be a crunch in prices in those kind of markets.

 

[NICUfello]

^
I don't know how average people making ends meat are surviving....