Financial Planning Considerations for Female Physicians

September 24, 2015

What is unique about a female physician? From a professional or intellectual perspective, nothing. But from a financial perspective, there are some differences to consider when it comes to long-term planning.

In general, women are more likely to take time out of their careers for leave following the birth or adoption of their child, resulting in fewer earning years than for their male counterparts.

Additionally, statistics show that women generally can have a longer lifespan than men.¹ These two factors can mean that female physicians need to plan for greater savings or retirement funds.

“To help achieve and sustain financial independence over the long term, it’s essential for female physicians to get comfortable with financial decision-making,” says Bridget Paton, a Senior Financial Consultant with MD Management Limited. “Investing your time in learning basic money management and investing principles, as well as creating a long-term financial plan, can help.”

Here are some financial guidelines to consider at different stages of your career:

Medical students: Develop good financial habits

It is never too early to start organizing your own finances. Start with your goals (short-, medium- and long-term) and develop a plan.

Sketch out a budget before the beginning of each medical school year. Estimate your costs and potential income. Be mindful of what you own and owe, even though you may not be earning a salary or saving funds.

If you need to borrow funds to pay for medical school, a budget will also help you determine how much you need to borrow and help you manage your money better.

Residents and maternity leave: Know what benefits are available

Many medical residents who are thinking about having children find that residency is the perfect time. Regardless of when you decide to take that step, planning for the financial impact of having a child is an important part of becoming parents.

While most practising physicians are self-employed, as a medical resident you are considered an employee. Maternity leave benefits vary by province and territory.

For example, in British Columbia, medical residents who give birth are entitled to 52 consecutive weeks of unpaid maternity leave. In addition to being granted this time away from work—including uninterrupted health benefits—residents get a certain amount of compensation.

In Ontario, a resident may receive up to 17 consecutive weeks of pregnancy leave at her discretion. In no case will she be required to return to her duties sooner than six weeks following delivery. And she may extend the leave for up to 12 months, inclusive of any parental leave.

Practising physicians: Minimize your taxes

Taxes are one of the most significant expenses that physicians will incur during their career. Up to 50 per cent of your taxable income could be paid in income taxes (depending on your province or territory of residence and income level).

Your financial plan should include ways to minimize taxes and maximize your cash flow. For example, relocating for residency may mean you can deduct your travel and moving costs. Or if your employer requires you to use your car for work, you may be able to claim car-related expenses.

Incorporating a practice is a strategy that many physicians use to minimize taxes, since the business tax rate is much lower than the personal tax rate in many circumstances. This move offers both income-splitting and tax deferral advantages as well.

Depending on your financial situation, other tax-optimization strategies may be available to you as well, Ms. Paton notes.

Retirement phase: Plan for a long retirement

As the average life expectancy increases, females generally should consider the financial implications of a potentially longer life. Saving for retirement becomes particularly important.

Among the retirement savings options are:

  • A registered retirement savings plan (RRSP). This is an investment account with tax benefits to help you maximize your retirement savings. Contributions to your RRSP grow unaffected by taxes and reduce your taxable income. RRSP withdrawals are treated as taxable income.
  • A registered retirement income fund (RRIF). This is used to withdraw retirement income. The investments inside the RRIF continue to grow tax-deferred like they do in an RRSP. You can continue to manage your RRIF the same way you manage your RRSP, but you can’t contribute to a RRIF.
  • Individual pension plans (IPPs). These are alternative retirement savings vehicles that allow for enhanced tax relief and increased pension benefits beyond those available through RRSPs and other retirement plans. They can be set up for one person or for a group of employees in the same company.

“Taking control of your finances means taking control of your future well-being,” says Ms. Paton. “Working with a financial advisor who understands the needs specific to female physicians can help ensure that you’re planning as effectively as possible.”

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