Financial Planning for Physicians: Protecting Growing Wealth

Physicians have great opportunities to build wealth but must navigate a unique financial journey that includes delayed earnings, potential legal liability, and various compensation structures.

These considerations demand a specialized approach when it comes to financial planning. We developed this Insight based on our experience working with physicians to develop personalized financial life plans.

Unique Financial Planning Imperatives for Physicians

After 10+ years of rigorous education and training, new physicians can earn a significant income from the jump, deservedly so. Despite that exciting prospect, physicians often feel like they are getting a late start and that they need to play catch-up financially.

In addition, those practicing in certain geographies (states without strong tort protections) may feel like everything they have worked so hard for could be taken away overnight.

Taking the high stakes and high-pressure nature of this career path into account, we have developed a two-part framework to provide physicians with financial peace of mind. It focuses on two straightforward goals: asset protection and asset growth.

Asset Protection: Five Strategies for Physicians

For physicians, safeguarding assets from legal liability is a central priority. A well-structured asset protection plan helps ensure that years of education, training, and income are not vulnerable to unforeseen claims.

In this section, we outline five foundational strategies to help physicians protect their wealth for the long term.

Strategy One: Consider Multiple Types of Insurance

A comprehensive insurance strategy is one of the most important tools physicians can use to protect their income and assets. Several distinct types of coverage may be beneficial.

• Disability Insurance: Physicians should consider a portable, own-occupation policy and potentially one that is specialty-specific. This ensures that if an injury or illness prevents them from practicing in their trained field, they will still receive full benefits. Statistics suggest that up to one in seven physicians could face a disability at some point in their career, making this protection especially critical.
• Malpractice Insurance: This covers claims related to professional liability and is essential for many practicing physicians. Coverage requirements and limits vary by specialty and state, so it is important to regularly review and update coverage as needed.
• Umbrella Insurance: This type of coverage provides additional liability protection for personal assets beyond home and auto policies. While it does not cover malpractice claims, it can be crucial in protecting against other non-work-related lawsuits or liabilities.

Coordinating across these insurance types can help physicians protect both their current lifestyle and progress toward long-term financial goals.

Strategy Two: Protect Assets Through Account Titling

In certain states, the way you title your accounts can provide an added layer of asset protection. One potentially attractive option for married couples is Joint Tenancy by the Entirety (TBE), a form of ownership in which both spouses are considered to own the entire asset.

Under this structure, if one spouse is subject to a lawsuit or creditor claim, the asset is generally protected because it is wholly owned by the other spouse.

TBE is permitted in several states (including Florida, Maryland, New Jersey, and Virginia) for a range of assets such as bank accounts, brokerage accounts, and real estate. In New York, the protection applies only to real estate.

Strategy Three: Protect Assets from Divorce

While physicians tend to be risk-conscious individuals, divorce remains a meaningful financial vulnerability, affecting roughly one in four marriages among physicians. 

Planning ahead can help preserve assets and ensure a more equitable outcome if a marriage ends. Prenuptial and postnuptial agreements are among the most direct tools available, enabling couples to clarify ownership and expectations before or during marriage.

These agreements can define how personal and professional assets (including practice interests) are handled in the event of divorce. We take a deeper look at the tax implications of a divorce and working through an equitable split here.

Strategy Four: Take Advantage of Retirement Account Protections

Qualified retirement accounts can serve as an effective layer of asset protection.

Plans governed by the Employee Retirement Income Security Act (ERISA), such as 401(k)s, offer strong protection from creditors under federal law. IRAs and other non-ERISA accounts may also provide protection, though the extent varies by state. While primarily intended for long-term savings (see below), these accounts can also help safeguard assets from certain legal claims.

Strategy Five: Keep Estate Plans Up to Date

While not specific to physicians, maintaining an up-to-date estate plan is essential for protecting and preserving assets. We recommend reviewing your plan regularly and updating key documents every 5–10 years or after major life changes.

Other Asset Protection Approaches: Life Insurance and Trusts

Additional strategies may apply depending on a physician’s specific circumstances. These tools are more specialized but may complement the core strategies outlined above.

• LLCs can help insulate rental real estate from liability exposure.
• Permanent life insurance, while not the most effective savings vehicle, may offer strong creditor protection for accumulated cash value.
• Asset protection trusts are available in some states but typically require irrevocable structures and long-term planning.

Priorities for Promoting Asset Growth for Physicians

For new physicians, the first priority is to establish a cash reserve and develop a plan to pay down and/or refinance student debt. Once that plan is in place, the real money is made by effectively tailoring a retirement savings strategy to a physician’s compensation structure.

Align Savings Strategy with Compensation Structure

Physicians often earn income through varying compensation structures, and each arrangement comes with distinct retirement planning opportunities:

• 1099 Independent Contractors: Establishing a sole proprietorship and contributing to a solo 401(k) offers a simple and highly effective way to build retirement savings.
• W-2 Employees: Participating in a 401(k) or 403(b) (and potentially a 457b) can provide strong tax-deferred savings. If available, physicians should also evaluate whether a mega backdoor Roth strategy fits their plan. It is especially important to understand the differences between governmental and non-governmental 457(b) plans, which affect risk and access.
• K-1 Private Practice Owners: While a 401(k) is often still an option, high-earning partners may benefit from adding a cash balance plan. These plans can allow six-figure annual contributions, though they come with administrative complexity and require a multi-year funding commitment.

Maximize Tax-Advantaged Savings Accounts

Beyond employer-sponsored retirement plans, physicians should take advantage of other tax-efficient vehicles, such as Health Savings Accounts (HSAs) and backdoor Roth IRA contributions. Building savings across multiple tax “buckets” (pre-tax, Roth, taxable, and tax-free) can improve tax efficiency during working years and offer valuable flexibility when drawing income in retirement.

Build a Financial Plan Aligned with Your Priorities as a Physician and Individual

At Wealthstream Advisors, we believe physicians can achieve lasting financial peace of mind by focusing on two core goals: protecting what they’ve earned and positioning their assets for long-term growth.

Whether you are just entering practice or planning for retirement, a well-structured financial plan can help align your decisions with both your professional responsibilities and personal values.

If you are interested in a more personalized conversation about your financial planning needs, we invite you to schedule a complimentary 30-minute consultation with a member of our advisory team.