You’re in your late 20s, just finished medical school (finally!), and are now earning income as a resident. After years of putting off travel and other desires to avoid accumulating more student loans, it’s tempting to splurge on things you’ve missed.

While it's essential to make room for your wants in your budget (check out our article on the 50/30/20 budget if you need guidance), it’s equally important to balance those desires with saving for the future.

Assuming you’ve already established a 3-6 month emergency fund and paid off any high-interest debt, it’s time to start planning for retirement. Ideally, aim to save 15% of your income for retirement. This goal should be achievable for a single resident in a medium- or low-cost living area or for a married resident whose spouse also works. If you have children or live in a very high cost-of-living (VHCOL) area, saving 15% may be more challenging, but starting with just 5% can lay a solid foundation.

Why Do I Need to Save During Residency?

You may have heard arguments against saving during residency, suggesting that it’s not worth it since you’ll earn significantly more later and should enjoy your life now. While it’s true that you can increase your savings once you become an attending, there are compelling reasons to start saving during residency.

1. Developing Good Habits: It’s crucial to get into the habit of saving early on. Even starting at a modest percentage, like 5%, allows you to increase your savings each year as your income rises. By establishing this habit now, you’ll be better prepared to save when you have a larger attending salary. If your program offers matching contributions to your savings, make sure to take full advantage of that employer match.
   
   

2. Maximizing Tax-Advantaged Accounts: There is a maximum annual contribution limit for tax-advantaged retirement accounts. While you might not reach that limit as a resident, you will likely do so as an attending. Once you hit the caps on these accounts, any additional savings will need to go into taxable brokerage accounts. By maximizing your contributions each year, you ensure more tax-advantaged funds for your retirement.
   
   

3. Compounding Growth: Starting your retirement savings early allows you to benefit from compounding growth, making it easier to achieve your long-term financial goals. Delaying savings could mean missing out on crucial years of growth, which can significantly impact your financial future.

   
   

Saving for retirement during residency may seem daunting, but it’s a vital step toward achieving financial security in the long run. By prioritizing your savings now, even in small increments, you’re not only setting yourself up for a more comfortable future but also developing essential financial habits that will serve you well throughout your career. Remember, every little bit counts, and starting early can lead to substantial benefits over time.