the-dr-team

Fellowship Transition

Fri, 12 Nov 2021 17:56:46 GMT

What you should know about the transition to being a Fellow

As you make the transition into fellowship there are some important financial tasks you need to take care of before you leave residency. We have outlined the 5 main financial priorities as you transfer into fellowship.

Build a budget

Moving into fellowship means you see a small bump in your paycheck (we know on rare occasions some make less in fellowship). The only difference from that “pay raise” is now you could be in a new city or state. Take advantage of this move to a new city to revisit your budget (or make a budget for the first time).

If you have never budgeted before, the first step you need to do is look back at your past spending. We recommend downloading your last 3-6 months of bank statements and printing or uploading them to excel. Then highlight your fixed spending and variable spending in different colors. Below is a sample list of fixed expenses vs variable expenses.

Fixed Expenses

Rent/mortgage Payments

Utilities

Phone bills

Groceries

Insurance Premiums

Car payments

Student loan payments

Other debt payments

Variable Expenses

Dining out

Amazon

Vacations

Subscriptions

Shopping

Entertainment

Car Maintained

Home improvement

If you have never made a budget before there are some applications and resources, you can use that to help. Below are some links to a few of the companies that are popular. Mint and You Need A Budget

Once you have outlined your current spending, you can create a projection on how you want to spend your future money. There are important decisions that need to be made as you move to a new city/state. Your goal with your future budget is to keep your fixed spending to no more than 50% of your take home (net/after taxes) pay. The majority of physicians overspend especially on big financial purchases, housing is at the top. Overspending is the reason 1 in 4 physicians 60 years old or over have less than $1 million in net worth.

Are you moving from a low cost of living city to a high cost of living city? Then you need to keep your rent as reasonably low as possible but know that a larger portion of your budget will be taken up with housing expenses.

What are some things to consider If you are moving from a high cost of living city (HCOL) to a low cost of living city (LCOL)? Luckily for you this transition is much easier. Look for the equivalent housing you have now and see if it is achievable to find that housing in the new city. What we recommended is to keep the same level of living arrangement, not the same dollar amount. This way you can free up extra cash to invest or move to other financial goals. This is especially important if you have been neglecting your Roth IRA, retirement plans (and possible employer match) during residency.

2. Residency retirement account

Most residency programs have retirement plans set up for you when you become a resident. Some automatically enroll you and therefore you contribute a portion of your paycheck every month whether you know it or not. If you are staying at the same training institution as your residency you won’t be able to do anything we talk about in this section until you graduate fellowship . If your fellowship is not at the same training institution as your residency you now have some important decisions to make on what to do with your resident employer provided retirement accounts (403b, 401k, 457 or Pension). Below is a quick list on what you can do with these accounts.

Keep the money in your residency employers plan (easiest but sometime less optimal choice)
Transfer your account to your new employer account, if allowed.
Convert into a Roth IRA (Please note you will pay taxes on any pre tax money that is rolled over to the Roth IRA)

The advice that is mostly given to new fellows is to convert your employer sponsored retirement plan from training into your Roth IRA during the first couple months of fellowship (you want to do this before Dec 31s). Here’s why:

The money you roll over will be seen as income for tax purposes in the year you roll it over (i.e. if you roll it over in November/December of 2021, taxes will be due in April 2022). The calendar year with your last 6 months of residency and first 5/6 months of fellowship is the lowest tax bracket you could be in for the rest of your life. By paying taxes on the amount of your roll over now you will be saving yourself from having to pay taxes on that amount in retirement when you could be in a higher tax bracket.

If you do not have the extra cash to pay the taxes on a Roth conversion by April 15th, then you can consider leaving the funds in your residency retirement account or roll it into your fellowship retirement account. You can then re-consider the Roth conversion options in the next calendar year or when you graduate from fellowship.

Note if you have not started retirement investing yet in training it is not too late to start. With your extra income from fellowship, you should look at investing in your Roth IRA.

3. Know your fellowship benefits

At orientation for your fellowship, you need to make sure you pay close attention to the retirement benefits options offered at your new institution. If you did not focus on your retirement as a resident there is no better time to start. Below are the important questions you need to know about your plan.

How soon can you enroll into the retirement plan? Is there a waiting period for new hires?
What retirement plans are available for you to invest in?
Does your employer match your contribution? Is there a vesting period on the match?
Does the plan offer a Roth or after-tax contribution?
How good are the investment options in the new plan?

The most important rule of thumb to follow when you are investing is always invest, at least, the minimum amount to get the full match (if there is a match).. If you do not do that you are leaving part of your salary on the table. If your new employer does not have a match, then you need to consider your options of investing in a Roth IRA or your employer 403b (you can certainly do both should your cash flow allow).

4. Update your student loan plan

Any time you have a change in your employment is a good time to revisit your student loan plan. You need to have a concrete plan in place to avoid mistakes that could cost you thousands to hundreds of thousands. A clear plan is especially helpful when life changes occur, such as moving states, changes in relationship status, increased income, extended training time and subspecialty career path. If you are going to pursue Public Service Loan Forgiveness (PSLF) you need to make sure you are following the below checklist as you change employers.

Is the new employer a 501c3?
Make sure you get the employment certification form filled out (if you didn’t do this while in residency you need to do this before you leave your current employer)- we recommend filling out this form each year
Call your student loan servicer each year and confirm the number of qualifying payments (something they don’t have the correct number)
Confirm you have no late or missing payments with your servicer as well

5. Disability Insurance changes

Before you leave your residency, you need to make sure you have received every discount available to you prior to leaving that institution. Some residency programs (especially larger programs) have special or discounted rates (which could be as much as 30-40%) for your disability insurance. Before you leave your institution, you need to confirm you have the best option available to you right now. Just because you already have disability insurance in place does not mean there are not better options available to you. Reviewing your options will make you aware of changes that could be beneficial.

For example, maybe you moved from a state like California (the most expensive state to buy disability insurance) to Texas. It is likely your monthly premiums would be less expensive. Even if you bought your policy a couple years prior.

Just like the recommendation to look at special discounts or plans prior to leaving your residency hospital you need to see if your fellowship institution has discounts available as well. There is no reason to continue overpaying for insurance when you do not need to. A broker that is doing what is right for you should make sure they review all these changes and get the best rate possible for you.

6. How do I find my first job?

Because you have been consumed with work, learning, and becoming the best physician possible; you may not have put much thought into your first ‘in-practice’ job. Many graduating residents/fellows do limited work on lining up their future jobs until the spring of the year they graduate. The earlier you can start preparing the more likely you are to obtain the position you sought. The reality is less than 50% of physicians renew their contract with the first employer they signed with out of training. This is usually because most young physicians delay their job search and take the first offer, they get late in the spring of their final year of training. Below are 3 tips to help you line up your dream job before the final months of training

Start networking early:
If you know where you want to live and practice after training, you need to start building contacts in that area for employers and positions.
Use your preexisting network or program to see if they have connections. Your Program Director and other attendings can be great resources to help expand your network.
Determine how you are going to practice medicine
You need to know if you want to work in private practice, small group or large hospital setting. You need to choose if you want to be a W2 employee or a 1099 contractor. (Know that your student loans and retirement/other benefits will be affected by the career path you choose)
Reach out to your peers to determine pay scale and job environment
Most young physicians do not use their current network to help them understand the job environment around them. The one greatest return on your investment (and easiest action item to do) is to ask your old residency and fellowship colleagues about their current job responsibilities and income. The easiest way to make sure you are paid a fair wage is to know what others make in your specialty in the jobs you are applying for.

Please note that if you are feeling overwhelmed with this transition, we are happy to help guide you through this big change. Our best advice is usually during years of transition. The move from residency and fellowship may not feel like a big change but it can be a great stepping stone to good financial education and choices.

Transitioning into Practice

Fri, 12 Nov 2021 17:56:44 GMT

What you need to know about transitioning into Practice

Congratulations, your training years are almost behind you! As you make this huge transition from a resident/fellow to a practicing physician, there are some important financial tasks that must be completed (some before you leave your program and others just after you start your job). The next 12 months will be jam packed with financial decisions that will set you up for financial success.

Financial stress is the number one stress in life and is even more of an issue for young physicians. Studies show that physicians less worried about their finances give better patient care. They also have happier and healthier careers. The below financial tasks can set you on the path to financial freedom and a happy/long career.

Choose your financial priorities

Once you graduate from training and move into your early practicing years, you can start to set the financial foundation for the rest of your career. Unfortunately, and fortunately, you will have more financial needs for your new income than you previously did while in training. In order to know where to spend your hard-earned money you need to set your financial goals. Your decisions now will help you build wealth and create financial stability. Below is a quick list of just some of the financial decisions we suggest you consider.

Buying a home
Paying off your debt/ Student loans
Maxing out your retirement account
Rolling over your retirement account from residency
Starting a family
Starting or buying into a practice
Take a vacation

The next step is to contemplate each goal and rank them from least to most important. Feel free to add in additional personal goals. I.e. Build a home, buy a winery, send kids to private school, take care of family member, retire early are just a few we have heard. Once you have identified your priorities you will want to make a plan to accomplish each goal, this is the most complex aspect, and we’d recommend seeking professional help (we can help you with this!). Far too often we hear from new attendings “I just started making a real income I want to go and enjoy it for a while. I will focus on my finances later.” The issue with that method of thinking is you can start a bad spending habit that is hard to come back from. Having a detailed plan will give you direction and clarity on the best course of action to accomplish all your goals.

Purchase disability insurance

Disability insurance is probably the most important piece of your financial life right now because you are at the greatest risk of loss of your future. Disability insurance is the only thing that guarantees you can continue to make an income even if you are sick or injured and can no longer work. With most insurance (including disability insurance) once you become financially independent you no longer need it. You can only become financially independent by investing and saving over time. Unfortunately, that could take decades to achieve. Which is why insurance is a stop gap until you have enough saved that you no longer need it.

Before you leave training, you should buy disability insurance (unless you are moving to a new state, please consult us for a personal review of your needs). Most residents should be able to get a discount on their disability insurance premiums. If you have not purchased disability insurance while you are in training, then this should be the number one financial task/goal for you to accomplish in the last couple months of training. Some insurance companies allow you to still get a discount after you graduate but the longer you wait the less likely you are to receive a discount.

Contract Review

As you start your job search before you sign your contract or even after you have signed your contract you need to make sure you understand what is in your agreement. Your contract is what tells you how you get paid and what your responsibilities are. There are some important parts of your contact that you need to make sure you understand. Often you do not have the ability to negotiate your contact, but you still need to understand all the details of your agreement. Below are just some of the financial subjects you should be able to answer.

Do you get a signing bonus? What happens to that bonus if you leave before your contract is up?
Is there a non-compete?
How will your tail insurance work if/when you leave this employer?
How often do you take call?
How is the holiday scheduling?
Am I a W2 (traditional employee) or a 1099 (independent contractor)- how does this status affect my financial planning?

For most large employers their contracts are standard and templated. You may not get a lot of say in what goes into each plan or negotiate the details. For smaller groups or private practices, it might be wise to have a contact attorney review your contact. The attorney can give you a little more clarity and guidance on what is in your agreement.

Know your student loan plan

You need to know your student loan plan and revisit that plan now that you are out of training. You should know now whether you are going to pay down your student loans or plan to apply for PSLF. Please remember that if you plan to apply for PSLF you need to make sure you have the below items checked off.

You are signed up for an income driven repayment program
You work for a nonprofit employer
You have filled out your employment certification form
You have no late or missing payments
You have confirmed with your student loan servicer that the qualifying number of payments is correct (they make mistakes on occasion)

For those that are going to pay back your loans in full once you have a signed contract you need to start looking into refinancing your loans. There are some loan repayment strategies depending on your long term and short-term financial goals. Note that neglecting maxing out your retirement accounts while you pay extra into your loans is likely a mistake that most ‘debt averse’ new attendings make because they are solely focused on their debt (again this is where your financial priorities come into play).

Learn about and setup employer retirement benefits

After reviewing your contract, you need to make sure you understand your benefit options, this next section will only be for those that are W2 employees (traditional employees). Independent contractors (1099) typically do not have access to employer benefits, and they need to establish their own benefits. We suggest working with a professional planner (us!) and a CPA.

You need to understand how you can use your new benefits to build your wealth for the future. Your employer retirement plan is not the only benefit you need to understand. Here is the checklist you need to make sure you understand.

Retirement Plans
Do they have a match?
What type of account can you open and fund?
What investment options are available in each plan?
Health Insurance
How much premium is paid by the employer?
Do you have access to a Health Spending Account (HSA) through a High Deductible Health Plan?
Do I have an FSA or a dependent care account?
Dental insurance
Vision
Life and disability insurance- how does this impact my own individual coverage and what is the difference.
Any other benefits/perks available to employees?
Some hospitals have perks available to you for being an employee at their hospital.

Max funding your employer retirement plans is likely the first line item you will want to take care of as you have not been able to do this with your limited income while in training. You will be able to catch up on your retirement savings that you might have neglected (or not been able to afford) while in training. Understanding your benefits and what is available to you will allow you to invest and save more money. It could also help you save on taxes you pay now and in the future.

Roll over Residency retirement plans

While opening and funding your new employer plans is important it is also important that you know what to do with your resident retirement plans as well. Most residency programs have retirement plans set up for you when you become a resident. Some automatically force you to contribute a portion of your paycheck every month whether you know it or not. Now that you are graduating you now have some important decisions to make on what to do with your training employer provided retirement accounts (403b, 401k, 457 or Pension). Below is a quick list on what you can do with these accounts.

Keep the money in your residency employers plan (easiest but sometimes less optimal choice)
Transfer your account to your new employer account, if allowed.
Convert into a Roth IRA (Please note you will pay taxes, on or before April 15th of the following year, on any pre tax money that is rolled over to the Roth IRA)

The advice that is mostly given to new attendings is to convert your employer sponsored retirement plan from training into your Roth IRA during the first couple months of practice. You want to do this before Dec 31st because the money you roll over will be seen as income for tax purposes in the year you roll it over. The calendar year with your last 6 months of training and couple months of practice is the lowest tax bracket you could be in for the rest of your life. By paying taxes on the amount of your rollover now you will be saving yourself from having to pay taxes on that amount in retirement when you could be in a higher tax bracket.

If you do not have the extra cash to pay the taxes on the rollover by April 15th of the next year, then you need to look at the plans and investment options for your new employer. If they have better or less expensive investment options to choose from in their plan it might be wise to consider transferring your account over. If the investment options are bad and expensive it might be worth keeping your plan in place until you have enough cash to convert it to your Roth IRA.

You can still fund your Roth IRA

Most new attendings do not realize they can still fund a Roth IRA even though their income is over the income limit to fund the Roth IRA directly. The current IRS tax law allows you to fund your Roth IRA through what is known as “the backdoor method”. There are plenty of articles that have more information on how to make this contribution. You can search on how to do this (we like the White Coat investor “how to” article), but it is a simple task that is often overlooked by many high-income earning professionals.

Having a plan as you make this transition can make the difference in having to work 5-10 years extra instead of retiring. Even if you do not want to retire earlier, having a financial plan will give you guidance and clarity to have a less stressful life and career. If you need help to create this plan and provide clarity, we are here to help. We feel our best advice is given during the years of transition. This is the time in life when you can start giving yourself a better financial future. Let us help you create that future.

6 student loan mistakes and how to avoid them

hi@warmwelcome.com (David Jay) — Fri, 13 Nov 2020 20:25:49 GMT

The new season is a great reason to make and keep resolutions. Whether it’s eating right or cleaning out the garage, here are some tips for making and keeping resolutions.

Make a list

Lists are great ways to stay on track. Write down some big things you want to accomplish and some smaller things, too.

Check the list regularly

Don’t forget to check in and see how you’re doing. Just because you don’t achieve the big goals right away doesn’t mean you’re not making progress.

Reward yourself

When you succeed in achieving a goal, be it a big one or a small one, make sure to pat yourself on the back.

Think positively

Positive thinking is a major factor in success. So instead of mulling over things that didn’t go quite right, remind yourself of things that did.

The one thing every residency student needs to know about Disability Insurance

hi@warmwelcome.com (David Jay) — Fri, 13 Nov 2020 20:25:49 GMT

There are so many good reasons to communicate with site visitors. Tell them about sales and new products or update them with tips and information.

Here are some reasons to make blogging part of your regular routine.

Blogging is an easy way to engage with site visitors

Writing a blog post is easy once you get the hang of it. Posts don’t need to be long or complicated. Just write about what you know, and do your best to write well.

Show customers your personality

When you write a blog post, you can really let your personality shine through. This can be a great tool for showing your distinct personality.

Blogging is a terrific form of communication

Blogs are a great communication tool. They tend to be longer than social media posts, which gives you plenty of space for sharing insights, handy tips and more.

It’s a great way to support and boost SEO

Search engines like sites that regularly post fresh content, and a blog is a great way of doing this. With relevant metadata for every post so search engines can find your content.

Drive traffic to your site

Every time you add a new post, people who have subscribed to it will have a reason to come back to your site. If the post is a good read, they’ll share it with others, bringing even more traffic!

Blogging is free

Maintaining a blog on your site is absolutely free. You can hire bloggers if you like or assign regularly blogging tasks to everyone in your company.

A natural way to build your brand

A blog is a wonderful way to build your brand’s distinct voice. Write about issues that are related to your industry and your customers.

Looking for an advisor? Here's a checklist for what to look for

hi@warmwelcome.com (David Jay) — Fri, 13 Nov 2020 20:25:48 GMT

Write about something you know. If you don’t know much about a specific topic that will interest your readers, invite an expert to write about it.

Speak to your audience

You know your audience better than anyone else, so keep them in mind as you write your blog posts. Write about things they care about. If you have a company Facebook page, look here to find topics to write about

Take a few moments to plan your post

Once you have a great idea for a post, write the first draft. Some people like to start with the title and then work on the paragraphs. Other people like to start with subtitles and go from there. Choose the method that works for you.

Don’t forget to add images

Be sure to include a few high-quality images in your blog. Images break up the text and make it more readable. They can also convey emotions or ideas that are hard to put into words.

Edit carefully before posting

Once you’re happy with the text, put it aside for a day or two, and then re-read it. You’ll probably find a few things you want to add, and a couple more that you want to remove. Have a friend or colleague look it over to make sure there are no mistakes. When your post is error-free, set it up in your blog and publish.