Tag: residency

Why You Need Disability Insurance, ASAP

Look, you’ve worked your butt off and now you’re in residency. The last thing you want to think about is whether something could happen that jeopardizes your ability to practice medicine. This could even be something minor, but would keep you from your medical specialty of choice.

Luckily, there’s a way you can help have some extra peace of mind and it’s also additional coverage above what (meager policy) your employer likely offers. Today, we’re going to review Disability Insurance – and specifically, why you need it NOW.

What is Disability Insurance?

Great Question! It’s an insurance policy you can purchase that provides coverage for you to guarantee a percentage of your monthly income should something unforeseen occur.

Why Do I Need Disability Insurance?

Whether you have loans (education or mortgage or something else) to pay, a partner or spouse – particularly children – all these factors should be taken into consideration when determining if you need disability insurance. Generally, the recommendation is that unless you are what is considered “Financially Independent“, as in you don’t need a job to support your lifestyle or debt (for the rest of your life), then you should have a disability policy.

While most consider extreme catastrophic situations when thinking of disability insurance, that’s not the usual case. Relatively less catastrophic things can occur in your life that can leave you able to work, but otherwise unable to perform your medical job functions. Things like:

  • Car accident or other accident
  • Severe illness
  • Developing chronic illness
  • Addiction
  • Mental illness

Many of these are treatable, manageable, and possibly curable. However, depending on the severity of the treatment, you might not be able to practice your specialty of choice. If this happens, disability insurance can provide additional income for you to support yourself, and potentially your family, while you’re still working in medicine.

Great – Do You Have an Example?

For example, perhaps as a surgeon, you are involved in a minor car accident in which you recover, but sustain nerve damage in your dominant hand. This may prevent you from practicing in your surgical specialty, but you can still practice medicine in a more general setting.

If you had a disability insurance policy prior to the accident, and you have the appropriate riders, you’ll be able to file a claim to augment your income while still working in medicine. This protects your income prior to the accident and allows you to keep working – supporting yourself and your family.

Photo by Matthew Waring on Unsplash

How Do I Get Disability Insurance?

There are reams of information on the web for physicians to secure disability insurance. The important thing is to do your homework and make sure you secure “own occupation & specialty specific” insurance. I’ve provided a few links below you should definitely read to get a deeper understanding of the importance of disability insurance.

The resources below also have vetted references for reputable insurance providers that can help you secure disability insurance. The younger and healthier you are when you first get insurance, the cheaper your policy will be.

Does The Surgeon Have Disability Insurance?

She does indeed! We worked with a local insurance agent, though were we to do it again, I would shop around more online before making a final decision. Either way, we both have a little more peace of mind having disability coverage.

Her policy is from Mass Mutual and provides $3750/month should she qualify for 100% disability now. (Given that she’s a resident, that’s a little less than what her monthly income is now, anyway). The policy is $164/month with the ability to upgrade the coverage once she graduates from residency.

Wrapping Up…

I get it, another monthly payment when you’re already likely cash strapped. From my perspective, as (possibly resident) physicians, you’ve put in years of work to get where you are. At the very least, secure your income so that if something does happen, you’ll have a larger safety net that can provide you stability while you transition to a different medical role or to another field entirely.

The goal here isn’t that you have to have disability insurance, the point is to make sure you have a plan for the unlikely event that something does occur. Perhaps you will rely on your spouse’s income, or have family you can fall back on – just don’t be left hanging when you might qualify for a disability claim!

Resources for Disability Insurance from the Web:

When Should a Doctor Get Disability Insurance?
Great resource from the Physician Philosopher covering what can go wrong when getting Disability Insurance
What You Need to Know About Disability Insurance
Everything you need to know about Disability Insurance from the OG himself, The White Coat Investor

Physician on FIRE’s Posts on Disability Insurance

Passive Income MD’s Disability Insurance Collection

Policy Genius on Why Physicians Need Disability Insurance

Thanks for stopping by! Questions about disability insurance? Check the links above and drop your question in the comments below!

-SurgeonJourney

How To Save Money When Your Program Doesn’t Offer a 401k or 403b Match

Working like a dog, Eight days a week?

You’re working those 80 hour weeks (at least), and stoked to be putting some money on the positive side of the ledger after years of studying and taking out loans. Hooray!

Talking with your non-medical friends, you hear about employee sponsored retirement plans like a 401k or 403b (for tax-exempt organizations) and are looking forward to getting a match on your hard earned contributions – BUT WAIT.

NO SOUP MATCH FOR YOU!

In most cases, residency programs do not offer a match for retirement contributions. While conducting research for this post, I reluctantly stowed my righteous indignation (for all residents) after learning more about the regulatory process for 401k and 403b programs.

These employer sponsored investment options are means-tested, specifically meaning that there are onerous regulatory requirements to ensure that an adequate distribution of employees across income ranges are taking advantage of the programs. If there are a disproportionate amount of high-wage earners using employer sponsored retirement program relative to the rest of the workers, the employer can be penalized.

If your employer doesn’t offer a match, particularly for a 403b, it’s likely this is because there will be less administrative fees associated for the plan as it doesn’t need to be means-tested. In this case, you won’t get a match, but you also aren’t hit with more management fees.

For comparison, at the SurgeonSpouse’s non-medical employer, I pay $12/quarter in management and regulatory fees to Fidelity – not that bad, really. The company also shoulders some of the fees, and the choices I have for investment are not amazing – more target funds and less passive-indexing ETFs. Nevertheless, I do get up to 6% salary match on my contributions, so not complaining.

I Don’t Get a Contribution Match, What Should I Do?

While in residency, take a look at you income holistically – I’m going to take an educated guess that (if you’re a resident) you’re in the $55,000 to $70,000 range, depending on your Post Grad-Year. Based on this, you’re going to want to be thoughtful about how you deploy your income from housing to food to entertainment to savings. I get it, you gotta eat – and you should.

Here’s my recommendation – focus on personal retirement plan options, specifically the Individual Retirement Account, or IRA, as it’s usually known. This plan is similar to a 401k/403b in that it provides pre-tax (traditional) or post-tax (ROTH) contribution options, though that’s where many of the similarities end.

The contribution limits for an IRA are lower ($6,000 in tax year 2020) than an employer sponsored plan ($19,000 in tax year 2020) – but you have more flexibility for investment options. Nearly all well-known brokerage houses offer IRA accounts. I use Vanguard and recommend them for their low fee ETFs. Fidelity, TDAmeritrade, and others offer IRAs as well.

How Much Should I Contribute?

This is a very personal question and very much depends on your situation. Say you’re making $60,000 a year. If you do make the maximum IRA contribution, that’s 10% of your pre-tax income – and we haven’t even talked about taxes, housing, loan payments, and living costs.

My advice is that it’s important to begin saving and investing as soon as you can, but don’t eat less so you can save more – you can be thoughtful about how often you choose to eat out and take more affordable vacations, for example.

If you’re looking for a specifically number, set a goal per year and break that up into a contribution each month. Perhaps you want to save $2,000 or $4,000 a year – that’s $167 or $333 a month – not bad! Every year that you save, even something, will grow for the decades to come. Over the long run, the US market grows roughly 8% per year.

Why Contribute at All?

With a high-income on the horizon, it can be tempting to delay saving, but the power of time and compound interest is potent – even Warren Buffett noted it. There’s an apocryphal tale of Einstein & compound interest as well, either way – it’s not wrong. Basically, the more time your money has to grow, the more you will have years from now – with less work. Remember, IRAs don’t allow non-penalized withdrawals until you’re 59 and 1/2 – this is putting money away for the long term.

Image result for einstein compound interest

Additionally, getting into the habit of saving now will help set you and your family up for a comfortable, less-stressful future – particularly as you get closer to retirement.

Questions?

While a seemingly simple question, there are lots of things to consider between employer sponsored and employee retirement accounts. Let me know what questions you have in the comments!

During Medical School: Managing Debt and Living Costs

So you’ve chosen a medical school, enrolled, and are happily studying through first year and loving anatomy lab. How do you manage your expenses and loans while in school? Excellent question, dear reader, and this builds on the previous post in the series that provides a high level summary of securing student loans.

Every person has a unique financial and life situation – perhaps you have a partner and are sharing living expenses. Are they in school? Are they working? Do they make a comfortable amount and are you close enough such that they can support you while you’re in school?

What kind of loans do you have, private or public?

From the perspective of managing loans while in school, both private and public loans generally allow you to defer making payments while you’re a full time student. Note however, that your loans will continue to accrue interest whether or not you’re making payments. Because you’re fully focused on school, it doesn’t make sense to make payments until after you’ve graduated. I’ll go into detail about ways to manage your public and private loans once you’ve graduated from medical school in a future post.

Managing Expenses – Find a Roommate!

Here’s where having the discipline to focus on keeping a budget will save you in the long run. By using one (or more) of these tools, you can get a perfect picture of your monthly income and expenditure, and carefully plan out what you’ll need each semester.

If you don’t have a partner that you’d consider sharing expenses with, there are additional options you have to save on housing costs. Check with your fellow classmates to see if they’re looking for roommates – do make sure you’re compatible living together. If the idea of living with a fellow med student is like bringing work home with you, see if you school has other graduate programs. Like med students, students in other grad programs are typically focused, high achieving, and might make an ideal roommate or three.

Ultimately, shacking up with a roommate for a few years while in school isn’t the worst thing you can do. It’s a great way to save on your largest expense outside of med school tuition and can reduce your need for loans.

Budget for Larger Expenses

As you progress through medical school, remember the long game. By the time you become an attending, (if you’re in the US), your superlative education will include:

  • Four years of undergrad
  • Four years of medical school
  • at least 3 years of residency
  • TOTAL: 11 YEARS after high school

If you’re like the Surgeon and planning on a surgery sub-specialty, that’s a seven year residency (including research). Tack on roughly two years of fellowship. Say you’re interested in becoming a Thoracic Surgeon. That’s a 17 YEAR ride after high school – buckle up.

My point with this isn’t to scare you, but to realize that your high income years (at this point) are about a decade away, the decisions you make regarding finances early on can save you much later in the long run. Remember, life is a marathon, not a sprint.

During medical school, larger expenses might include mandatory testing (like STEP exams), vacation (responsibly), transportation (keeping your car alive), and in your fourth year: residency interviews. Loans are certainly one way to manage these expenses. But another, perhaps more prudent option, would be budgeting and planning for these expenses ahead of time.

What Should YOU Do?

In the end, I can’t tell you what to do. I know what worked for The Surgeon and me, and I’ve seen what can work for others. Ultimately, it’s about being responsible with your financial decisions, closely evaluating living arrangements and expenses, and keeping your mind and body healthy for the long run.

It’s also great to instill these habits early, so that once you are making a bit of an income (at least adding to the positive side of the ledger) in residency, you can work on saving. Keeping those habits into your attending years will have you set up to be debt free while maximizing your financial potential for your life time!

What questions about expenses and budgeting do you have while in med school? How to make ramen more tasty? Adding an egg and some leafy greens can really kick up a ramen pack on the cheap.

-SurgeonJourney

Part 1: Med School Loans and How to Find Them

Accepted to Med School, Now What?

Congratulations! Your hard work through your undergrad years has paid off – that GPA and MCAT score and your summers spent doing research and shadowing have prepared you for the next four years, studying to become a doctor. As the glow fades from your monumental achievement, reality set in as you must figure out how to finance this expedition. (If you found this post by accident and you don’t require loans for medical school, go have a mai-tai and then come back for other info).

Let’s jump into the different ways one can pay for school. You’ll likely have information from the medical school you plan on attending to secure funding to pay for tuition and living expenses. You can skim through this section if you took loans out for undergrad. Keep in mind, the type of loan you accept will alter the different repayment options you can choose down the road. This decision, though seemingly minor, can have a large impact on a doctor’s financial situation for potentially decades.

Once you accept an offer, get your checkbook out – typically there’s a deposit required to hold your spot, and the school will provide resources to you for financial assistance depending on your situation. In my anecdotal experience, it seems that these Financial Aid offices can be anywhere from mildly helpful to possibly committing willful malfeasance. Your mileage may vary. Nevertheless, there are a TON of resources to talk you through the different options.

Since this blog is focused largely on surgeons with a residency of at least five years (my surgeon is in the greater than five year category), plus an additional one or two (or possibly three) year fellowship, I’ll focus on the decisions you need to make that will allow you to qualify for PSLF. I should note, also, that there are some longer residency + fellowship combos with medicine specialties that make this information helpful (cardiology, for one).

What’s PSLF? I’m Glad you Asked!

PSLF is an acronym for Public Service Loan Forgiveness, and the Consumer Financial Protection Bureau has a great summary of the program:

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your federal Direct Loans after you make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying public service employer. 

–consumerfinance.gov

So, what does that mean? Let’s break it down:

  • Federal Direct Loans
    • This means that the US Department of Education (and Betsy DeVos) is your lender. Basically you’re securing your loan directly from the Department of Education.
  • Qualifying Monthly Payments, 120 of them
    • Meeting the required payment each month as specified by your payment plan is all you need to do here. If you are attempting to qualify for PSLF, you should choose FedLoan as your servicer – they’re the only loan servicing operation that will manage PSLF.
  • Qualifying Repayment Plan
    • This is where some real value can come into play with the PSLF program. Federal loans can qualify for a number of different repayment plans, I’ll dig into this with lots more detail in a post dedicated to PSLF, but know for now that it can dramatically decrease your monthly payments to as little as $0.00.
  • Working Full-time
    • At least 40 hours a week. If you’re a general surgery resident, this will be less than half your week (unofficially; of course your week is officially 80 hours).
  • Qualifying Public Service Employer
    • In nearly all cases, as a resident you’ll be employed by a non-profit – 501(c)(3) – organization affiliated with your teaching hospital and have nothing to worry about here. (I’ve heard reports that Kaiser in CA does have their physicians, including residents, employed by a for-profit entity; I’ll do some more research on this).

So there it is! Work ten years for a non-profit while meeting the payment required each month and the remainder of your loan will be forgiven (principal and interest TAX FREE!) by good Ol’ Uncle Sam.

Too much of a good thing?

I have heard that there is brewing interest in Congress to institute caps on forgiveness, but for now there aren’t any. At the time of this post, it’s still safe to go for PSLF as a med student. If there are changes, most speculate that existing borrowers won’t be affected – depends how the US Treasury is looking.

Photo by Ricardo Rocha on Unsplash

Loan Decision Time

I digressed a bit with the PSLF intro, but let’s get back to paying for med school – it’ll all fit together, I promise. Once you get over the sticker shock, put together a rough budget of your expenses you think you’ll have each year, broken down by semester – there are lots of guides online for this, so I’ll just create an example here:

By Semester:Cost:
Tuition$25,000
Miscellaneous and spurious fees$4,000
Living costs: Housing ($1000/month), Food ($400/month)$8,400
Total (per semester):$37,400

Depending how frugal (or not) you are, you’ll be spending at least $70,000 per year between tuition and living expenses.

Getting that Cheddar, Public or Private?

Two main options are private and public loans. In order to qualify for PSLF, you must use a public loan. After submitting a FAFSA form, you’ll likely be approved for two federal loans, Direct Unsubsidized and Direct PLUS. The former are capped at $40,500 per year, though Direct Unsubsidized Loans don’t have any strict requirements, like credit checks, and come with a pretty reasonable fixed interest rate.

You might be wondering what’s the difference between Unsubsidized and Subsidized Loans – I sure did when I first saw it. It has to do with how the interest on your loan is handled. For Subsidized Loans, the kindly U.S. Department of Education will pay the interest accrued while you’re in medical school. They do come with more restrictions than unsubsidized loans and are based on financial need. You’re responsible for the interest accrued on unsubsidized loans while you’re in school – if you choose not to pay interest while you’re in school, it will capitalize (your interest accrued gets added to the principal) on your loan.

If you find yourself needing more than $40,500 per year in loans, and you very well might, Direct PLUS loans are your next stop. These do come with more requirements, like a credit check, and may have more restrictions for borrowers with an adverse credit history.

SurgeonJourney’s Suggestion

From my perspective, I didn’t fully understand how PSLF worked until my spouse’s last year of medical school. By that time, we had maxed out the Direct Unsubsidized option every year and covered the rest of tuition with private loans. Were we to do it again, I would likely try to take out all public loan options for the purpose of PSLF.

We were fortunate that while my spouse was in school, I was working a full time job at a software startup, which certainly eased concerns for living expenses. I know that not everyone will have this situation, so it’s important to know your loan options and also focus on managing your expenses wisely. There are some great budgeting tools out there I’ll cover in later posts.

Let me know your thoughts and questions in the comments!

-SurgeonJourney

Managing Federal Loans and Qualifying for PSLF, a Practical Guide

Loan decisions start as soon as an aspiring doctor receives their acceptance to medical school. After the wave of excitement passes, assuming you don’t have a trust fund, the next question is invariably: how am I going to pay for this education? Navigating loan options is complex and confusing – having first hand experience (well, via my spouse), I’m here to help!

This is going to be a multi-part series focusing on different phases in the progression of loan acquisition, spending, and eventual payoff or forgiveness.

Med School Loans: A Series

With the rising cost of medical school – even for state schools, it definitely is important to evaluate payment options and consider your residency and speciality wisely. Each of these decisions will have an impact on your future finances, from the type of loans you choose to your income as an attending. The length of residency and potential fellowship you choose will also affect which loan forgiveness and payment plans you will qualify for if you have federal loans.

We’re going to start at the beginning, right after you accept an offer to attend medical school. From there, each segment will focus on a different phase of the medical education and training process, culminating in graduation from residency and fellowship.

Along the way, we’ll look at different ways to manage student loans for medical school. If you have any questions, comments, or suggestions for this series – let me know in the comments!

-SurgeonJourney