Physician Burnout and Resident Wellness are increasingly popular topics in medicine. The Medscape 2018 National Physician Burnout and Depression Report showed that nearly 40% of burnout is caused by finances. Of all the things that are not generally taught in residency, the one topic that could be unanimously agreed upon as being most beneficial in the long run would be Financial Literacy.
Currently, I’m not aware of any programs with this built into their curriculum. There are some programs with elective after-hours courses, or grand rounds taught by Attending Physicians that are financial hobbyists. I’ve also seen insurance salesmen give talks at residency programs on financial planning with an obvious emphasis on asset protection. Yet, the most well-versed residents tend to be those that have read books, listened to podcasts, or followed blogs on the subject, probably at the expense of missing some Orthobullets questions.
As my own residency is nearing an end, I’ve become increasingly aware of how ignorant I’ve been on certain financial topics. As a result, I’ve spent a relatively small amount of time and learned a considerable amount. I wanted to write this article in hopes that it would reach residents in programs where the topic isn’t discussed openly and at least spark an interest.
Resources
Since the advent of “The White Coat Investor” (WCI) in 2011, this has become an increasingly popular subject among physicians and has spawned other similar resources such as “Physicians on FIRE”, “Passive Income M.D.”, and “Financial Residency”.
All of the aforementioned resources are written by numerous doctors across many specialties and cover every financial topic relating to physicians. It’s invaluable to have free information on taxes, investments, buying a home, student loans, and insurance that is specifically directed towards the needs of physicians.
Blogs are the easiest online resource to consume as a resident. If you need help refinancing student loans or have questions regarding disability insurance, it is easy to navigate websites such as WCI to find an article on the subject.
Podcasts are my personal favorite. Primarily because they are the most passive resource. It’s very easy to listen on your commute, during a workout, or in between cases. The two I listen to most frequently are WCI and “Financial Residency”. I prefer playback speed 1.4x and select the “trim silence” tab. It’s surprising how many topics you can get through in a week just listening on commutes alone.
Asset Protection
Disability Insurance is definitely something to address early in residency. The perfect time to get it is intern year. Earlier equals better. You are often able to get cheaper premiums and not have to do your medical underwriting again when you increase your benefit as an attending. You also get a longer benefit period. The type you need is “Own-occupation, specialty specific”. You need enough to cover expenses (tax free benefit), and save for retirement. As a resident, you will likely only be eligible for a $5,000/month benefit. Riders you should include are “Future Purchase Option” which is the ability to get an additional policy with a 5-10k benefit as an attending without having to do medical underwriting again. It is also recommended to get an “Inflation Adjustment Rider” and “Residual Disability”. One additional thing to consider is the elimination period, which is the time before the benefit kicks in. The typical time is 90 days, so it’s advisable to have enough savings built up to cover expenses in the meantime.
Regarding Life Insurance, I’ll start by saying there’s almost never a reason to buy Whole Life Insurance. It’s using insurance as a form of very expensive investment that you’ll be upside down on for up to 15 years. So the mantra for life insurance is to buy the cheapest, level-premium insurance you can find. Like with disability, you want to get in early with a low premium while you’re in good health. As a resident, you can still potentially get covered for $1.25 million or $2.5 million, and pay $70/month or $140/month respectively for the 30-year term. Some companies multiply your current salary times the number of years before you reach 65 to calculate your eligible benefit amount.
A reasonable strategy is to decrease these as your wealth accumulates. If you have enough savings for your family to live comfortably then you no longer need life insurance. Similarly, in the twilight of your career, a substantial amount of money can be saved by decreasing or stopping disability insurance. This is provided that you have enough savings to retire if needed.
Student Loans
Public Service Loan Forgiveness (PSLF) has recently come under the spotlight as not being as appealing as it initially seemed, with <1% of loans being forgiven. The feedback from bloggers and podcasts is that paperwork is not filled out or kept properly, and that the program is a bureaucratic mess leading to substantial difficulties in getting credit for all eligible payment periods. Essentially, the government is making it hard to get loans forgiven.
The Income Driven Repayment plans include Income Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). These allow you to potentially pay $0 per month for the first 18 months of residency. Currently, most bloggers advise using the REPAYE program which provides 5% lower monthly payment than IBR and most importantly an interest rate subsidy that PAYE does not offer.
My personal experience with PSLF was that I got credit for only 18 of 48 months of residency, and was given no explanation. My attempts to remedy the situation were met with lengthy reply times and no correction in sight. Also, my payments grew to >$350 per month on the IBR plan with >6% interest rate. Realizing that I was also paying another $250 per month on private loans I felt that consolidating to a lower interest rate (4.8%) and lower monthly payment ($100 total) was the correct choice for me. It should be noted that I was in contract negotiations for private practice and getting the necessary 120 months in PSLF was unrealistic.
PSLF is still definitely a viable option if done right and meticulously monitored. If you are micro-managing your PSLF then you can get over 6 figures in forgiveness down the road. Just remember that forgiven debt is taxed as income the year it is forgiven, so it’s not totally free money. However, for those who won’t be eligible or want other options, the WCI website has links and discounted rates on loan consolidation with SoFi, Laurel Road, and Splash Financial. These allow you to lower you monthly payment to $100 per month while in training, and consolidate all loans to a lower interest rate than PSLF programs. For a time, Splash was offering $1 per month payments and its unknown if the program is coming back due to funding.
Financial Planning
This subject is multi-layered and unique to each individual. Most information can easily be found using the aforementioned resources. There are even lists of vetted financial planners if needed. It is very important to have a plan or strategy for how to manage your current income, savings, and debt. Being proactive got you into Orthopedics and can also help you accumulate wealth much faster than your peers. The truth is most residents are ill-prepared to receive their first attending paycheck.
Finding ways to live frugally and free up cash can allow you to pay off high interest debt such as credit cards, which in turn frees up more monthly income. If your debt is under control, consider ensuring you having some savings set aside in case of an emergency. Recommended savings are 15-20% of your income; however, this is only realistic once you’re an attending. If you are living comfortably and have enough set aside to cover insurance deductibles, then investing could be worthwhile.
Tax averse strategies should be applied to all financial decisions, especially investing. When you retire you want to have a mix of tax free and taxable investments to live on so you can set your yearly income. As a resident your tax bracket may be the lowest it will ever be. Therefore, after-tax investments are advised. Your employer likely has either a 403b or a 401k option as well as the ability to select a percentage of your paycheck to contribute to this. Passive investing is the easiest option. Make sure and set your contributions to ROTH 401k or ROTH 403b, which means your contributions will be taxed before going into the account, grow tax free, and used tax free in retirement. Several employers also have an employee-match where they will match a percentage of your contribution (my employer will match 6%), which is free money (pre-tax). There are several articles on how to modify this account to get the highest returns (index funds, etc). Lastly, the IRS has limits on how much can be invested in these accounts annually, so while you probably won’t have to worry about it now, it’s good to be aware of.
There’s always more to learn in orthopedics and in finances. Hopefully this has peaked an interest or brought to light some things you can address while in residency.
**DISCLAIMER: I have no personal or financial interests with any resource mentioned in this article.
