MS4 Seeking Match Advice

[RenOl]

Looking for some input on the value of some extra cash as a resident at a relatively low wage, given my personal situation below.

Background: MS 4 coming up to submitting rank list. I’m stuck between ranking two programs in relatively close geographic vicinity as my #1. No need to move for either program.

• Program A has a call load of about 300 hours beyond the traditional 8-5 workday during PGY-1, 250 hours during PGY-2, 150 hours during PGY-3, no call PGY-4. Gross pay is about $11k more for PGY-1 year, $8k more per year for PGY-2-4, though it works out to be about $35/hr in pay at both programs. (Of course, I understand that estimating duty hours is not an exact science.)


• Program B has no required call. Might have to pay an additional $100-$200/mo in transportation/parking.

I’d receive excellent training at either program and both have strong track records. All other factors are relatively similar (benefits, retirement options, etc). I plan on a 5 year residency/fellowship. Of note, I can start moonlighting as a PGY-2 at $130/hr.

Social: Live in a high COL area due to spouse’s govt job. Rent a house, live with spouse, 2 children under age of 4, and my elderly parents, whom we financially support. I am 36 YO. Spouse is same age.

Finances: I have $250k in mostly direct loans that I will likely consolidate and use REPAYE. Hope to qualify for PSLF and/or possibly state/fed loan repayment. Spouse has about $35k in direct loans and is in the process of getting certified for PSLF. We estimate that she will need to make 12-24 more payments to qualify. We are just waking up to the fact that we are not in a great financial situation: no emergency fund, minimal college savings, and <75k in retirement from previous and current employment. At both programs, we can pay the bills and save at least $2000/mo. Presumably at program A we’d benefit from the additional gross pay.

My questions:

• I am leaning towards program B, as in about 25 moonlighting shifts starting in PGY-2, I can close the entire salary gap between the two programs. There is also the invaluable bonus of having weekends and evenings to spend with the kids. However, I am concerned about the loss of income during PGY-1 and how that affects my ability to invest additional funds in retirement, college savings, etc, particularly since I’m 36 years old. Is this concern well placed, or is it not a big deal?

• I am assuming that it makes more sense to first funnel all savings into an emergency fund, even at the expense of funding a pre-tax 403(b). However, the consequence is that I miss out on reducing my AGI, thereby increasing my monthly student loan payment and decreasing the REPAYE interest subsidy. Any thoughts on this strategy?

[FIREshrink]

Compensation was about dead last on my list of considerations when making my rank list, as it should be with yours. Go to where you will get the best training, but also where the program culture will fit you best. If all other factors than those you have listed are a dead tie, then quality of life over money wins every time, esp in training when the money is negligible either way.

You don't need a huge EF because you have two extremely secure jobs: government, and residency. I'd max out tax-advantaged space, balancing between traditional or Roth to optimize your two variables, which are in tension: 1. lowering your AGI to lower your debt repayment requirements; and 2. filling your tax advantaged space which is use it or lose it.

Knowing nothing else about your situation, max out your traditional 403b, and your Roth IRA, and use the Roth funds as an EF, keeping the investment somewhat low risk (say 50/50 stocks/bonds).

[GXA]

There is also the invaluable bonus of having weekends and evenings to spend with the kids.

I think you may have answered your own question.  You will have an extremely well paying job soon enough, and if you maintain a reasonable lifestyle, you will have plenty saved up.

Your kids are only young once...

[childay]

I pretty much agree with FIREshrink.  That said it can be difficult to determine which program has better training or even what the culture is like until you are actually in the program.  It can also be difficult to determine true work-hours.

Otherwise, what kind of residency has no call whatsoever?  That obviously sounds awesome!

[jjandjab]

Agree with above on residency. Given you have a family, I would much rather have the flexibility to be at home or work more shifts as I see fit, rather than have a set requirement. And given the extra work at program A is paying you what $35/an hour for call? Totally go with B. You will make back the $35k difference over the life of the residency in very little time as an attending (or moonlighting as you point out)

I'd disagree with FIREshrink here on the 403b. Make sure you have a good emergency fund (maybe 3 months) before the 403b, especially depending on the field of government work your wife is in... I am not a big political guy, but there is clearly a movement afoot to shrink government overall and I'm not sure we can call that reliable without more information.

Save a good solid foundation first, then go for it with the 403b. I'd worry about college savings last at this point. Just make sure to live way below your means since at 36 you have a negative net worth. You are in good shape for thinking about it though, so good luck as you move on.

[ticker]

I'd agree with everything said above, with one little caveat (and forgive me if this makes the decision anything other than easier):  All of my most impactful learning in training happened on call.  The increased workload, lack of back-up, etc. always made me do my best work, generated my fastest learning, and really cemented a lot of clinically relevant information in my mind in a way that never happened when a wise attending was there overseeing things.  But, setting aside the fact that call might be good for you, I'd agree that if everything else is roughly equal, I'd take the superior schedule.

[WallStreetPhysician]

RenOl wrote:

Looking for some input on the value of some extra cash as a resident at a relatively low wage, given my personal situation below.

Background: MS 4 coming up to submitting rank list. I’m stuck between ranking two programs in relatively close geographic vicinity as my #1. No need to move for either program.

• Program A has a call load of about 300 hours beyond the traditional 8-5 workday during PGY-1, 250 hours during PGY-2, 150 hours during PGY-3, no call PGY-4. Gross pay is about $11k more for PGY-1 year, $8k more per year for PGY-2-4, though it works out to be about $35/hr in pay at both programs. (Of course, I understand that estimating duty hours is not an exact science.)


• Program B has no required call. Might have to pay an additional $100-$200/mo in transportation/parking.

I’d receive excellent training at either program and both have strong track records. All other factors are relatively similar (benefits, retirement options, etc). I plan on a 5 year residency/fellowship. Of note, I can start moonlighting as a PGY-2 at $130/hr.

Social: Live in a high COL area due to spouse’s govt job. Rent a house, live with spouse, 2 children under age of 4, and my elderly parents, whom we financially support. I am 36 YO. Spouse is same age.

Finances: I have $250k in mostly direct loans that I will likely consolidate and use REPAYE. Hope to qualify for PSLF and/or possibly state/fed loan repayment. Spouse has about $35k in direct loans and is in the process of getting certified for PSLF. We estimate that she will need to make 12-24 more payments to qualify. We are just waking up to the fact that we are not in a great financial situation: no emergency fund, minimal college savings, and <75k in retirement from previous and current employment. At both programs, we can pay the bills and save at least $2000/mo. Presumably at program A we’d benefit from the additional gross pay.

My questions:

• I am leaning towards program B, as in about 25 moonlighting shifts starting in PGY-2, I can close the entire salary gap between the two programs. There is also the invaluable bonus of having weekends and evenings to spend with the kids. However, I am concerned about the loss of income during PGY-1 and how that affects my ability to invest additional funds in retirement, college savings, etc, particularly since I’m 36 years old. Is this concern well placed, or is it not a big deal?

• I am assuming that it makes more sense to first funnel all savings into an emergency fund, even at the expense of funding a pre-tax 403(b). However, the consequence is that I miss out on reducing my AGI, thereby increasing my monthly student loan payment and decreasing the REPAYE interest subsidy. Any thoughts on this strategy?

Click to expand...

Excellent responses by the other posters. I'd vote for Program B. Salary is unimportant; any difference can be made up with a few extra weeks of shifts once you're an attending.

[The White Coat Investor]

I agree. Compensation dead last for residency. Fit with the people in the program and adequate strength of training are far and above everything else. Then probably location. Then stuff like call. Compensation way down there. The key to becoming wealthy as a physician is NOT how much you're paid during residency. It's about how long you can live like a resident afterward before having a lifestyle explosion.

[StarTrekDoc]

Remember this time.  Match is a moment like no other.

That said, do what's the best training that sets you up for your career.  That said, if all equal, take the one with most flexibility.  $$$ will come after residency soon enough.   As WCI said, maintaining a resident lifestyle on expenses well into your first decade post residency is going to be more significant than any form of residency compensation/moonlighting.

 

[DMFA]

RenOl wrote:

 

[...]

Finances: I have $250k in mostly direct loans that I will likely consolidate and use REPAYE. Hope to qualify for PSLF and/or possibly state/fed loan repayment. Spouse has about $35k in direct loans and is in the process of getting certified for PSLF. We estimate that she will need to make 12-24 more payments to qualify. We are just waking up to the fact that we are not in a great financial situation: no emergency fund, minimal college savings, and <75k in retirement from previous and current employment. At both programs, we can pay the bills and save at least $2000/mo. Presumably at program A we’d benefit from the additional gross pay.

[...]

• I am assuming that it makes more sense to first funnel all savings into an emergency fund, even at the expense of funding a pre-tax 403(b). However, the consequence is that I miss out on reducing my AGI, thereby increasing my monthly student loan payment and decreasing the REPAYE interest subsidy. Any thoughts on this strategy?

Click to expand...

It is pretty unlikely that you'll pay less on $35,000 at 6.6% over 10 years for PSLF (esp if you file taxes jointly) than you would if you just refi'd to a low 5-yr variable rate.  Has she been making payments for 8-9 years already and hasn't previously certified any of her employers?  Retroactive certification can be a pain.  Which repayment program did she use?  Are you completely certain all the loans are eligible for it?  If all you really have are 1-2 more years of a low payment for tax-free forgiveness, though, that's a great route.

As for your $250,000 and your family situation...have you given thought to filing taxes separately?  This might make which dependents go on whose return difficult and limit your eligibility for several deductions and credits, as well as prevent you from making direct Roth IRA contributions...but the ability to reduce the amount due on your student loans while in residency can be very helpful until you refinance them as an attending (or, if you're committing to PSLF with might be a bit risky, just paying as little as possible).

With 2 children and 2 dependent adults, you're probably going to need an emergency fund because that's a high amount of financial responsibility.  I hate to say not to emphasize tax-advantaged retirement savings, but with a quarter million in debt and six mouths to feed, you might find that to be fairly difficult (especially if the parents have health issues which are not adequately addressed by any savings they may have).  However, emergency credit is relatively easy to obtain, should it come to that...

I'll make these points, though, since they're fairly pertinent regardless of specifics:

• Choosing residency programs is a holistic process.  There are far more important things about it than pay (might be an odd sentiment on a financial forum), though the additional $11,000/yr is nice (lots of call, though).  Life has to not suck as much as possible.


• Consider filing taxes separately and using PAYE to minimize your student loan repayments (if AGI is $60,000, PAYE would max at $196.25 for a family of 4).  You might end up best off refinancing your wife's, unless she really does only have another year.


• Moonlighting is awesome for getting extra money, but doing it during residency means way less family time.


• You really should sit down with a financial planner with your budget, planned earnings, and overall goals for money in your life (vague, right?) and try to figure out a good path here.  There are too many moving parts and too much uncertainty (esp with old people, currently dealing with my mom's estate) to give good guidance on here.


• The most important things are tempering your lifestyle, not inviting more debt (credit cards, cars), and avoiding silly financial pitfalls (bad whole life insurance policies, expensive advisers).

[Traveldoc]

You sure learn a lot during call, but that can also be said for moonlighting. I certainly did, so i think that evens out. The latter also gives you flexibility on when you want to do it.

Another advantage of moonlighting is the benefit of a creating a solo 401. Does either program provide a 403 or 401?

I'd go with option B, hands down.

 

[RenOl]

Thanks everyone. I'm glad that so many physicians are interested in helping the next generation with more than clinical training. It is hard not to get discouraged at myself for years of poor financial decisions before entering medical school, and then having the expectation that simply being a doctor will take care of everything. I am learning, albeit slowly and late. I am finding that changing our mindset on how we spend is one of the more challenging tasks we have faced.

• Consider filing taxes separately and using PAYE to minimize your student loan repayments (if AGI is $60,000, PAYE would max at $196.25 for a family of 4).  You might end up best off refinancing your wife’s, unless she really does only have another year

We will certainly reconsider a re-fi of my wife's loans pending the results of the PSLF certification. I did run the numbers on our 2016 taxes, and the reduction on loan repayments (even in PAYE, though I am leaning towards REPAYE due to the interest write off) in filing separately did not supersede the credits and deductions from filing jointly.

• You really should sit down with a financial planner with your budget, planned earnings, and overall goals for money in your life (vague, right?) and try to figure out a good path here.  There are too many moving parts and too much uncertainty (esp with old people, currently dealing with my mom’s estate) to give good guidance on here.

I was actually heavily considering hiring a financial planner before I began educating myself on sites like WCI. Then I began to wonder how much they could help a family who essentially has negative assets.

• Make sure you have a good emergency fund (maybe 3 months) before the 403b, especially depending on the field of government work your wife is in… I am not a big political guy, but there is clearly a movement afoot to shrink government overall and I’m not sure we can call that reliable without more information.

Appreciate the variety of input on this issue. My wife says her job is "permanent," but I agree that nothing is guaranteed at the moment.

 

[DMFA]

I think you're confusing financial planning with wealth management.  Financial planning is about creating your overall goals with money in general, setting up a plan to get you out of your rut, properly structure your debts, protect the current assets you've got, set up appropriate insurances, and factor in both retirement savings and everyday expenses.  Johanna Fox has a good article outlining it (not an ad, I promise).  Your bank may also have some free planning advice available (mine did until I figured things out).

I would make absolutely certain that your wife is eligible for PSLF.  There are details regarding the loan types, payment plans, and payments made that may make some (or hopefully not all) of the 120 payments needed for forgiveness not qualify; it's more than just working for the government or a nonprofit.  Make sure all the details fall in line.