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Resident Finance Question

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  • Resident Finance Question

    Hello to all, I've been reading the blog since its inception (right before I started medical school). I am now in my intern year and hoping to gain some wisdom from the community (especially Dr. Dahle). I will give my financial history first to frame the context of my question. My finances are fairly different from the average intern and I do not present any of the following to boast...I am trying to make the most informed decision I can. As far as liabilities go, I have about 160k in med school debt at an average of 6.6% (which I am currently in the process of trying to switch to REPAYE). We have no other debt other than medical school. For assets, I have real estate investments that return anywhere from 10-18% per year, giving me a nice 20-35k cushion to my resident salary. I have about 95k of cash that is invested fairly conservatively and has returned anywhere from 3-12%. I've got about 13k in checking (have to pay hospital bills for birth of first child). Everyone is probably asking why I have cash that invested in vehicles that have such a fluctuating rate of return: this is because I intermittently have real estate opportunities that have been historically great investments. This is also why I have chosen to not pay off my student loans (basically, I know that I can achieve a significantly better return than the 6% I owe on the loans, which will hopefully be even lower after REPAYE). Other that this, I also have some intellectual property that may or may not take off during residency. Finally, there is interest from a buyer in my largest real estate holding that, if successful, would more than triple the investment that I have in the property (I would obviously lose the 20-35k/year until I could re-invest...which I would pursue aggressively).


    I am in a very well-paying transitional year with excellent benefits. I matched into dermatology but my residency pay and benefits will be taking a significant hit to the tune of about 20k/year (when everything is totaled up; I am not referring to just raw salary). My health insurance costs alone go from $187/month with a $2,000 deductible with amazing coverage to $650/month with a $10,000 deductible. I have fairly good job prospects post residency. Assuming that dermatology does not get completely obliterated in terms of compensation before I finish, I anticipate being debt free and fairly close to financial independence within 10 years of finishing residency.


    Now, for the wrinkle. I am heavily considering joining the Reserves while I am in residency. I was almost certain that I was going to do the military HPSP scholarship when I decided to go to medical school because it was inconceivable to me to go into the amount of debt that many medical schools require. Fortunately, I got into what was once one of the cheapest state medical schools in the country and have a fairly low debt level and had an unrestricted specialty choice (they did raise tuition fairly significantly every year I was there). I have no issues with military service and several other physicians in my extended family are or have served in the military. Many people tell me that it is financial craziness to join the reserves, but I am not so sure. Here is my reasoning: time value of money. I have had success early in life by not delaying making money. By joining the Reserves, I would completely nullify the pay cut I take when I start derm. That would free up almost all of my residual income from my real estate investments, allowing me to grow these profitable endeavors. Furthermore, it would also likely give me the flexibility to pursue some of the stock market activities I had engaged in during undergrad which is how I generated my initial reserve of cash. I think that there is actually a decent chance that I could grow my investments by at least the size of my outstanding medical school debt. Furthermore, the benefits offered by the military would allow me to lock down my health, disability, and life insurance situations in the most favorable way possible and would decrease that background worry that all new fathers feel. I have no issues with drilling one weekend a month when I finish or serving two weeks per year. A three month deployment would obviously not be the most favorable thing for a family man such as myself, but I think that the benefits that would be realized during residency would outweigh both the lost income and the lost time away from family. Another benefit to the additional income from the Reserves during derm residency is that it would allow us to live within walking distance to where I will spend almost all of my time in clinic. This is huge for me because if I had to drive, I would spend a lot of time in traffic and get home after my child went to bed. So, bottom line, is this a crazy thought to join the Reserves? My only worry is that I am underestimating what life in the Reserves would entail. I would love feedback from the community, particularly those who have served in the military. Many thanks in advance!

  • #2
    Not military, but yes it is a crazy thought.

    It is crazily overthought, imo.


    • #3
      Not really the feedback I was looking for, but I appreciate you sharing your thoughts. I don't really believe in overthinking when it comes to long as it doesn't lead to analysis paralysis. The way I have analyzed things has put me in a fairly decent position at this point in time. Hopefully some more meaningful feedback will come in.


      • #4
        You need to post some $ numbers so we have an idea what you're talking about numbers-wise.  My gut instinct is you are way off from a financial perspective.  Of course you probably have other good reasons to enlist.  Also enlighten those of us not in the military what your comittment would be and how long you plan to stay in reserves etc.


        • #5
          The STRAP program offers around $2,300/month, military health insurance which is around $200/month, around $600/month in drill pay. The usual military benefits also apply (dental, vision, USAA home/auto/disability/life, etc). The commitment is 2 years of service for every 1 year of the program. My total commitment would be 6 years if I took this program. I would estimate the total net benefit to be somewhere around 35-40k/year.


          • #6
            Bottom Line Up Front:  Do not join the military for financial reasons alone, otherwise, you'll be on SDN posting about how .milmed screwed you.

            I know you mentioned in your post that you had reasons other than financial; but, then you went on to say you didn't mind a drill 1 weekend per month, 2 weeks per year, or the occasional 3 month deployment.  I'm here to tell you that's a perfect, bare minimum, case scenario.  Hell, I think it would be almost foolish not to signup if those things were guaranteed.  But that's not the case.  That 1 weekend per month may be when your scheduled for call at your civ practice, or during your kids first soccer game.  The 2 weeks a year may be extended to 4, curiosity of a natural disaster (ala Katrina).  Your private practice suffers.  The 3 month deployment you speak of is "at best" 90 days boots on ground, which doesn't include mandatory pre-deployment workup and post-deployment re-integration.  Not to mention, most Reservist physician deployments that I've seen have been 4-6 months.

            The Reserves is like an average moonlighting gig with exceptional benefits.   But, IMO, it's your #1 commitment and obligation.  Trumping even your private practice, because when Uncle Sam calls you have to answer.



            • #7
              Active duty ER in a deployed setting. 4 year HPSP.  I LOVE my deployed job. The most rewarding/enjoyable critical care/ER job I will ever have. However, I was very fortunate in obtaining it. I could have just as easily been stuck in a job/location as WCI and been pretty miserable.  I cannot over emphasize the importance of not joining for financial reasons.  You will be frustrated and miserable. It sounds like you have a good perspective on the reserve expectations from family members, so that may not be as big of an issue.  I have a family military background and wanted to serve in some capacity which is why I did HPSP. I have loved my time in the military and would do it again in a heartbeat. However, I have been very fortunate with getting the residency location as well as the base that I wanted. It doesn't always work like that. I also echo ActiveDuty with the deployment issues: that is best case scenario. I agree the benefits are very good. Having been deployed with the Guard and Reserve, have you looked at the guard? They seem to be happier with their support. I looked at both and that seemed to be the better deal after I got out, but I am not planning on either when I separate. That's more than two cents worth.  Sorry to ramble on so much.


              • #8
                I forgot to mention that one of my attendings in residency did the program you are describing. His deployment was 6 months.  You just never know. He did the Army Reserve.


                • #9
                  Many thanks for the comments! I know there is tremendous variability in the experience and I guess that is what I am trying to get a handle on before I make any decisions. Everyone in my family has been more or less satisfied...but I know there are many people out there who have been anything but satisfied with their military experiences. I am hung up on it because it really is something I have always wanted to do and we really could use the benefits during residency in a big way. My wife is even on board now because she has seen how necessary good benefits are once a child is involved. Furthermore, joining in residency would allow us to live right next to where I will be in clinic for 3 years, allowing me a great deal of time with my family that I would not have otherwise had. Anyway, thanks for the help - would love to hear from others as well if they're out there!


                  • #10
                    Each individual experience is in the eye of the beholder.  So you will get a lot of variability in your response.  The most important things to consider are your values and motivations.  If your motivations are of a sound basis, no matter what your future experience entails, you can always look back and say this is why I made that decision.

                    I've seen too many physicians disgruntled by milmed, who only joined to have med school paid for, etc.

                    That being said, I'm active duty and have enjoyed every minute of my experience and practice to date. (with the exception of the lack of quality disability insurance at a reasonable price)  I was also fortunate enough to secure a surgical subspecialty residency, and a prime duty station location on 2 separate PCS cycles.  That however is not always the case, so take my comments with a grain of salt.

                    Best of luck to you!


                    • #11
                      I think you may not be underestimating life in the reserves - at least no too much.

                      But I think you may be underestimating how much having a kiddo will change your life. Is it possible for you wait 4-6 months after the baby is born and then evaluate?

                      I can tell you that after kids (3 now), my perspective has completely change from before we had kids.


                      • #12
                        Our child is 3 months and you are exactly definitely has changed me. One of the most attractive aspects of joining in residency is the fact that we would literally be within walking distance of where I will be in clinic. This unequivocally means more time with the family because there would be no commute. I could also go home (or they could come visit) when I'm free for lunch which is a HUGE plus! It's basically weighing 3 years of guaranteed more time against the possibility of deploying in the reserves...not an easy decision.