Ideal income

[psych007]

I am curious.  I work in a hospital in NYC where the average attending salary is about 180K per year for a 40 hour work week.  But, the hospital allows ample moonlighting opportunities at $135/hr.  The work is not very taxing, if you ask me.  Some of the attendings there milk the clock so much that some have been notorious for earning up to 700K/year in salary plus moonlighting (Obviously working to the bone).

Generally, what is the ideal income in which the tax penalties outweigh the benefits of added income (might be a personal bar, I guess)? Is it always advantageous to make the most money possible?  What do you think is the ideal income bracket, even for an expensive city like NYC.

 

 

[Zaphod]

psych007 wrote:

I am curious.  I work in a hospital in NYC where the average attending salary is about 180K per year for a 40 hour work week.  But, the hospital allows ample moonlighting opportunities at $135/hr.  The work is not very taxing, if you ask me.  Some of the attendings there milk the clock so much that some have been notorious for earning up to 700K/year in salary plus moonlighting (Obviously working to the bone).

Generally, what is the ideal income in which the tax penalties outweigh the benefits of added income (might be a personal bar, I guess)? Is it always advantageous to make the most money possible?  What do you think is the ideal income bracket, even for an expensive city like NYC.

 

 

Click to expand...

Definitely not always advantageous in these scenarios where it is essentially a linear scale, ie, there is only so much time you can spend earning that money, and the returns certainly diminish.

Obviously the break even point will differ for everyone, and Im sure its a lot higher in NYC. Just on a tax/earn basis though, a married filing joint person has a marginal rate of 28% up to about $231k, which isnt bad. Depending on your 1099/w2/401k status I'd shoot for at least the 260k that gives even a SEP-IRA full contributions. Anything above that 231k is at 33% and you start to not get much back for every incremental amount of work you do.

Of course one has to pay the bills so that can be the deciding factor initially, but you keep a whole lot more from 0-250k than you do from 250-500k. Its pretty wild how it works actually. Even worse in a high tax state/city like NYC.

Think of it like this. If your salary is base 180k/y then your actual pay for moonlighting (only fed addressed for simplicity) is:

180-231: 97.2/h

231-413: 90.45/h

413-467: 87.75/h

467+: 81.54/h

Remember you're more exhausted and getting paid less. Real life rates lower of course including state/city/aca etc...

[childay]

Obviously the top bracket is the ideal income.  Whether it is worth working that hard is another question and obviously will vary widely depending on the details and the person.

[TheGipper]

Working more into the top tax bracket becomes more advantageous if you have the ability to put away more money tax free.

For example, many docs not only can put away 53k into 401k/PSP, but also 18k into a 457b, and another 10k-100k into a defined benefit/cash balance plan.  Add to that spousal retirement plans, catch up amounts over 50 years of age, and solo 401ks through self-employment/independent contracting, and the extra hustle can start to pay off.

Are you able to do moonlighting that will pay you as a 1099 contractor instead of a W2 employee if you have already maxed out your currently tax-advantaged space.  If so, you can tax shelter that.

[drcolleen]

Coming from a tangent or perhaps just a female perspective, I think for many families be they female physicians or dual physician/working couples, there is a point at which working more hours does not improve quality of life or financial stability.

1- If you never see your family I'd argue you are missing the point of life so from a subjective standpoint more money is not necessarily better (unless you don't like your family but let's pretend this is not the case).  Also, divorce is a big financial hit.

2- If you are working more hours many end up outsourcing tasks around the house such as cleaning, lawn care, car maintenance, childcare, cooking, even shopping to name a few and these expenses often add up to more than the time and money it would have taken you to do them-- or at least the ones you don't hate doing.  So if you are working extra hours just to pay the upkeep of a life you don't get to enjoy I would argue it's not worth it e.g. do I want to work an extra hour @ $70 after taxes to pay for ordering food for me to eat at the hospital over a weekend + the rest of the week or be at home to make dinner which has left overs for me to pack lunches for the week saving $70?).  There is no tax advantage to "employing" more people around your house.  I'm on another non-financial physician forum and many say they are living "paycheck to paycheck" they all blame student loans it seems but everyone seems to have nannies, pick up meals every night, carry expensive handbags, etc so this picture is not financially "better" to me.

Ideal income -- and perhaps more importantly to some of us is the concept of ideal time invested in working -- is likely a very individual decision that changes with the phases of life.  Personally, having 4 young kids at home I would not elect to work more hours for more money, but as they get older that will change.  Taxes aren't everything, just the first 1/3rd like placebo

[ko]

psych007 wrote:

I am curious.  I work in a hospital in NYC where the average attending salary is about 180K per year for a 40 hour work week.  But, the hospital allows ample moonlighting opportunities at $135/hr.  The work is not very taxing, if you ask me.  Some of the attendings there milk the clock so much that some have been notorious for earning up to 700K/year in salary plus moonlighting (Obviously working to the bone).

Generally, what is the ideal income in which the tax penalties outweigh the benefits of added income (might be a personal bar, I guess)? Is it always advantageous to make the most money possible?  What do you think is the ideal income bracket, even for an expensive city like NYC.

 

 

Click to expand...

Just a little reality check as an aside - for someone to make $700k based on the numbers you provided, they'd have to work an extra 74 hours per week in addition to their regular 40 hours for a total of 118 hour per week, every week for 52 weeks per year.

 

I realize your question wasn't actually about how to make $700k per year at your hospital and was instead about where people think their optimal income level is. But as part of the context, I would just state that people often exaggerate, especially so when it comes to hours they work and, by extension, how much money they may make. I find it helpful to keep that in mind when comparing my situation to another's.

[psych007]

ko wrote:

psych007 wrote:

I am curious.  I work in a hospital in NYC where the average attending salary is about 180K per year for a 40 hour work week.  But, the hospital allows ample moonlighting opportunities at $135/hr.  The work is not very taxing, if you ask me.  Some of the attendings there milk the clock so much that some have been notorious for earning up to 700K/year in salary plus moonlighting (Obviously working to the bone).

Generally, what is the ideal income in which the tax penalties outweigh the benefits of added income (might be a personal bar, I guess)? Is it always advantageous to make the most money possible?  What do you think is the ideal income bracket, even for an expensive city like NYC.

 

 

Click to expand…

Just a little reality check as an aside – for someone to make $700k based on the numbers you provided, they’d have to work an extra 74 hours per week in addition to their regular 40 hours for a total of 118 hour per week, every week for 52 weeks per year.

 

I realize your question wasn’t actually about how to make $700k per year at your hospital and was instead about where people think their optimal income level is. But as part of the context, I would just state that people often exaggerate, especially so when it comes to hours they work and, by extension, how much money they may make. I find it helpful to keep that in mind when comparing my situation to another’s.

Click to expand...

NYS and NYC employees' salaries are public information, so it very easy to look up folks salary.  So i know for sure that most of the docs there are doing very well.  Check this link out....im not making this up

http://nypost.com/2011/10/02/kings-county-shrink-claimed-to-work-141-hours-in-one-week/

[Slav4ikMD]

Good question, but I don't think there are simple answers here.  Lots of variables.  Also depends on how much harder you'd have to work to earn past a certain point.  Also depends on how much you can put away.  If it's all W2, I would argue that getting past around the 400k mark becomes counterproductive in most circumstances.  But if you can combine W2 and 1099, put max away pretax AND have your own business on the side for deductions, then getting to higher numbers might not hurt you.

I too know a few people making in the 700k range by having these "sleeper" jobs, it's not a surprise.  If I were single I'd probably do more of that too.  I do some 48hr oncall shifts and the numbers do add up pretty quickly.

For the hospital that you mention it's totally crazy (in a good way) as that's a city/state job and it adds to your pension too - a scam in a way, but good for those who can take advantage of it.

[Zaphod]

psych007 wrote:

ko wrote:

psych007 wrote:

I am curious.  I work in a hospital in NYC where the average attending salary is about 180K per year for a 40 hour work week.  But, the hospital allows ample moonlighting opportunities at $135/hr.  The work is not very taxing, if you ask me.  Some of the attendings there milk the clock so much that some have been notorious for earning up to 700K/year in salary plus moonlighting (Obviously working to the bone).

Generally, what is the ideal income in which the tax penalties outweigh the benefits of added income (might be a personal bar, I guess)? Is it always advantageous to make the most money possible?  What do you think is the ideal income bracket, even for an expensive city like NYC.

 

 

Click to expand…

Just a little reality check as an aside – for someone to make $700k based on the numbers you provided, they’d have to work an extra 74 hours per week in addition to their regular 40 hours for a total of 118 hour per week, every week for 52 weeks per year.

 

I realize your question wasn’t actually about how to make $700k per year at your hospital and was instead about where people think their optimal income level is. But as part of the context, I would just state that people often exaggerate, especially so when it comes to hours they work and, by extension, how much money they may make. I find it helpful to keep that in mind when comparing my situation to another’s.

Click to expand…

NYS and NYC employees’ salaries are public information, so it very easy to look up folks salary.  So i know for sure that most of the docs there are doing very well.  Check this link out….im not making this up " />

http://nypost.com/2011/10/02/kings-county-shrink-claimed-to-work-141-hours-in-one-week/

Click to expand...

Hmm...seems there is a lot of "reported" in that article suggesting that possibly the numbers were fudged. People simultaneously get upset about the hours and that one could be paid for being available but not necessarily "working". Its the same for any position of that nature, police, fire, etc...its just the numbers that make peoples eyes pop, although if you see how much some police/fire people make with their overtime you'd be shocked as well.

[The White Coat Investor]

I'm in a bit of a unique scenario in that I've lived as a family on both a low 5 figure income as well as a high six figure income and nearly everything in between over the years. I assure you there is no additional happiness whatsoever above the $200-300K a year range for us, and that's gross income. Not counting savings, taxes, charity, and major purchases (big home improvements, boats, cars, monster vacations etc) we spend a very low six figure amount each year. It will be a five figure amount once the mortgage is paid off. So whatever is made above that goes to taxes, charity, and savings for the future.

So how much time would I be willing to spend working at something I didn't enjoy to make more than that? None at all unless I were going for even earlier financial independence for some weird reason. But it gets complicated when you actually do something you enjoy. And making money by itself can be kind of fun. But when I'm missing out on other stuff I want to do in order to work for money I don't need, that's not very fun.

[Josh0731]

That's a good point about being a W2 employee and going above $400k - if you don't have access to all the ways business owners can squirrel away extra earnings, the tax burden of having your income climb higher than that means all that extra work is being compensated so much lower than you are worth that (for me) its not worth the time out of life and away from family and friends.  But this is a point that is totally lost on most people - I've tried to have this conversation with colleagues and people just don't get it, mainly because I think they have no idea how their taxes work.  (Future blog post idea??)

[ko]

psych007 wrote:

ko wrote:

psych007 wrote:

I am curious.  I work in a hospital in NYC where the average attending salary is about 180K per year for a 40 hour work week.  But, the hospital allows ample moonlighting opportunities at $135/hr.  The work is not very taxing, if you ask me.  Some of the attendings there milk the clock so much that some have been notorious for earning up to 700K/year in salary plus moonlighting (Obviously working to the bone).

Generally, what is the ideal income in which the tax penalties outweigh the benefits of added income (might be a personal bar, I guess)? Is it always advantageous to make the most money possible?  What do you think is the ideal income bracket, even for an expensive city like NYC.

 

 

Click to expand…

Just a little reality check as an aside – for someone to make $700k based on the numbers you provided, they’d have to work an extra 74 hours per week in addition to their regular 40 hours for a total of 118 hour per week, every week for 52 weeks per year.

 

I realize your question wasn’t actually about how to make $700k per year at your hospital and was instead about where people think their optimal income level is. But as part of the context, I would just state that people often exaggerate, especially so when it comes to hours they work and, by extension, how much money they may make. I find it helpful to keep that in mind when comparing my situation to another’s.

Click to expand…

NYS and NYC employees’ salaries are public information, so it very easy to look up folks salary.  So i know for sure that most of the docs there are doing very well.  Check this link out….im not making this up " />

http://nypost.com/2011/10/02/kings-county-shrink-claimed-to-work-141-hours-in-one-week/

Click to expand...

Sure, I don't doubt there are docs making that much. But there are few implications. One of the following must be true:

1. Docs making that much are working an unholy amount (as mentioned before with the numbers you provided, it would be ~120 hours/week, every week for 52 weeks per year); or

2. Their comp numbers (base and/or overtime rate) are higher than what you stated

And there are not many humans that can sustain option 1 for very long, particularly for several years. There are a few, yes, but they are extreme outliers, and even those that can do those kind of hours often don't do it for more than a few years (case in point, look at the burnout rate for investment bankers). Even the article you linked to says that Dr. Rahman "tested the limits of human endurance" for the year he did it, and the following year his overtime hours dropped to half of the previous year's level.

I may not be a doc but I work in a field where crazy hours are part of the culture and I'm telling you, the vast, vast majority of people in this world (even high-performers) cannot work those kind of hours sustainably.  And all I'm saying is that when considering career options and earning trade-offs, a single data point from a single point in time, often given anecdotally  (although I agree that you have some hard reports here), is often not representative of real life.

[trackjunke]

My wife and I recently struggled with the same question.  When is enough enough and what is the utility of that extra money?  I was working full time and she was working part time.  However, we still required a full time nanny because of our hours at work.  Luckily we work in the same specialty so we decided to split 1 FTE which allowed one of us to be home with our daughter at all times.  Between taxes, nannies, house cleaner, commuting cost, malpractice premiums etc etc....over half of that extra 0.5 FTE was going to paying for those things.  It just did not make sense.  That being said, the only way we can make this work was minimal debt, significant front loading of retirement accounts and trying our best to avoid lifestyle creep.   It is still to be seen if this will work out or not but seems to be good for now and are still on track for FI well before normal retirement age.