Comparing two different contracts for new physician starting out(crosspost BH)

[slippingsloth]

Hey Everyone, sorry to those who read this and bogleheads several members suggested I cross post here. SO I DID.

 

I have a pair of job offers (one from an academic institution salary 300-330k the other in private practice 336-360k). Salary ranges are based on call taken.

The academic institution has 403b and 457b plans as well as a small pension which allow the tax deferred sheltering of 18k per account(36k total). The private practice group does not offer w2 employees any tax deferral accounts but does offer a higher salary(not dramatically higher but in several years could be>100k difference as partner). The question I guess I am posing is from a strictly financial point of view how much is that tax deferral space worth to a young 32yr old doc. I appreciate that the ta deferred space is valuable as my wife and I would be taxed in upper brackets on that money and it could grow pretax. I am just trying to square the value of the salaries against one another especially over time.

[benign_user]

If money was the only issue I would strongly recommend against looking at the first couple of years salary as the driving factor for what job you settle. If (and a big if) partnership is part of your contract agreement then the > 100k you will make once you are partner will more than make up for the difference. Academic jobs tend to remain stagnant in terms of salary while private practice partnership track jobs have a big upswing later on. My only big caution to you is to make sure the partnership track is guaranteed after the first year (as in you will be guaranteed to make partner after 2-3 years and they will let you know after 1 year if you won't make partner) as I've heard practices are more and more screwing their junior partners out of partnerships (especially when there is a technical component involved).

[conniebird]

Does the academic job offer a match for 403b? Most large ones do. Also the benefits in academics tends to be substantial - for example, if you have kids, many offer tuition assistance - mine offers 10K per kid x 4 yrs, max 2 kids, for example.

Agree - do not base decision solely on salary, it's pretty much the same. There is another thread on academic vs private, this is something you'll need to decide on your own. Once you go private, it's rare to go to academics.

[Zaphod]

If the private practice job doesnt offer any tax deferred programs are you a 1099? Either way it allows you to set up and control your own retirement structure and usually put far more away, there wont be a match but it will pale in comparison. If on a 1099 you'll be able to put 53k into a SEP/401k, 6.6 into an HSA, and a lot more in a defined benefit if you choose.

Lots of benefits to being in control of your finances instead of whatever HR has available.

[litovskyassetmanagement]

slippingsloth wrote:

Hey Everyone, sorry to those who read this and bogleheads several members suggested I cross post here. SO I DID.

 

I have a pair of job offers (one from an academic institution salary 300-330k the other in private practice 336-360k). Salary ranges are based on call taken.

The academic institution has 403b and 457b plans as well as a small pension which allow the tax deferred sheltering of 18k per account(36k total). The private practice group does not offer w2 employees any tax deferral accounts but does offer a higher salary(not dramatically higher but in several years could be>100k difference as partner). The question I guess I am posing is from a strictly financial point of view how much is that tax deferral space worth to a young 32yr old doc. I appreciate that the ta deferred space is valuable as my wife and I would be taxed in upper brackets on that money and it could grow pretax. I am just trying to square the value of the salaries against one another especially over time.

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If you become a partner in a private practice, you might be able to get them to adopt a retirement plan with $53k retirement plan maximum. It is rare that a practice like that does not have a retirement plan.  That's something you might want to probe by talking with senior partners for example.

An academic position might be more stable though given what's happening in the medical industry.  However, a private practice might also be able to adopt a Cash Balance plan later on (and you could make significantly higher contributions later on).  So right now you might want to repay your student debt and save some money after-tax, and the value of tax deduction will rise as your salary rises, so the highest benefit to you will happen later on (and a private practice has the ability to institute much better retirement plans, though it is not guaranteed that this would happen unless you push for it and other partners go along with it).