A few questions...

[FirstNobleTruth]

I am planning out my next few years, and could use some advice.

I’m 28, graduating from EM residency in June. Recently had an unexpected breakup with my anticipated future wife, and so am having to rethink/recalculate a few things. For the next year, I will be doing a non-ACGME accredited fellowship, with my base salary at ~150k and with the opportunity to make more moonlighting (which I plan to do). After that, I am exploring options to work abroad for 6 months-1 year, likely in Australia or New Zealand. I haven’t found the exact position yet, but to be (very) conservative, I’m going to estimate my salary at 100k (for the sake of this thought experiment). After that, I will return to the US and likely take a community EM position.

Here’s the kicker – I have 300k in debt. I didn’t begin my financial education until my 4th year of medical school (thank you White Coat Investor – I owe you incredibly), and so I didn’t make the best decisions during college/medical school. In residency, I’ve done comparatively well, maxing out my Roth every year and paying back my loans via IBR. It is a goal of mine to pay off my loans aggressively.

My two questions:

1. Is loan refinancing an option for me? Like most 2012 med school graduates, my loans average somewhere around 7%. If I was going straight into a community job, I would absolutely refinance. My only concern is that with my lower/varied salary, I’m not sure if I will be able to meet the required higher monthly payments. From what I understand, people generally refinance to 5 or 10 year terms, correct?

2. Disability insurance. This is something I’ve still had trouble grasping. Why do most people recommend getting your own Disability Insurance during your last year of residency, and then upgrading during fellowship/attendinghood? Is there significant cost savings? In addition, would this insurance cover me when working abroad? Likely not I’d expect.

Finally, although I greatly respect everyone here, I am not looking for career advice, just financial advice. I know it doesn’t make financial sense necessarily to do a fellowship or to work abroad, and I would be much better off doing locums in Wyoming and paying off my loans ASAP. But, sometimes you have to do what you’re interested in, and sacrifice in other areas.

Thank you all.

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[maxxor]

1. Can't address this one.
2. Carrying your own DI requires a physical, labs, health screening, and records requesting before underwriting can happen to gauge your appropriate risk to the insurer. Your health is a huge part of that, and simply, you're healthier when younger. You often can get DI as a benefit from an employer; however, unless you are paying for the DI with post-tax dollars, any benefits paid out to you are taxable. Further, that DI is tied to an employer; rather than to you. Safer to carry your own policy than to simply rely on your workplace.

 

[Plastikos]

1. Yes its an option, but will be much harder without a stable contract/income. There are tons of different scenarios to choose from.
2. Yes. You can get in with less hassle and at a lower rate than later on as a resident.

 

[The White Coat Investor]

1. Apply and see. Wouldn't be surprised to see you turned down by everyone on a $100K salary ($150K+ however, is a different story). However, the good news is that at $100K you may still qualify for reduced PAYE/IBR payments.
2. Ask if it will cover you. It may not, but in NZ and Australia...if it didn't you could probably buy some there. As far as why to buy it as an attending- it's for two reasons. First, residents can't afford as much as they probably ought to have. Second, the companies won't sell much of it to you until you are about to or start making the big bucks. So you buy what they'll sell you or as much as you can afford as a resident, then add on some more as you graduate. Then you drop it when you become financially independent. There are also some special deals for graduating residents/new attendings you may wish to take advantage of. An independent disability agent experienced in working with docs can help point out what those are (like no medical exam etc)

What fellowship? Why are you worried about being criticized for a fellowship where you'll make $150K+? That's hardly delaying financial life. I made <$120K my first four years out in my camouflage fellowship.

 

[FirstNobleTruth]

Thank you all.

It's a fellowship in EMS/Air Medical transport. I don't want to go into specifics too much obviously, but I'm excited about it.

I'll explore the refinance options, but at the least I'll probably continue IBR and then preferentially put extra money towards my higher interest loans, as I have not consolidated for just this reason.

In regards to disability insurance, is it generally cheaper overall to purchase as a resident and then add more when you become an attending? Or could you just buy it as an attending? I have disability through my residency right now but to be honest I don't know the details in regards to own-occupation, etc. Definitely something I'm going to have to look in to a lot more.

 

[FirstNobleTruth]

Follow-up question:

I have ~18k in a state retirement account that my residency made us put aside throughout residency. I'm graduating and leaving the state, and so don't want to keep this in the pretty crummy state retirement plan here.

What should I do with it? Should I convert it into a 401k or into my Roth IRA? And I believe I'd have to pay taxes on the conversion if I put it into my Roth - is that correct?

Thank you.

 

[ThoracicGuy]

Follow-up question:

I have ~18k in a state retirement account that my residency made us put aside throughout residency. I'm graduating and leaving the state, and so don't want to keep this in the pretty crummy state retirement plan here.

What should I do with it? Should I convert it into a 401k or into my Roth IRA? And I believe I'd have to pay taxes on the conversion if I put it into my Roth - is that correct?

Thank you.

You would pay taxes on the Roth conversion. Unless you're looking at a period of low income to reduce that tax burden, I would put it into the 401k. This leaves the opportunity for a backdoor Roth conversion.

 

[Plastikos]

agree. since you're still a resident you may be able to make out on the rollover portion and if possible I would maximize that. Otherwise rollover to 401k.

 

[SClENCE]

I read this:

"You can avoid the 10 percent early withdrawal penalty before age 59½ if you use an IRA distribution to pay for college. IRA, but not 401(k), withdrawals applied to higher education expenses including tuition, fees, and books are exempt from the penalty. Room and board are also qualifying expenses if the individual attending college is at least a half-time student."

So maybe you could convert the state retirement account into a IRA and then withdraw it to pay student loans with no penalty (still paying taxes)?

Not really sure if this is possible/feasible or the best option but considering there is no penalty it may be worth considering if your income will be dropping when you work abroad.

I know with the Roth IRA can you also avoid penalty though I would not withdraw from the Roth because you will be taxed for it even if you can evade the penalty.

 

[allyphoe]

Student loans aren't higher education expenses for purposes of avoiding the penalty on early IRA withdrawals.

 

[SClENCE]

Oh... that sucks lol. Can use use it for tuition if you are still in school I wonder? Or housing? Or is it just for books and little stuff stuff?

 

[ThoracicGuy]

Oh... that sucks lol. Can use use it for tuition if you are still in school I wonder? Or housing? Or is it just for books and little stuff stuff?

Taking out of your IRA to pay for school doesn't make much sense. You're not likely to have enough in the IRA now to pay for school and you'll lose the space once its gone. Just take the loans.

 

[bc65]

Disability insurance: The younger you are when you get it, the cheaper it is, but a couple of years won't make a difference. Usually, they will insure you up to 50 or 60% of your gross income, so you usually need the income before you get the coverage. However, you might find an agent who will sell you insurance based on anticipated future earnings. Their incentives are aligned with yours: They will try hard to get you approved for a bigger policy so that they can get a bigger commission. A friend of mine was able to buy such a policy while a resident, and then became disabled 2 years into practice, and is now collecting. Consider a 180 day exclusion period. Get inflation protection and guaranteed increase options.

You want your own policy rather than one through work so that you can change jobs and keep the policy. You might not be insurable later.

You might consider getting the policy before your fellowship is confirmed, or perhaps just referring to it as an ER fellowship. I would be concerned that an insurance company might not want to insure someone who will be flying in a helicopter or small plane on a regular basis.

 

[h.hulk73]

1. Apply and see. Wouldn't be surprised to see you turned down by everyone on a $100K salary ($150K+ however, is a different story). However, the good news is that at $100K you may still qualify for reduced PAYE/IBR payments.
2. Ask if it will cover you. It may not, but in NZ and Australia...if it didn't you could probably buy some there. As far as why to buy it as an attending- it's for two reasons. First, residents can't afford as much as they probably ought to have. Second, the companies won't sell much of it to you until you are about to or start making the big bucks. So you buy what they'll sell you or as much as you can afford as a resident, then add on some more as you graduate. Then you drop it when you become financially independent. There are also some special deals for graduating residents/new attendings you may wish to take advantage of. An independent disability agent experienced in working with docs can help point out what those are (like no medical exam etc)

What fellowship? Why are you worried about being criticized for a fellowship where you'll make $150K+? That's hardly delaying financial life. I made <$120K my first four years out in my camouflage fellowship.

Thanks for the useful information