401k's/Pension/Profit sharing

[cfdavid]

Could some of the attendings comment on what sort of the above investment vehicles most partnerships have??

JWK mentioned a 401k in a recent post. Are these common in the PP world?


As many of you know, 401k's are the major investment vehicle in the corporate world. ******Some advice to the residents from someone with 9 years in the corporate job market; If you have access to any "company"/partnership sponsored/managed retirement vehicles, TAKE ADVANTAGE OF THEM.

***And regardless of partnership sponsorship (matching contributions etc.), you can always just do an IRA. The key is to have a direct deposit set up, so that you contribute X% (at least 10%, ideally more) directly from each paycheck. It gets deducted out of your check every week (or two) and you basically forget about it.

This is the key to saving, and acquiring wealth over the long haul. That, and making sure you're getting sound financial advice, with more reality, and less wishful thinking.

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[2ndyear]

I'd love for people more in tune to this than me to post any and all advice. I literally have NO idea what I am doing. Yes I am in private practice, and I have a 401k. When it came time to decide how much I would put away, they asked me how much and gave me a choice of risk categories. I chose 15% and moderate risk. By the way, 15% seems like a big chunk. Personal info: married, no kids, no house. Immediate financial plan: Pay down high interest credit cards and my higher interest student loans. Like to save for a down payment on a house, but I'd like to wait and see what the market does around here. On a side note, is a financial adviser worth it? I figured when I had time I could find the info I need on the google, but it's not that simple.

 

[cfdavid]

I'd love for people more in tune to this than me to post any and all advice. I literally have NO idea what I am doing. Yes I am in private practice, and I have a 401k. When it came time to decide how much I would put away, they asked me how much and gave me a choice of risk categories. I chose 15% and moderate risk. By the way, 15% seems like a big chunk. Personal info: married, no kids, no house. Immediate financial plan: Pay down high interest credit cards and my higher interest student loans. Like to save for a down payment on a house, but I'd like to wait and see what the market does around here. On a side note, is a financial adviser worth it? I figured when I had time I could find the info I need on the google, but it's not that simple.

First, 15% is a great start. Especially if your group has any matching options (my company matched .50 for every dollar I contributed which was fantastic).

Regardless, good job on that. I'd say you're on the right track.

While I won't make specific recommendations per se, I do recommend reading the book Crash Proof by Peter Schiff. At the VERY LEAST, you'll better understand a lot of the big financial issues, even if you don't agree with his projections etc.

I'd be weary of financial advisors. Again, in my experience, very few are worth their salt. Do some reading on your own, and you can do just fine.

 

[militarymd]

Financial Advisors: I have 3 of them.

You need a lot of things:

deferred savings can be put into a lot of things.

- SIMPLE IRAs, KEOGH plans, 401k, annuities, 529's, DEFINED BENEFIT plans.....others.

The tax code is complicated...I don't know why it has to be so complicated, but it is....so an advisor is adviseable....I have 3...and they fight over who gets my business, so they need to do their jobs well....my threat to them is always that "maybe I don't number 3".

As for how much to save....As MUCH as the tax code allows and then some.....and that's why the advisors can help, they can find other vehicles for you to put your money.

once in PP, you can arrange payment in SO MANY ways to help you save money.....

Once again, an advisor is needed to help you.

 

[cfdavid]

Mil has a point on financial advisors (good ones!, or even a good tax accountant). When you're dealing with Mil's level of cabbage, tax sheltering becomes important.

Just make sure you're not overpaying for loaded funds or any other investment vehicles that offer huge commissions to said "advisors". This is key.

 

[mstudent12345]

I have a degree in finance and worked in the industry before going to med school so I'll try to answer a bit.

The short of it is that at 401K (or 403b or other similar pretax vehicle) has positives and negatives. On the plus side:

1)Any money you contribute is gets in and grows without tax, you just pay the tax when you get out. What that means is that if you are already in a high tax bracket or foresee yourself in a lower one that you are currently when you retire then it makes sense to contribute. In contrast if you are a resident, and think you will be in a higher bracket later then the advantages are less clear.

2) It forces you to save. As you have it now then you automatically save 15% of your income. That puts you in great shape for retirement

3) Some employers have a match. If they do that is basically like extra salary without taxes
​

Minuses:

Basically, the money you contribute is basically locked in there until you are 65. There are ways to "loan yourself" the money, etc but basically if you forsee needing the money don't contribute in the first place

2)​

So what to decide:

If your employer has a match ALWAYS contribute enough to max that out. After that I would use my money in the following order: Pay down any high interest dept (defined as higher than the return you can get from you investments), save in a liquid way for coming expenses (ie house, tution for kids, a rainy day fund, etc), then in a 401K, roth IRA, etc.)​

As for how to invest I would suggest broad diversitifed funds with low fees. If you want to go really easy there are funds out there targeted to retirement at a certain date that will adjust your risk to be more conservative as you get older.

As for a financial advisor if you don't know much then an advisor can give you some personal time and help you set up a plan. There are even some that you just pay for a few hours while they teach you. Of course there are also books. I would reccomend a random walk down wall street which is supposed to be quite good.

Hope this helps.

I'd love for people more in tune to this than me to post any and all advice. I literally have NO idea what I am doing. Yes I am in private practice, and I have a 401k. When it came time to decide how much I would put away, they asked me how much and gave me a choice of risk categories. I chose 15% and moderate risk. By the way, 15% seems like a big chunk. Personal info: married, no kids, no house. Immediate financial plan: Pay down high interest credit cards and my higher interest student loans. Like to save for a down payment on a house, but I'd like to wait and see what the market does around here. On a side note, is a financial adviser worth it? I figured when I had time I could find the info I need on the google, but it's not that simple.

 

[jwk]

As for how much to save....As MUCH as the tax code allows and then some......

Absolutely !!!!!! The joys of compound interest over time. Waiting even five years early on to start contributing costs you many many hundreds of thousands of dollars 30-35 years down the line.

Here's a real basic example - my son took some of his graduation money and opened a Roth IRA with $2000. If he NEVER puts in another dime, with an 8% return, in 40 years it will be worth more than $43000. If he waited five years and started with that same $2000, in 35 years it would be worth just under $30,000. That's a 21x return vs 15x. And this is just a one-time investment in a no-load targeted retirement fund.

Use a simple financial calculator like this

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

and just play with the numbers. If you don't understand the beauty of compound interest and the importance of investing early, learn! The accumulated return you lose by waiting can NEVER be gained back -ever.

 

[militarymd]

Mil has a point on financial advisors (good ones!, or even a good tax accountant). When you're dealing with Mil's level of cabbage, tax sheltering becomes important.

Just make sure you're not overpaying for loaded funds or any other investment vehicles that offer huge commissions to said "advisors". This is key.

excellent point. I forgot to say that you HAVE to ask how they're making their money...be blunt...

 

[DrRobert]

Unfortunately I don't know much about finance. But one of my attendings gave me this advice: when you start making private practice salary put $50K/year into retirement/savings/investments, $50K/year to pay off debt (student loans, credit cards), and use $50K/year to live (basically living like a resident). And anything you make above and beyond $150K/year (after taxes of course) use for pleasure (vacations, cars, women, etc.)

After 5 or so years I'd have my debt paid off and could use that other $50K/year to improve my standard of living (bigger house, nicer car, etc.)

We'll have to wait and see but this sounds reasonable to me. My only problem will be deciding how to save/invest that $50K/year meant for retirement.

 

[radslooking]

excellent point. I forgot to say that you HAVE to ask how they're making their money...be blunt...

exactly. not that i was going to buy this product... but i asked a life insurance salesman (who was trying to get me to pay 16,000 yearly premiums) "how he gets paid", and he mumbled something about the "majority of the first year premium" and "then 1% or something of later premiums, because we offer you guidance, and want to make you happy", blah blah blah. The "majority of the first year premium" part was almost inaudible. Schiesters.