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Maybe I am doing this for the money...

Discussion in 'Military Medicine' started by bobbyseal, Apr 26, 2004.

  1. bobbyseal

    bobbyseal Boat boy
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    Hey all,

    I was just tooling around on www.staynavy.navy.mil looking at my possible retirement. I figured, "Let's see what retirement looks like after 20 years." I couldn't believe that being O-6 (which is not outrageous with 20 years in the medical community) could garner over $62K a year at 2021 (the highest year available).

    I figured at that time I'd be in my late 40's, and could easily continue on starting my own practice or joining in on another practice. I'd make the "big bucks" while keeping that $62K a year while not having to save a single penny of my salary for retirement.

    Am I being ridiculous here, because all you here is that one shouldn't do it for the money. MilMD please smack some sense in me!!!
     
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  3. evines

    evines peek-a-boo
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    I'll slap it into ya. :D

    Sure the retirement is good, but you'd still make more in the long run going civilian route. You could probably invest 62K a year and still have more spending money than your military counterpart (unless you're in FP or other relatively low pay field). I can't even imagine the retirement you could have investing 62K a year for 20 years. :eek: .

    Don't do it for the money.
     
  4. HeavyD

    HeavyD Member
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    Common', invest enough for $62K ANNUAL RETURN at, say, age 50? You have better be making some good money with that side business of crack production in order to augement the cost of living that is not covered by the $592.50 q 2wks and then investing. The talent in private practice is being able to invest in a sheltered fashion where you don't loose all your gains in taxes. Take a minute and check out the staynavy.navy.mil web site. It is applicable (at least regarding retirement) to all services. See what 20 years of service will produce at retirement. Note that it is inflation-adjusted. This, in my eyes, is by far the greatest 'perk' of maintaining military involvement. Talk to a financial advisor and calculate what sort of annual investment it takes produce a portfolio that will furnish 6+ MILLION over a 40 year term. If I stay 20 yrs. in Navy med I will be ~50. Great age to work part-time in the civi-world and ease into retirement. And remember, this $$ is outside of personal IRA's, TSP's, and other investement that we all should be making while we work towards that final day at the office. After the $$ itself, consider the cost of heathcare when we are retired. Barring a major overhaul in the current status, this will be the greatest cost of retirement. 20 vets will have, at the least, a basic coverage at 0 cost.
    Hell yeah it's more than JUST the privilage to serve.
     
  5. Andrew_Doan

    Andrew_Doan Doc, Author, Entrepreneur
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    Assuming the military doesn't cut back on retirement funds, the retirement is a great incentive to serve 20 years. As stated by HeavyD, the $$ is adjusted to inflation; thus, your income will grow with age.

    In addition, Medicare is busted, and funds are not available. Reimbursements are decreasing each year. It'll be interesting to see if private practice physicians will make similar salaries to their military counterparts in one or two decades. With the baby boomers getting older, the majority of patients will have Medicare as their primary insurance!
     
  6. Navy Dive Doc

    Navy Dive Doc Senior Member
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    This is a good post, I'm glad someone brought it up. Figure you would have to bank around 1.4 million to safely be able to throw off an O-6 retirement check and enough to keep up with inflation. Yes, you could theoretically save that much after leaving the Navy, but it would take a lot of discipline.

    That being said, the military knows this and there are a few aspects you need to look at.
    1. Any one coming in now falls under "high 3" retirement. This means that the Navy (or Army/AF, all the same) takes your 3 highest years of income (base pay) and averages those to get your baseline base pay that is then divided by your retirement percentage (50% at 20 years, 2.5% per year of service thereafter up to 75% at 30 years). So, since you'll probably put on O-6 near the 20 year mark, you might get less money for retirement. It's still quite a bit of money, though, especially when you consider that it is cost-of-living adjusted for life as long as you draw a breath. No risk of wiping out your funds.

    2. The military knows this, and is doing everything they can to minimize the number of Physicians drawing retirement. Anyone coming into the Navy from HPSP is a USNR, not USN. (USUHS is USN, so this doesn't apply) That means you are technically a reservist. On active duty, that means nothing day-to-day. Historically, after 4 years of active duty, you could "augment" to the regular Navy, USN. This provides you some protections, especially later in your career. If you are an O-5, USN, you essentially have job security. It's like getting tenure. O-5 is considered a terminal rank, one that you can ride until retirement. Lower ranks are not as safe, if you fail to select for O-4 or O-5, you can be sent packing with a severance package. If you're an O-5, you're allowed to stay until retirement. For the line officers, O-5 often comes quite late, 15 years or so is common. So, 20 is close and there are plenty of CO jobs, etc. for O-5's. For the medical Corps, though, O-5 comes early, and Docs are smart and realize that if they don't care about making O-6, they can play and find the good billets, hang-out, etc. The deadwood that you hear about, it does exist.

    So, the point of this is as follows. The Navy has changed the rules and will now no longer let you augment to USN if you have any obligated service. That means, for those of us who return to residency, we can't augment until late in the game. For me, I'll have 12 years of service and likely be wearing O-5 before I could even ask to augment. (4 years DMO, 4 years residency, 4 years payback). Guess what, at that point they've gotten their pound of flesh out of me and there are more obligated service folks coming behind. Because I'll still be a USNR, I can be told at the end of my obligated service that my time in the Navy is done. No golden parachute, just out the door.

    Now, combine this rule change with Rumsfeld's desire to trim the tooth to tail ratio, and PBD 712 drawing down billet size, and it doesn't take a big leap of logic to realize that the military is going to work hard to get Docs to leave before retirement. Getting someone to leave after residency payback but before retirement is the ultimate "good deal" for the government.

    OK, so what, you were getting out anyway, right? Well, it's nice to think that it would be my choice to stay after payback was over. There will be jobs. But there will likely be a lot less, so coming into the military with an absolute plan to stay to retirement as a physician may not be a viable plan. This post is right, the military retirement structure is a good deal economically for those who stay. As with everything else, be sure that the military knows this and will do what is in its own best interest, not yours.

    Those who know my posts will know that I think the HPSP and military medicine are a good deal, and I'd do it again. But I am a cynic at heart, and am a realist, and want everyone to have as much info as possible. Will I stay until retirement, I doubt it, but I will position myself to be one of the Docs they decide to keep so it will be my choice. I'll try at least, the next administration may want to double the Medical Corps and the whole plan will change again. So it goes...
     
  7. Andrew_Doan

    Andrew_Doan Doc, Author, Entrepreneur
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    Thanks for the info! :thumbup:

    For me, I'll be able to augment into USN after 4 years of AD and 16 years of remaining service. I should be eligible for O-4 in 2005-2006 and then O-5 early in my Naval career. We'll see how it goes. I'm flexible. If the Navy doesn't want me, then I'm confident I'll find something to do with my time! ;)
     
  8. Spang

    Spang SDN Angel
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    DiveDoc:

    Chew on this one for me: I have 13 years AD, so 7 to go until 20. If I do GME1 then GMO for 2, now I have 4 to go. The I do a residency, say FP for the sake of argument, of 2 years, now 2 to go, then payback takes me to 20.

    Here's my question. I made O-4 right when I go off AD to go to med school. Should I push to make the first O-4 board while an intern, or let it ride another year, in case I don't make O-5 later and need to ride the HYT waiver at the end? Or should I be optimistic and think that of the MC's making O-5, as a former line officer with great fitreps I'd make it anyway, thus go for earliest chance at O-4 to maximize my high 3?

    r/

    Spang
     
  9. FliteSurgn

    FliteSurgn This space for rent.
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    Ah, you must remember that $60k at retirement in 20 years is based on cost of living allowances...that's because the cost of living goes up (surprise, surprise)...that $60k is only worth $30k in equivalent dollars today.
     
  10. Spang

    Spang SDN Angel
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    Don't forget several states do not tax either military pay or military retirement. That's about a 30% difference in money in the bank, year after year. Your returns on most investments, outside of IRA's, TSPs, etc, are taxed, either when dividends are paid, or when you start taking out at retirement. (Roth excepted)

    Spang
     
  11. FliteSurgn

    FliteSurgn This space for rent.
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    Whoa...what state has a 30% income tax? It's usually more like 6-8%. Those states that don't tax military income...they don't tax anyone's income...military or civilian...because they don't have state income tax.
     
  12. Spang

    Spang SDN Angel
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    Sorry, I got carried away there in the 'Quick Reply'! Let's try this;

    A great deal of your "pay" on active duty is not "pay" it is an "allowance" therefore not subject to federal or state witholding (my 30% rant). Some states, IL and MA are examples, do have a state income tax but do not tax military pay and/or retirement.

    Of those states that do not have state income tax, some still tax dividends and capital gains at 6 or 7%, NH and TN are examples.

    My point was that when considering how much your military retirement is worth in comparison to other taxable investments, consider the effect of state income or capital gains taxation as well. Also consider the effect of investing "tax free money" such as allowances, while on active duty; you've already made gains just by not having to pay taxes when the capital was earned.

    Thanks for taking my comments to task!

    Spang

    PS: Check out this site for state-by-state tax laws re: pay and/or retirement:

    http://usmilitary.about.com/library/milinfo/statetax/blstatetax.htm
     
  13. r90t

    r90t Senior Member
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    Spang,
    I sat for the O-4 board as an intern. It is worth it, as old fitreps do play a part of the selection process. I have 9 years in, however, post FTOS, I will have ~4 years, with a 4 year payback. I thought it is worth the risk.

    7yrs left. 1 will be burned in internship, then you will put on O-4 with under six years of service, as the earliest you will be promoted is the October post-internship. That gives you 5 1/2 years left before 20 to make O-5. If you sit the board 3 times before failing to select, you will be over 20.

    If you are going to sit for the boards in internship, you have to submit a waiver and let everyone know your intent, or your package won't get looked at.
     
  14. Navy Dive Doc

    Navy Dive Doc Senior Member
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    Spang,
    I agree with r90t, sit for the board and in your case I wouldn't worry about the HYT thing. O-5 is an 85% select rate, you'll get picked up without any problem. The Navy won't send you packing with 19 years in. My points were for people like me, straight out of HPSP, looking at 10-12 years in after residency payback in a drawdown world. Maybe it will be easy to stay for retirement, but I was always plan for worst case. In your case, don't worry about it, and take the extra year of O-4 pay.
     
  15. Navy Dive Doc

    Navy Dive Doc Senior Member
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    Spang,
    I forgot to add: I believe there is a process where you can appeal the O-4 HYT thing if it came down to that. It's either over 15 years or over 18 years, you can request to stay until retirement as an O-4. I would think this would be automatic for someone who changed communities like you. They chopped your time in service in half for promotion purposes, you could raise a huge s***storm if they tried to usher you out at 18-19 years. No worries.
     
  16. Spang

    Spang SDN Angel
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    Thanks for the gouge guys. Can't wait to get back out there. Med school had been a nice change of pace, but it'll be nice to have some cash again :cool:

    Spang (aka Ant Boy)
     
  17. entpa

    entpa Member
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    For you AF guys, when you get selected for O-4 you are offered a regular commision which gives you some "tenure" as was mentioned previously. The high three system does cut down your retirement pay significantly. This basically requires you to stay on AD at least 3 yrs beyond any promotion to recoup the raise in your retirement. Keeping in mind retirement is based on "base pay" only. Also, when you retire you will be asked to pay for the "survivor benefit plan". This will allow you spouse to collect some of your retirement if you croak before she does. SBP payments are a percentage of your retirement pay. I will pay about $233 a month on O-4 retirement at 25 yrs. This will get my wife about $1700 a month until she is social sercurity eligible when it drops due the her recieving SS. If you decline SBP your spouse has to agree in writing that she understands what you are declining and she/he gives you permission to decline. I'm having a hard time deciding on using that SBP payment for life insurance instead. But with SBP you don't miss a payment or need a physical.
     
  18. r90t

    r90t Senior Member
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    Discussed this with my skipper today, who is retiring in Sept. He said that once you get to the 18 year point, you are in a "guarded" catagory, and will not be asked to leave if you fail to promote.
     
  19. haujun

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    Is it possible for a military physician to be promoted at below the zone? If yes, what are the criteria for this fast promotion?
     
  20. Spang

    Spang SDN Angel
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    Thank, r90t. What do I need to know about getting my package in for the board internship year? Will my program director be able to help me with that or the detailer, or placement?

    Spang
     
  21. r90t

    r90t Senior Member
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    Your program director should have all of the info that you need, esp. with the number of prior officers at USUHS. However, I had to have all fitreps into the board from prior commissioned time, awards, etc..make sure that your package is complete as if you are going up for O-4 from your previous career. Call your detailer and let him know your intention, and there is one person at the BUPERS that you have to call to ensure your record gets placed it the to screen basket. Good luck, Rob
     
  22. GMO_52

    GMO_52 Senior Member
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    One more thing, for us USU types, we get a 24 year retirement once we reach 20 years.
     
  23. B-Daddy

    B-Daddy Junior Member
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    Since the board seems to have some finiancial savvy types, how do you all feel about buying a home/townhome in the DC area while attending USUHS. I am currently waitlisted at USUHS but need to start house hunting soon since I am coming from active duty and need to sell my current home. I cannot imagine renting for 4-5 years with the market continuing to appreciate at its current rate. Am I crazy to spend $300,000 to buy a townhome in Gatihersburg or Germantown? And how far is too far of a commute? My realtor told me to look out in Mt. Airy which is at least an hour drive each day. I am married and have a one year old daughter if that compicats things. Any advice is appeciated.
     
  24. Homunculus

    Homunculus SDN Caveman Administrator
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    no, you're not crazy. townhomes we have looked at that are priced (and selling) for 230-250k were bought 4 years ago for 150-170k. it's an insane market right now, and i wouldn't count on being able to find something in one weekend. we've been looking for about a month now, and haven't been able to put a contract on a place yet. one we were interested in appraised at 205 but wanted 240, another we "came in second" out of 7 bidders. crazy stuff. anyway, with USUHS there is the added possibility of you staying for residency in town, which would give you 7 or more years of appreciation before you sell. financially to me it makes sense to buy, but others may disagree. especially since your BAH is substantially lower than what mine will be (2k for me as an O-3 with dependents). We're looking in silver spring/rockville/gaithersburg as well as the laurel area. the farthest i'm looking is around 30 miles from Walter Reed-- i'm not willing to make a larger commute than that. believe it or not out agent (who lives in germantown) told us some peope are goign as far as frederick (!!) and commuting. coming from the midwest, this comes as a bit of a shocker since here you can live 30 miles out of town and still have a 20 minute or less commute.

    good luck on the wait list :)
     
  25. B-Daddy

    B-Daddy Junior Member
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    Homunculus,
    I am assuming that you went to USUHS and are buying now after you have graduated. Do you think that buying a property furthur out when you were in school would have affected your performance as a student? This is the big concern I have. Although I will have the measly Ensign BAH, which is really a crock of nothing in DC, I have no debt and our parents are willing to help out since they are both retired with no mortgage's. The cost is not that much of a problem I don't think, but I have yet to be approved for a loan.
    I have seen a bunch of properties in the "Gunner's Lake" subdivision, is that someplace to stay away from or is it good to go? I will be up in DC a few times to look over the summer and hope to get lucky on one of the final trips and actually not get outbid.
    This conversation could probably be an entirely new forum so this will be my last post. I would like to hear what you have seen and experienced in your househunting adventure if you don't mind dropping me an e-mail. Good luck. :thumbup:
     
  26. Homunculus

    Homunculus SDN Caveman Administrator
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    actually i'm an Army HPSPer starting my residency at Walter Reed this summer. i'll only be there for 3-4 years, but we're going to buy because of 1) the appreciation in the market 2) tax deductible interest. i'd hate to "throw away" that BAH every month on rent. at least this way i can stretch it a little further.

    to answer your question briefly, i personally think it would be a wise investment to buy-- even with you being gone for a lot of your third year (i don't know why USUHS does it that way, but you have a LOT of out rotations your third year there). it's not a necessity by any means, and the people i do know that go to school there happen to rent. but they're all single and have roommates.

    don't worry about taking over the thread. if worse comes to worse i'll just split them (one of the many powers of being a mod, lol)
     
  27. militarymd

    militarymd SDN Angel
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    Buying is mostly likely a good idea, with the high demand for housing in the DC area, but one thing to consider is having the low interest rate bubble burst.

    Right now it is the ultimate seller's market with the extremely low interest rates, but as the interest rates rise over the next few years, and it will, the price of homes will drop, or at least not appreciate like you expect....add in the closing costs, etc...one can still come out behind a little after 4 years....so be careful about how much you buy.
     

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