The True Student Debt Analysis-You may not like what you are about to learn

[StayFocused]

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I saw the word 'wisconsin' in the OP's name, and I just stopped reading. 🙂

 

[189362]

I think Ill be ok. Quite honestly I'd rather make 60k as a doctor than 10 million as a garbage man. While being able to provide for myself and a family is important. How content I am with what I'll wake up every morning to do matters significantly as well.

 

[flip26]

6.8% is a bit high most loan consolidations are at or below the rate of inflation (4%).

This is wrong.

 

[jpro]

This is wrong.

What is right then?

 

[MacGyver]

I don't think that the FP avg. salary is that low. At least in the NYTimes article on dermatology that came out about a week ago they have a chart listing the average FP salary as $178,859, and the source is Medical Economics. So that's about another $40k that you need to correct for.

thats a BS number that comes from salary surveys that oversample high earning physicians due to reporting bias.

the "real" salary number is found in the US Census Data via the US Labor Department. Unlike salary surveys, there is no reporter bias because it pools everybody's data together automatically.

According to the USLD, the median physician earns about 165k. Thats across ALL specialties, so FPs are obviously lower.

 

[jpro]

flip26 are you referring to the consolidation of private loans?

 

[flip26]

What is right then?

The OP used 6.8 percent, and that is a good estimate and may actually be on the low side for what we will be facing in 4+ years...everything I have read on this subject is that unless the feds do something about it (with more interest rate subsidies for student loans) the long term outlook is for higher rates...I am not counting on the government to improve this situation...

Thie following is pretty easily obtained public information on current consolidation rates:

Federal Consolidation interest rates are based on the weighted average of student loan interest rates. Federal student loans disbursed on or after July 1, 2006 have an interest rate of 6.8%*. Federal student loans disbursed before July 1, 2006 will remain variable interest rate loans. These loans will re-adjust every July 1 based on the results of the 91-day Treasury Bill. Currently, interest rates for these variable loans are:

• Stafford Loans for borrowers in grace (1-6 months after graduating): 6.62%
• Stafford Loans for borrowers in repayment: 7.22%
• Parent PLUS Loans disbursed after July 1, 1998 but before July 1, 2006: 8.02%
• Parent PLUS Loans disbursed after July 1, 2006: 8.50%

 

[Obnoxious Dad]

Here's a 2006 scenario for a guy in Illinois.

Please remember this is entirely hypothetical and does not represent a financial plan. To get a real financial plan you need to see your local professional and go over your specific situation.


A new doctor in Illinois in 2006 made $150,000 per year, had a stay at home spouse and two kids, had a brand new 30 year mortgage of $350,000 @ 7%, had a student loan balance of $225,000 to be paid over 25 years @ 4%, had real estate taxes of $7,500 per year, and bought two new cars @ $20,000 each @8% interest his financial life would look like this:

Wages 150,000.00


FICA 5,580.00

Medicare 2,175.00

Federal Tax 19,855.00

Illinois Tax 4,440.00

Total Tax 32,050.00

RE Tax 7,500.00

School Loan 14,251.59

Mortgage PMT 27,942.70

Taxes & Loans 49,694.30


Total Tax & Loan & MTG 1,744.30


Wages Minus Tax & Loans 68,255.70


Car Payments 9,732.67


Disposable Income 58,523.03

The federal income tax calculation assumes that this is the first year of the mortgage and you would have $24,500 in deductible mortgage interest.

You would still need to buy term life insurance to protect your kids, food, gas, car insurance, utilities & clothes.

Please also remember that compared to most Americans you would be in the lap of luxury and doing something interesting and worthwhile.

 

[insane]

thats a BS number that comes from salary surveys that oversample high earning physicians due to reporting bias.

the "real" salary number is found in the US Census Data via the US Labor Department. Unlike salary surveys, there is no reporter bias because it pools everybody's data together automatically.

According to the USLD, the median physician earns about 165k. Thats across ALL specialties, so FPs are obviously lower.

great sig. thats my favorite quote from malice.

also "
Ask God how many shots of bourbon he had before he cut me open." is a close second

 

[kypdurron5]

I agree with most other posts here- those numbers are crazy. 40% taxes?!? The highest marginal (fed income) tax rate is 35% and that's only on income over $349K. At $132K you're talking a maximum of 28%, but after deductions, exemptions, and credits you won't even pay that much. Also, if you're running your own private practice (self employed) there are all sorts of tax benefits.

$2,000/mon mortgage? Either your house is too expensive or your loan terms are awful....with 200K school debt a mortgage of $2,000/mon is a bad decision (IMO).

$400/mon car payment? My goodness! Buy a house (or rent) with a $500-800 mortgage, and drive a $5000 car. At least until you pay off some school debt. THEN upgrade your lifestyle.

Car insurance at $1500 to $2000? Stop getting speeding tickets! (and get that $5000 car with liability only).

Even using your numbers- you still have $27,000 after house payment, school payment, car payment, taxes, and insurance. Many people in this country live on $27K BEFORE these things (that's $13/hour). I certainly hope your $2K/mon house doesn't need repairs, and your car that costs you $400/mon plus insurance at 2K/yr isn't dying on you. So that only leaves utilities, food, gas, and health insurance. The rest is discretionary spending, and if you're smart, you'll put most of that towards school debt and pay it off WELL before 30 years. Then for the next few years you can focus on paying your car and house off...and for the rest of your life you can do whatever you want with this extra money.

Something else that's no where in your numbers....marriage. If you do happen to be married, and assuming your wife can pull at least $25K, you can not only double your bottom line (after expenses), you also get more tax benefits. If she's a doctor, even if her debt is the same as yours, all the better. You'll have to contend with her debt as well, but we've already paid all your expenses and then some.... That doesn't put you in contention with Bill Gates, but I think you'll make it.

 

[kypdurron5]

Here's a 2006 scenario for a guy in Illinois.

Thanks for posting- that's a far more detailed and comprensive analysis. Even if it's on the high side, $58K in discretionary income with a 350K house, $40K worth of cars, $225 school debt, and a lazy wife that refuses to work, there's a lot of room to loose some of that 58K and still be very comfortable.

 

[WellWornLad]

Well, let's look at my current situation and compare:

Job: research tech @ 30,000/year

After taxes/health insurance/401k, I take home about $1,750/month.

Rent: $700/month (rather low for the city I live in - and that's not equity, either)
Utilities: $50/month (average)
Undergrad student loan payment: $540/month
Motorcycle insurance and gas (can't afford a car): $50/month

What I have left over to spend on food, clothes, application expenses, books, movies, going out, vacation, or a stiff drink every month: $410, or less than $102.50 a week.

I get by. There are plenty of people I know who have to work several jobs to support their families and still do not live as well as I do. All I expect from medicine is that I won't have to live hand-to-mouth. Anything else is just a bonus.

Now kindly quit your bitching.

 

[fahimaz7]

$2,000/mon mortgage? Either your house is too expensive or your loan terms are awful....with 200K school debt a mortgage of $2,000/mon is a bad decision (IMO).

A 2,000/month mortgage is about a $300,000 house. My brother, is locked at 5.1% over 30 years (jumbo loan b/c it's an expensive house) pays $5,800/month. His house was purchased for ~$800,000 and he financed $650,000.

My parents house, is $130,000 and they pay $900/month.

Just to put things in perspective. Also, there's no way that you're getting a house, in a good neighborhood, in most major cities for $130,000. The reason my parents is that price is they bought it 20 years ago.

 

[kypdurron5]

A 2,000/month mortgage is about a $300,000 house. My brother, is locked at 5.1% over 30 years (jumbo loan b/c it's an expensive house) pays $5,800/month. His house was purchased for ~$800,000 and he financed $650,000.

My parents house, is $130,000 and they pay $900/month.

Just to put things in perspective. Also, there's no way that you're getting a house, in a good neighborhood, in most major cities for $130,000. The reason my parents is that price is they bought it 20 years ago.

There's nothing wrong with a 130K house right out of medical school! >) Plus, who says you have to practice in a major city...and does Wisconsin even have "major cities?" 😉. Especially in a field like Family Medicine, I would image life would be much more enjoyable in a small to mid-sized city. If you're a plastic surgeon shooting for $500K+, you might not have much of a choice but to live in a big city and get a $1 million house, but then again, you can afford it.

 

[Hurricane95]

I don't understand the purpose of this thread.

This combined with your other thread on how engineers make more money than medicine or something like that makes it seem like you have some weird vendetta against the medical field and are trying to discourage others from applying to medical school.

Frankly, I'm confused.

 

[xylem29]

What happens if you have say...$350K of debt? (Like I will, assuming I get in)

 

[metalgearHMN]

​

What credentials do you have to provide this analysis. It seems to me that it's over simplified, and others have mentioned some good points.

Again here are the main points:

Highest tax bracket in the U.S. is taxed at 35%, if you make more than $350K a year

Your income is taxed in a tiered system, so only your income that falls within the certain bracket gets taxed at that rate.
For Example:
Your first $15,000 is taxed at 10%,
from $15,000 to $60,000 its taxed at 15%,
from $60,000 - $130,000 is taxed at 25%
from $130,000 - $195,000 is taxed at 28%
and on down the line

Interest payments on your student loans can be claimed in tax rebates

Also, you're not factoring in investments. Welcome to 2008, living paycheck to paycheck is for suckers, you have to save and invest.

 

[flip26]

​

What credentials do you have to provide this analysis. It seems to me that it's over simplified, and others have mentioned some good points.

Again here are the main points:

Highest tax bracket in the U.S. is taxed at 35%, if you make more than $350K a year

Your income is taxed in a tiered system, so only your income that falls within the certain bracket gets taxed at that rate.
For Example:
Your first $15,000 is taxed at 10%,
from $15,000 to $60,000 its taxed at 15%,
from $60,000 - $130,000 is taxed at 25%
from $130,000 - $195,000 is taxed at 28%
and on down the line

Interest payments on your student loans can be claimed in tax rebates

Also, you're not factoring in investments. Welcome to 2008, living paycheck to paycheck is for suckers, you have to save and invest.

Simply looking at the marginal federal income tax rates is incomplete.

For people with 6 figure incomes, a better rule of thumb is that roughly 50 cents of every earned dollar is taxed away if you include federal, state, and local income taxes, property taxes, social security contributions by the employee, capital gains taxes, and sales taxes. Furthermore, as physicians who are just starting to make decent incomes in their early to mid 30s (if not later) you will need to jump on building a retirement fund, too, further reducing your disposable income for things like paying off student loans...not to mention everything else in your life...health and disability insurance, malpractice premiums, etc...

In conclusion, simply using the marginal fed tax rates is understating the total bite of your paycheck from all sources.

Furthermore - and this is not an attempt to politicize this discussion - but if either Clinton or Obama is elected, federal income tax marginal rates will be raised significantly - they have already guaranteed that they will "roll back" the so-called Bush tax cuts, and the coming increase in entitlement programs (national health insurance, etc) will be paid for with additional income taxes on the "rich" which is defined in our country as anybody making over about $80k...

There is a lot of disinformation and incomplete analysis on this thread...

 

[nu2004]

I’m taking a half-hour out of my time to make this post. I’m here to help pre-meds really understand just how much of a burden student loan debt actually is as a practicing physician.

Close to 50% of doctor’s work in the area of FP. The average salary in the area of FP is $840,000. So I will be using these numbers from here on out.
Loan balance: $200,000
Interest rate: 6.8%
Loan term: 30 years
A word of caution…..$840k is going to seem like earning pennies when you read a real analysis of medical student debt.

40% of your $840k is going to go to taxes. This gives you $504,000 for the year.


Mortgage payment: this will vary from place to place. I’m going to use $8,000 per month on your ridiculous mansion in the suburbs. You will spend $106,000 per year on your mortgage.
You are now down to $398,000 left over for the year.
Now you have property taxes. I’m going to assume that you will need to pay around $12,000.
You are now down to $386,000 for the year.
Car payment: let’s put down $1200 a month for that sweet new BMW convertible. Your wife or husband have a car? Good thing you got them that 10 year-old Tracker. Now you are close to $1250 a month.
Car insurance? $3,000 per year.
You are now down to $368,000
You need to pay back your student loans. With the above calculations, you will be paying $1,303.85 a month.
You are now down to $352,354.
Do you have house repairs, children, car expenses, food, gas, health insurance? Good luck affording all that stuff, sucker!

 

[Concubine]

Simply looking at the marginal federal income tax rates is incomplete.

For people with 6 figure incomes, a better rule of thumb is that roughly 50 cents of every earned dollar is taxed away if you include federal, state, and local income taxes, property taxes, social security contributions by the employee, capital gains taxes, and sales taxes.

See the government website. It will show you exactly how much money will be taken out in taxes with your income.

 

[Concubine]

I’m taking a half-hour out of my time to make this post. I’m here to help pre-meds really understand just how much of a burden student loan debt actually is as a practicing physician.

Close to 50% of doctor’s work in the area of FP. The average salary in the area of FP is $840,000. So I will be using these numbers from here on out.
Loan balance: $200,000
Interest rate: 6.8%
Loan term: 30 years
A word of caution…..$840k is going to seem like earning pennies when you read a real analysis of medical student debt.

40% of your $840k is going to go to taxes. This gives you $504,000 for the year.


Mortgage payment: this will vary from place to place. I’m going to use $8,000 per month on your ridiculous mansion in the suburbs. You will spend $106,000 per year on your mortgage.
You are now down to $398,000 left over for the year.
Now you have property taxes. I’m going to assume that you will need to pay around $12,000.
You are now down to $386,000 for the year.
Car payment: let’s put down $1200 a month for that sweet new BMW convertible. Your wife or husband have a car? Good thing you got them that 10 year-old Tracker. Now you are close to $1250 a month.
Car insurance? $3,000 per year.
You are now down to $368,000
You need to pay back your student loans. With the above calculations, you will be paying $1,303.85 a month.
You are now down to $352,354.
Do you have house repairs, children, car expenses, food, gas, health insurance? Good luck affording all that stuff, sucker!

Only $352,354 for everything else! I'm screwed!

 

[Kraazy]

I get the OP's point that people should be realistic about the debt burden that they will face as physicians, but being realistic also means realizing that debt, even in large amounts, is manageable with a focused plan. This will mean budgeting and not "living the life", but many expenses of daily life can be reduced in order to maximize the amount by which you pay down your debt. Not to mention the probability of having a partner/spouse with a job who will help absorb some of those costs. The key is to live below your means; if you were to maintain a "resident lifestyle" with a fully licensed doctor's salary, you would pay your debt off much faster, although it's hard to resist the temptation of spending the money on more fun things than loan payments.

As a sidenote, this also means that if you're premed, you should start saving and minimizing debt as soon as possible. You'll be one step ahead if you minimize your debt from undergrad, and have some money put aside for the application process, living expenses during med school, and perhaps even begin saving for retirement.

 

[sunny1]

I don't understand the purpose of this thread.

This combined with your other thread on how engineers make more money than medicine or something like that makes it seem like you have some weird vendetta against the medical field and are trying to discourage others from applying to medical school.

Frankly, I'm confused.

I agree. For the posters who are cautiously urging people to be reasonable about their expectations, I think that's well and good.

But there are other posters in general on SDN always arguing about how other fields make sooo much more money and how the debt is gonna be too overwhelming -- and yet they are still premed just like the rest of us. It makes me wonder whether they are gunners (or snipers) just trying to get people to drop out of the "competition." If that's not the case, then they need to qualify their statements by saying something to the effect of "yeah it might not be the best paying job for my time and effort out there, but I'll still pursue it because --" instead of only complaining about it.

I heard on NPR a few years ago (and unfortunately can't find a reference for it other than msn, eh) that so long as you keep your total educational loan amount equal to about 2/3 - 1x the amount of your expected first year of salary, you should be within reason. So that, combined with good financial planning along the way (and being able to live off my hubbie's salary during med school, ha!) makes me feel comfortable about my choices at least.

 

[WashU_01_USC_04]

Now, this is worst case scenerio with me. Chances are I'll get some scholarships, probably move back to Montana and practice in an underserved area, get raises, and deduct from my taxes more than I listed. With my math (correct me if I'm wrong), I will probably be ok with paying off my loans in less than six years.

It's irrelevant, but you left off $6324 in FICA Tax, $1595 in Medicare Tax, and $5722 in Montana State Taxes.

Also, are you planning on saving any money? Why would you want to pay off those loans so quickly? 6.8% interest is cheap money. Instead, use the money to do some investing. With dollar cost averaging (DCA) and a "throw-a-dart" philosophy on picking funds, I have been getting an annual return of roughly 16% over the last 8 years across my 401k, Roth, and taxable accounts. Essentially, at 16%, you are doubling your money every 5 years. If you DCA, the rate that your money grows is amazing. Had I tried to pay off my debt from undergrad 8 years ago, I would not be where I am today. Right now, I have the comfort of knowing that I could pay off my undergrad Stafford/Perkins loans 40x over, but why should I when they are locked in at 3.5%?

As a sidenote, this also means that if you're premed, you should start saving and minimizing debt as soon as possible. You'll be one step ahead if you minimize your debt from undergrad, and have some money put aside for the application process, living expenses during med school, and perhaps even begin saving for retirement.

If "debt from undergrad" means educational loans then you need to qualify portions of this statement. If subsidized, those loans are interest-free as long as you are in school. There is no advantage to paying them off. Instead, take the same money and put it in a Roth IRA (if you currently make less than $114k). Although this is considered post-tax money, it effectively reduces your FAFSA EFC, as though you had paid off the student loan, because it is considered a "retirement account" even though there are NO penalties or restrictions to withdrawing your principal/contributions when you need them. You'll read about how this isn't a "qualified distribution", but it doesn't matter because it's not penalized and not taxed. At no point in the FAFSA was I asked what the cost-basis of my Roth was. There is no catch as long as you don't withdraw any capital gains. If you've been contributing to a Roth for the past decade, that's a lot in cost-basis you have accessible. Education loans are cheap money and easy to leverage.

I hope this helps someone out there!

 

[kypdurron5]

Also, are you planning on saving any money? Why would you want to pay off those loans so quickly? 6.8% interest is cheap money. Instead, use the money to do some investing. With dollar cost averaging (DCA) and a "throw-a-dart" philosophy on picking funds, I have been getting an annual return of roughly 16% over the last 8 years across my 401k, Roth, and taxable accounts. Essentially, at 16%, you are doubling your money every 5 years. If you DCA, the rate that your money grows is amazing. Had I tried to pay off my debt from undergrad 8 years ago, I would not be where I am today. Right now, I have the comfort of knowing that I could pay off my undergrad Stafford/Perkins loans 40x over, but why should I when they are locked in at 3.5%?

That's silly. 6.8% may be cheap money, but it's still money that costs you every day you don't pay it off, and we're not talking about investing that money (e.g. margin investing), we're talking about putting off debt repayment and paying compounding interest in the interim. Plus, 16% is a MUCH higher yield than your typical investment account. So sure, if you can pull 16% you're still making a net of 9.2%, but even that's not right because you're loosing 6.8% on 200K, and making MAYBE 16% on whatever money you're able to contribute (which will not nearly be 200K for at least a couple of years worth of post-medical school investing). I'm a big proponent of investing, but paying down at least some of the $200K has to be a priority (at any interest rate).

 

[Chemist0157]

I was surprised with the first post because I saw the ending number first...

...and then I read the rest of it.

Fact: Loans are big, but so is the salary. There are too many rich doctors to even THINK that they are making that little.

I'm not doing it for the money. Heck, if I can just pay off my loans and live a good life and support my family, I'll be happy.

 

[Kikaku21]

Wrong! You won't be filthy rich. Filthy rich is earning millions of dollars a year...or over a life-time. Most doctors are not filthy rich.

A doctor might make a great income, but when you compare a person making a very similar salary, the life-time income IS GREATER FOR THE OTHER PERSON.

First of all-- I'm pretty sure he (the filthy rich guy) was joking.

2. You should stop now. You've been completely owned in this thread. Your "debt analysis" is does not include relavent debt estimates, the correct interest rates, the correct tax bracket, any tax deductions, a spouse/partner that makes an income, investments of ANY kind, coherence, intellegence, or tact.

3. Not only has it been pointed out that your analysis was wrong. In addition, more compelling and realistic alternative analyses have been suggested. Concrete examples of why you are wrong, with cited sources have been provided. You are sunk.

4. Worst of all, is your motivation for writing this thread. Trying to scare people for no reason is lame. Cut it out.

 

[172858]

this post makes no sense.

moral of the story - don't go into medicine unless you love it. it's a sacrifice in every way possible.

 

[Kikaku21]

That's silly. 6.8% may be cheap money, but it's still money that costs you every day you don't pay it off, and we're not talking about investing that money (e.g. margin investing), we're talking about putting off debt repayment and paying compounding interest in the interim. Plus, 16% is a MUCH higher yield than your typical investment account. So sure, if you can pull 16% you're still making a net of 9.2%, but even that's not right because you're loosing 6.8% on 200K, and making MAYBE 16% on whatever money you're able to contribute (which will not nearly be 200K for at least a couple of years worth of post-medical school investing). I'm a big proponent of investing, but paying down at least some of the $200K has to be a priority (at any interest rate).

Most student loans... Stafford and Grad Plus, for example, are simple interest... Not compound. Makes a pretty big difference.

 

[pparikh]

I think this is the real message OP had in mind. Don't do it for the money, its not worth it. Do it because it is something you want to do because of intrinsic factors.

If you want to make money, spending 12 years in training/school postsecondary and then making 150k is not the way to go. Instead, do some mathematical economics major in undergrad, maybe a CFA cert. Do some investment banking and you'll make much better money, starting at a much earlier age and with higher prospects of larger raises. Become a dentists, or even a lawyer although I think CFAs still make more than both.

 

[kypdurron5]

Most student loans... Stafford and Grad Plus, for example, are simple interest... Not compound. Makes a pretty big difference.

Fair enough. After posting my response I just couldn't help but prove to myself that I was right (and willing to accept that I'm wrong). I can't fathom any circumstance where accruing debt on 200K is preferable to investing, unless you already have a huge investment account, OR get a ridiculous yield (16% doesn't cut it). My calculations of course have wild assumptions, but here are some numbers. (Interest accrues once at the end of the year, investments are made lump-sum and somehow accrue full interest the first year (I'm being generous), and school debt is paid interest-only- this interest reduces the amount available for investing each year, 6.8% debt interest, and a GENEROUS 16% ROI).

It doesn't really matter what numbers I plug in, but in this case it's 200K debt, and $30K available each year for debt repayment OR investment. Oh, and please forgive the terrible formatting; I didn't just want to throw final numbers out there without giving you a chance to correct anything I'm missing.

Year Debt DebtInt Investment InvestInt
Year 1 "200,000" 13600 "16,400" 2624
Year 2 "200,000" 13600 "32,800" 5248
Year 3 "200,000" 13600 "49,200" 7872
Year 4 "200,000" 13600 "65,600" 10496
Year 5 "200,000" 13600 "82,000" 13120
Year 6 "200,000" 13600 "98,400" 15744
Year 7 "200,000" 13600 "114,800" 18368
Year 8 "200,000" 13600 "131,200" 20992
Year 9 "200,000" 13600 "147,600" 23616
Year 10 "200,000" 13600 "164,000" 26240
Investment Account /w Int: $190,240
Still Owe: $200,000
Net Worth: $-9,760

Now, if you paid the debt off first over 8 years and only invested for the last 2:

Year Debt DebtInt Investment InvestInt
Year 1 "181,560" 12346.08 0 0
Year 2 "161,866" 11006.89 0 0
Year 3 "140,833" 9576.64 0 0
Year 4 "118,370" 8049.13 0 0
Year 5 "94,379" 6417.75 0 0
Year 6 "68,757" 4675.44 0 0
Year 7 "41,392" 2814.65 0 0
Year 8 "12,167" 827.32 0 0
Year 9 0 0 30,000 4800
Year 10 0 0 60,000 9600
Investment Account /w Int: $69,600
Still Owe: $0
Net Worth: $69,600

 

[kypdurron5]

I think this is the real message OP had in mind. Don't do it for the money, its not worth it. Do it because it is something you want to do because of intrinsic factors.

His point was clear, but he failed to prove that point even using bloated numbers. Debt or no debt, a physician generally makes a comfortable living. His numbers yield a very reasonable lifestyle, one that is far better than I'm living now or than my parents ever lived. But on top of it, his numbers represent high costs and an income from the lowest paying sector of medicine. This is exactly why medical students are fleeing primary care- lowest income and high debt. Yet still, the numbers provided yield a comfortable (but not rich) existence. This scenario could quickly be modified by a) reducing expenses, b) going into a higher paying specialty, c) choosing a cheaper (state) medical school, or d) encouraging your spouse to work as well. On top this, there will come a day when school debt is repaid. If the physician focus's on getting this paid off ASAP there will then be plenty of room for excesses, investments, savings...whatever you want to do with your $150K/yr.

I don't think anyone should choose a career based on a single factor (including money), but there is money in medicine, and with a little fiscal responsibility, a very good living. Ultimately money is the reason we work in the first place, and medicine isn't a bad choice.

 

[JAMMAN]

The Federal tax tables show that for a person making 98,000/year he will pay (21.8k if single and 17.5k if married).

What you also didn't take into consideration is that a lot of these family practices get HUGE bonuses from the hospital system that they are in. I know an Internal Med. guy that has a base salary of 180k/year. He gets ~160k/year in bonuses.

Here's the over 100k tax publication for a married couple...

Section B—Use if your filing status is Married filing jointly or Qualifying widow(er). Complete the row below that applies to you.

Taxable income.

At least $100,000 but not over $128,500 $ × 25% (.25) then subtract $ 7,152.50 $

Over $128,500 but not over $195,850 $ × 28% (.28) then subtract $ 11,007.50 $

Over $195,850 but not over $349,700 $ × 33% (.33) then subtract $ 20,800.00 $

Over $349,700 $ × 35% (.35) $ $ 27,794.00 $


What you do, is take your income up to 99,000 (which is 17k for a married couple) and tax anything over 100,000 according to these tables.

So if you make 400k/year after deductions..

first 100k is 17k worth of taxes
next 300k is at 35% tax - $27,794

This is correct if you use the standard tax table. Unfortunately, almost every physician in practice is subjected to the alternative minimum tax which almost always raises your tax burdeon. I just calculated it for $400K and a person making $400K would have a tax burdeon of about $90-100K...and that is federal tax alone. Add in state, local, property tax, social security and medicare and nearly 40% of your income will be gone.

Also, property taxes over $6K are quite common in my neighborhood.

 

[Tutmos]

6K for property taxes? Where do you live? I think several of those figures are inflated.

That's actually pretty normal. I pay almost exactly $6k in property taxes. That's in Minnesota on a 450k house. Also 40% tax burden is well within reason once all taxes are factored in, fed, state, municiple, sales, gas etc.

I'm not making any comment about the OP's info, just that those points are within reason.

 

[Cegar]

Bull****

Please take a class on the tax system. And economics. And go look up some figures.

Your thoughts and theories are not automatically correct. Have you ever even filled out a 1040? Good god man.

 

[kansaskid]

There is no 40% tax bracket. And even if someone is "in" the highest tax bracket, their entire income is not taxed at that level. It's a cumulative system where the amount of income in the first bracket is taxed at that level, and the amount of income in the second bracket is taxed at the second level, and so on until the highest bracket is reached and any remaining income is taxed at that level. The tax amounts from each bracket are then added together and that is the level of income tax paid. To determine the 'actual' tax rate, you divide that total by the original income. That percentage will be considerably less then the highest tax bracket rate and is the marginal tax rate. A single doctor making 100,000 would be placed in the 28% bracket which would put the marginal tax rate at more like 24 or 25%.

Edit: Glad to see other people got here, too. Yay, economics!

 

[TheRealMD]

There is no 40% tax bracket. And even if someone is "in" the highest tax bracket, their entire income is not taxed at that level. It's a cumulative system where the amount of income in the first bracket is taxed at that level, and the amount of income in the second bracket is taxed at the second level, and so on until the highest bracket is reached and any remaining income is taxed at that level. The tax amounts from each bracket are then added together and that is the level of income tax paid. To determine the 'actual' tax rate, you divide that total by the original income. That percentage will be considerably less then the highest tax bracket rate and is the marginal tax rate. A single doctor making 100,000 would be placed in the 28% bracket which would put the marginal tax rate at more like 24 or 25%.

Edit: Glad to see other people got here, too. Yay, economics!

They were talking about cumulative taxes from your entire salary including stuff like state income tax and what not.

 

[tncekm]

6K for property taxes? Where do you live? I think several of those figures are inflated.

Unfortunately, for a CA resident this isn't inflationary, really. In an average CA suburb right now during the "housing collapse" a 1500 sq ft home will still regularly see $5K/yr in property taxes.

Other than that, I think the rest of the criticisms are valid. 🙂 Just don't forget his overall point. Although he may be trying to "scare you", the gist of his argument is legit in that $150-200K isn't going to go around as well as you think it would when you add up all of your expenses. You'll be living better than most, but considering your student loan it won't be a "huge" increase in quality of life until you're either making a heck of a lot of money or you somehow manage to get rid of your student debt.

 

[n618ft]

👍 tax deductions and no state income tax... $5k-8k in property taxes will get you a 2500-3000sq ft waterfront house around here.

 

[Bananas Foster]

why the hell does this thread keep getting resurected?