What? I Have to Leave Residency? Planning for Your “Real World” Future

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It happens every late fall and accelerates into spring; graduating residents start to stress about the move into practice. Not the medical, professional transition — that is relatively easy. The stress starts at negotiation and continues through benefits enroll­ment. How much of a house can we afford? How much should we contribute to retirement? Do we need this supplemental insurance? What do all of these retirement booklets mean? This article is intended to provide a framework for making informed, effective, confident decisions.

Preface

There is a logical progression of decisions that need to be made, and they start with confirming your new practice. Until you know what that looks like in terms of location, type of practice, compensation, and benefits, it is difficult to plan the transition. Below are guidelines for mapping this out.

Practice type

  • Independent Contractor (IC)— As an IC, you will have significant flexibility, as well as the responsibility of being self-employed. You need to understand self-employment income, structure your business and personal expenses so they can easily be identified, set up an additional account to maintain tax pay­ments, and plan a forward-looking budget. Based on your hourly rate and expected shifts, determine your gross monthly income and develop a ratio that will divide your income in to three categories: 1) taxes, 2) retirement, 3) discretionary. This will enable you to be well organized, as well as make prudent use of your earnings. It is often more effective to hire someone to provide this guidance.
  • Private or Democratic Group — Consider that you will commonly have 1-3 years as an employee before making partner and becoming self-employed. During the employee period, you will likely have fixed income, minimal business expenses, a limited ability to contribute to retirement, and you will not have to think like a business person. Your budget should be well defined. As you transition in to a partner role, it will be important to have an accountant and other financial advisors guide you in navigating the changes in taxation, retirement eligibility, and medical benefit limitations.
  • Hospital Employee—A W-2 employ­ment position with a hospital provides financial stability, diverse resources, and often competitive scheduling. In exchange for security in these areas, employees typically do not earn as much as private practitioners and have less flexibility in designating money to retirement and other important programs. For many, a significant advantage of hospital work is the ability to do research, train residents, and be involved in the collaborative, educational side of medicine.

Goals

It is important to articulate what you want to accomplish and when. Below is a common set of goals.

  • Buy a new home in the next 12 months.
  • Pay down student loans aggressively.
  • Develop sufficient retirement income beginning at age 60.
  • Put your three children through four years of undergrad.
  • Minimize income taxes.
  • Eat, live, and enjoy a reasonable standard of living.

Pieces

With a set of goals and some numbers, it comes down to developing an actual plan. This is equivalent to putting together a financial puzzle, setting up bank accounts, obtaining insurances, starting investment programs, and developing a portfolio. These are all pieces that need to be identified and fit into your plan, based on your time horizon and objectives.

Action plan

The rubber meets the road when you confirm your objectives and have specific next steps to take. The greatest plans fall victim to inaction when they are in the hands of the wrong people. Identify the goals, agree on the steps to get there, and delegate the implementation to someone who does it for a living.

The Confident Transition Plan

Thousands of residents have benefited from our direction during the transition between training and practice. Appropriate direction can enable you to reduce debt faster, build wealth more rapidly, have confidence, and enjoy the freedom and flexibility that you have worked so incredibly hard to attain.

M. Shayne Ruffing, CLU, ChFC, AEP

M. Shayne Ruffing, CLU, ChFC, AEP

Managing Director, Integrated WealthCare, 866.694.6292, shayne.ruffing@integratedwealthcare.com, www.IntegratedWealthCare.com
M. Shayne Ruffing, CLU, ChFC, AEP

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