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Is Anesthesia the best field for early retirement?

Posted on October 28, 2019January 30, 2021 by SmartMoneyMD

Two of the biggest hitters in the physician finance online world are both anesthesiologists (PoF and PassiveincomeMD). Both of them are masters of side income by approaching money in completely different directions. Is it sheer randomness that out of dozens of possible medical fields, both of these successful money-oriented doctors are in the same specialty? Or is there a particular personality or mindset that lends itself to both anesthesia and successful money management?

The chicken comes first
The field of anesthesiology has quite a few characteristics that allow its doctors to become financially successful more easily than other fields. Let’s take a look at some of them:

High earning potential
The median annual income for anesthesiologists hovers in the high $300,000 range. I know plenty of anesthesiologists who earn at least 25% more than that. Some anesthesiologists living in a strategic part of the country who have the ability to add in shifts/cases can earn 100% more than that. High earning potential gives anesthesiologists fundamentally greater financial firepower than internists or family practitioners. We all know that compound interest is king, so those who are able to amass a larger nest egg early career will have a longer trajectory for the money to grow.

Are you skilled in starting IV’s, dosing propofol, and cellphone games?

Stable volume/business
Anesthesiologists are a dime a dozen in hospital rosters, and they can slide under the radar. Most patients meet their anesthesiologist in the preoperative area, and never see them beyond the postoperative area. Patients looking to have their gallbladders removed don’t typically seek second opinions on who is going to intubate them—wouldn’t you think that the gal running your ventilator ought to be scrutinized just as much as the gal who is going to take out your gallbladder?

Interesting, right?

What this means is that work for anesthesiologists tends to be relatively stable. As long as there are surgeries being performed and hospital contracts to be honored, the revenue will come. Patients won’t go out of their way looking for a different anesthesiologist to manage their surgery.

Relatively inconspicuous specialty
Likewise, patients don’t seek out particular anesthesiologists to participate in their care. Aside from pain management clinic, there is no clinic component in the anesthesiologist’s daily routine. In contrast, patients wanting elective mastopexy surgery, rhinoplasty, or LASIK have certain expectations of how their doctor appears. There is doctor shopping in these fields, and a dissatisfied patient will look elsewhere for care or even demand a refund on surgery!

That’s right. Belligerent patients can demand a refund for a rhinoplasty but I’ve never heard of a patient demanding refund on a “bad intubation”!
In some ways, it may be financially advantageous to stay out of the spotlight.

Work hours
Financial success is contingent upon both work and non-work hours. If you spend 90 hours a week at the hospital, you will likely be inclined to make decisions that simplify your life but perhaps at the expense of your wallet.
Anesthesia tends to have relatively controlled work hours, and most on-call schedules have expected outcomes (doctors at busy hospitals will definitely get called to go in while on call and vise versa). The work to income ratio often is balanced enough so that there can be ample time to pursue hobbies or ventures to increase net worth. Medical students take note!

The egg comes first

Every medical specialty lends itself to a particular personality, and anesthesia is no different. The field requires a good deal of attention to detail at the beginning and end of a case, and perhaps a more laid back personality with interests in outside hobbies. If the outside hobby happens to be involved with finance, then the field allows for successful ventures with money. Perhaps we are self-selecting those who are already financially-inclined and noted that they work in identical professions.

Beware of your job

While the intent of this website focuses on finance, there are quite a few political and economic factors that directly impact the earning power of physicians. We all know about reimbursement cuts and increasing costs of doing business, but the elephant in the room is the increasing popularity of replacement of doctors by physician extenders.

It is a very well known fact that nurse anesthetists have worked alongside anesthesiologists to increase the throughput of medical care. However, lobbying powers have enabled many of these paramedical fields to work independently of any medical doctor supervision. Interestingly, reimbursement schedules for these two fields with completely different rigor and demand are disturbingly identical.

What does this mean for anesthesiologists? Please stay active with your board society, and make sure that you take part in helping your profession remain solvent! Political factors may not necessarily be as logical as healthcare should be. Other medical specialties should also be aware of similar encroachments in their profession as well.

The bottom line

What does this all mean? If you pay attention to finance, maybe you’d enjoy being an anesthesiologist? Or maybe becoming an anesthesiologist will confer you advantages to becoming financially secure? Either way you look at it, anesthesiologists will have a bright future.

What specialties do you think are more favorable for early financial independence?

Photo courtesy of Flickr

Fundamental financial tips for the incoming resident

Posted on August 10, 2019January 30, 2021 by SmartMoneyMD

The transition from medical school to internship is both an exciting and traumatic period for doctors. As a fully anointed “M.D.” (or D.O.), the new doctor has a well-deserved and distinguished title to her name. No more “student doctor” anymore. Most orders won’t have to be cosigned anymore. Want to place an order for 100mg of lasix? Prime those kidneys, and have at it. On the flip side, being a doctor is stressful. Becoming a new doctor for most of us was hair-pulling-out stressful. Those who have not gone through the process will never truly understand how traumatic the beginning of internship or residency is.

Binge-eating, crying in the bathroom, retail therapy…if you can think of any self-abusive punishment you can better bet that at least one newly anointed physician has tried.

New residents also neglect their financial health too. Going from no salary to some salary impacts one’s psyche. If you add in a stressful environment then it’s pretty easy to start making bad financial choices. Predatory businesses who want your credit score will lend you more than you should ever incur to your name.

Whenever I am mentoring a new trainee, I try to distill the financial aspects of their training to a few fundamental steps. No new doctor should be spending hours of her free time during residency mastering financial matters anyway—you need to be mastering your profession. Below are a few of the pointers I try to highlight:

Assess your 401k/403b options
Die hard savers will browbeat you into maximizing all of your tax-advantaged space no matter what. As a resident you technically should have enough income to fully contribute to your employer’s retirement program. Many non-physician middle class households have comparable incomes to medical residents, and many still do contribute to their retirement accounts. In practice what you should do may not be as clear-cut. Some of you are probably training in high cost of living cities where your trainee stipend will not get you far. Some of you will have certain family obligations that limit what you can squirrel away even though all objective financial advice tells you that the longer you have something invested into the market, the longer you can allow for it to grow.
I certainly did not maximize my 401k/403b options during my training, although I was not well-equipped to manage my finances either. My training program did not offer any matching options, so I figured that I would have been better off either keeping my earnings in a savings account as an emergency fund or using excess funds to repay my student loans. The interest rate in savings accounts were atrocious, but it allowed me to keep around emergency money.
The bottom line on whether to maximize your retirement accounts during your training ultimately depends on how much you can budget. Most medical residents are going to be in the lowest tax bracket ever in their training so the savings will come only in retirement when you start withdrawing.

Sometimes this is the only savings medical residents have on hand…

Track your loans
It is not difficult to lose track of what you owe and when your payments are due. It is always easy to apply for deferral or forbearance, but eventually that will catch up to you as well. Update your mailing address if you have moved recently. I’ve lost count of the number of times that my mail was misplaced after changing addresses. Even though most transactions are conducted online now, it still is good practice to minimize the chance that you lose any important mail.

Watch out for credit card debt
When I started residency, I started receiving all sorts of flyers for credit applications. It’s as if someone knew that I suddenly came into a windfall with a real job. Perhaps the student loan companies sold my information to lenders. While lenders are generally more cautious about extending too much credit in recent years, it’s not difficult for most people to open too many lines of credit especially if you are in a stable profession.
You might think that credit card debt is something that only others would get caught up in. Think again. It’s just as easy for doctors to become deep in credit card debt as anyone else. The problem with doctors being too busy is that less important matters can become forgotten. I’ve embarrassingly forgotten to pay bills even though I had the funds to do so. I’ve had co-residents who set their payments only for the minimum amount due each month not realizing that they were paying interest rates up to 25%!

Don’t buy that house
No matter how you justify it, owning a condominium or house during your residency probably isn’t going to give you any financial brownie points. The biggest hassle with owning property at this stage in your life is that there isn’t any guarantee how long you will benefit from owning it.
There are plenty of residents who purchase condominiums during their training with the intention of renting the units out to future trainees. This could be lucrative only in a high cost of living area where the property value will actually appreciate. Sure, rental income is all about cash flow but there is a good chance that the work that you’d have to put into managing or outsourcing the maintenance will offset much of the financial gain.

Think about it. How much are you willing to put up with in taxes, maintenance issues, and heartburn for a rental that goes for $1000 a month? How about $1500 a month? $2000 a month? What if your day job as an attending physician paid you $300,000 while your residency rental was 1000 miles away?

What other suggestions do you have for residents in training?

Are doctors overpaid?

Posted on July 14, 2019January 30, 2021 by SmartMoneyMD

I would have thought that all doctors are on the same page about being overworked and underpaid, but I was surprised to read on a recent physician forum that some doctors claim that our profession overall is compensated adequately.

Should doctor salaries be publicized?

Posted on June 20, 2019January 30, 2021 by SmartMoneyMD

One of my coworkers who grew up in India told me that their teachers in grade school would post everyone’s scores in the hallway after every exam. This comparison of grades and objective testing further extended to cities and even regions in the country. There are people going through the hierarchical ranks with “gold medals” in science or engineering. Throughout this process, it was relatively transparent who the smartest or highest achieving people (at least on paper) were. The “winners” in the system also got the best opportunities for jobs and potential to move to the United States. He once asked me why the hospital systems aren’t transparent about doctor salaries or executive salaries.
While there isn’t a single best answer to his question, I began to wonder how our healthcare system would fare if incomes were publicized.
Can grades even be compared to income? No way. There is a finite cap on grades, and everyone in the class can theoretically earn a 100% if no one ever misses a question. There is only so much money floating around in the world. Not everyone can get a “100%” on their salaries.

Corporate America can do it

The corporate world often discloses the compensation of some of its management members under their shareholder agreement. Non-profit entities have to disclose their executive compensation schedules through a 990 form—this is a powerful resource for you financial voyeurs who want to see what other people are earning. Remember, all non-profit institutions (read: hospitals) file this publicly so you might actually find some interesting financial information on your coworkers or friends. Some of the names on these compensation schedules belong to doctors, but these numbers are unrelated to what doctors earn in their clinical practice.

Posting salaries of your doctors
Clearly publicly posting one’s income is not really a socially acceptable analogue to posting grades in school. The inherent problem with the public being aware of your physician’s salary is that laypeople truly have little idea what goes into the training or daily routine of a doctor; they just see the salary and judge based on a number.

What might actually be an interesting scenario is if everyone’s compensation within a hospital or medical group be listed. This includes everyone—the janitor, all of the mid-level managers who make your lives hellish, all of the HR people who litter their email signatures with online and fabricated degrees (BA, AClh, MBA, CFO, BLS), and the one guy who doesn’t do much of anything but still gets paid more than the pediatricians and family medicine doctors in the group.

Here is a hypothetical layout of the salaries of Medical Group A:

While physicians still remain at the top of the income chain, you might be surprised how many hands are in the pot. At the basic level, doctors (and to a certain extent midlevels and physician extenders) are fundamentally responsible in bringing in the revenue. However, this revenue has to be distributed among all of the other workers in the organization. And we all know that the number of administrators in healthcare has grown by several thousand percent since the mid 1970’s. What has been most revealing in speaking to various hospital personnel is that most non-physicians have little idea what doctors actually do, even though they are working alongside the doctor!

Go back and reread that statement. Those of you in the hospital or clinic settings will know what I am talking about. Remember the time the hospital facilities person told you that his call schedule was worst than yours because he was on call all of the time? The worst case scenario was that a water pipe in the hospital had burst so he had to unlock the door for the plumbing staff to do the repairs. Oh, if he “forgot” to pick up the phone there would not be any consequences. <end rant>

In the end, I realized that nothing good would come out of posting anyone’s salary. We would actually lose out as doctor because what people want to see are numbers, not how much work or how long it takes to get to where you’re at.

What hospital statistics don’t reveal about doctor salaries

Posted on June 2, 2019January 30, 2021 by SmartMoneyMD

I came across a heated newsgroup thread related to a recent survey comparison of medical specialty salaries and the revenue that each specialty generates for hospitals. Overall there is a general correlation between higher hospital revenue and higher salaries, but there are some outliers. According to the data, ophthalmologists generated one of the least amount of revenue for hospital yet reported income that was in the middle of the pack. You can read the official survey data on Merritt-Hawkins.

Naturally, there was some animosity from those specialties who felt short-changed by the system. Why would a certain field be compensated more for contributing less to the system? The devil in the detail, of course.
This topic presents a good learning opportunity for all doctors.

A study is only as good as the data given
We’ve all taken part in clinical or laboratory research at some point in our lives. Some of us conduct research in our jobs. We all know that variables need to be controlled, and shoddy survey research is only as good as the respondents’ responses.

In this survey, both hospital and office-based specialties are lumped together. Certain medical fields like dermatology, ophthalmology, and psychiatry are office-based fields. For the most part they function independently of hospitals, and generate revenue from professional charges as well as ancillary services. They do not typically bring in much revenue to hospitals.

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Why? These specialties are unique:

These specialties typically do not consult other specialties, so the referral chain ends with them.
These specialties typically do not order high volumes of ancillary testing such as lab work or imaging.
Procedures that these specialties perform can typically be conducted outside of the hospital. Anything done outside of the hospital translates to zero revenue to the hospital.
They’re also not likely to be employed by the hospital either.

If you look back at the survey, a field like ophthalmology isn’t going to bring much revenue into the hospital. An ophthalmologist isn’t likely to be employed by a hospital either. So the reported salary of an ophthalmologist isn’t likely to have any correlation with hospital revenue at all.

In contrast, neurosurgeons employed by a hospital are going to be more common. Most of their surgeries are performed in the hospital, and their work brings in significant technical revenue to the hospital. A hospital could contract with independent neurosurgeons for their services, but from a business standpoint employing the neurosurgeon would give the hospital much more control.

Key points in the business of medicine
It’s never a good idea to make career decisions based on money especially in medicine. What might be a hot field with great compensation may no longer be the case your entire career. The key points I impress upon my students to assess are the following:

You need to choose a field that you enjoy.
Once you’ve narrowed down your potential options, get a sense of what you can do with your expertise. Inpatient, outpatient care? Lifestyle?
Understand how one’s skills within a profession translates into income. You don’t have to understand everything, but getting a head start will allow you enough time [read: years] to synthesize the right questions to ask in the future.

If your career specialty is already set, it’s not too late to reassess what you understand or not about your field. If you are an internist, you probably already have a good sense of job options available like outpatient care or hospital medicine. Study how revenue stream occurs. Figure out where the middlemen are, and ask yourself if you are okay with how the system you are in works. Realize that not every one of your peers will share the same values that you do. Make sure that whatever you decide to do helps to preserve your profession. I’ve seen plenty of doctors “sell out” their profession to make a quick buck. Don’t be that gal. We’ve worked too hard to throw away everything.

The bottom line? Don’t get mad if someone else seems to work less and earn more! If that is important to you, figure out what you can do to make it right! You’ve got an entire career to do it.

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Financial conundrums of dual income doctor households

Posted on May 27, 2019January 30, 2021 by SmartMoneyMD

Two incomes are better than one, right? As we all know, the answer isn’t clear cut. If we have to actively “work” to generate income (shout out to @PassiveIncomeMD), we have to balance exchanging time for money. Nothing comes for free. When you throw in a tax system to convolute matters, certain households are actually punished for going into the workforce. There is a delicate balance between each income-earning member and what each profession entails. Some households are hit harder financially than others due to the income situations of each spouse, but hey, we don’t choose our partners based on their incomes right? ?

This conundrum isn’t limited to doctor households or families with a high-income earner. One of my neighbors is a financial analyst with a stay-at-home wife and two kids. The wife opted resign from her previous job as a teacher because her entire income would have gone towards child care. That’s just how life plays out sometimes.

The tax man punishes disproportionate incomes

The U.S. tax system almost always “punishes” the spouse with a lower income. Two main reasons:

The tax system is progressive, just like how the jackpot in those slot machines keep on growing. The higher your income, the more likely you will get pushed toward a higher marginal tax bracket. Suppose a dual income household has a physician earning $350,000 a year and an IT customer support specialist earning $60,000 a year. The physician income alone puts the family in the 32% marginal tax bracket. If the IT professional were single, he’d only be in the 22% bracket. If he were the sole breadwinner in the family, they’d be in the 12% marginal bracket. Instead, the family will be in the 35% marginal bracket. This means that a good portion of his income will be taxed at 32% (until the family income reaches the 35% threshold) and the rest at 35%! Perhaps that is the penalty one pays for being in a high-income household. For some households, giving up 35 cents for every dollar you earn on a $60,000 might not be worth it.
Social Security and Medicare taxes get taken out “twice” in a dual working household. This is a system that you pay into while working and will receive some repayment in retirement. But one could argue that it’s still potentially less money in your pocket. A family with spouses earning $350,000 and $60,000 a year will potentially take home less than another family with a single earner with a $410,000 income.

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This boy stays at home to entertain the family. Not a bad main gig!

Whether the lower income producing spouse remains in the workforce ultimately depends on what is most important to the family. Interestingly, most of my colleagues in this situation made their decisions based on finances. Essentially all of the lower income spouses ended up leaving the workforce to care for their children until the kids became old enough to enter school. Some of the spouses re-entered the workforce. One wife of a couple I know actually worked side gigs with Instacart and Rover while the kids were in school!

Spouses with similar incomes fare better

Our tax system tends to be more forgiving when each member of a dual income household has similar incomes. Each member still needs to pay into Social Security and Medicare separately, but they would have been required to do so even if they were unmarried. These households are undoubtedly more equipped to reach their financial goals more quickly, but are also susceptible to overextending their earnings because they have higher earnings.
Most of my experience with dual income households is with dual doctor households. Since medicine is a relatively time-demanding profession, I find that most dual doctor households are obligated to outsource many tasks. Instances include:

Utilization of grocery delivery services or grocery pick-up services.
Utilization of Uber Eats, Seamless, or other restaurant delivery services.
Utilization of dry cleaning services with pick-up services.
Nanny or Montessori schooling for young children. Some nannies command salaries in the $70k range, more than what most medical residents earn! I once knew a doctor household who kept their nanny until the kids were well into high school!
Utilization of lawn and home cleaning services.

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There is no end to what you can outsource. While the income levels of dual doctor households may be higher, their taxes are higher, and the expenditures tend to be higher as well. Are these families actually better off financially than single doctor households? I would suspect that the split is actually more even than we would expect. There are a handful of dual doctor families I’ve seen that completely outspend their earnings. Shocking? Not anymore.

How to be a winner

There isn’t a single best answer to handle the finance implications of dual income households. The bottom line is that some of us are going to get the short end of the U.S. tax system. We might not have a choice in the matter. What we do have control over is how much we save and invest.

Plateauing net worth and lifestyle inflation

Posted on May 6, 2019January 30, 2021 by SmartMoneyMD

Wealth accumulation can follow many trajectories, depending on discipline and external factors like stock market health or economic fluctuations. With a proper financial plan, doctors can stick to a game plan that should allow them to reach financial milestones rather predictably. The adage that wealth begets wealth certainly does hold true most of the time, but it doesn’t necessarily guarantee financial victory. One of the issues with wealth accumulation is that goals, needs, and desires rarely remain constant over time. Life happens, and sometimes that can derail even the most sound financial plans. Let’s take a look at the financial trajectory of a typical financially-conscientious physician:

The doctor in training and early career doctor
Many early career physicians are knee-deep in debt. Some of us venture even further into the red by purchasing a home or buying a big-ticket item on credit while on a resident’s salary. Fortunately any early career financial missteps can be righted with a lengthy enough career length. I find that this generation of physicians overall tends to be more aware of finances, possibly because of the negative changes in medicine. Doctors at this age will often start picking up financial books or talking to financial planners. Some of them will be directed to @WCI’s website and find out that it’s cool to be attuned to your bank accounts.
This is also the point where many doctors are able to dig out of a negative net worth when the financial strategies start working. I remember that the time my net worth became zero—I felt as happy as I did when I got accepted into medical school and residency!
When our financial strategies start working, we hope that it could continue indefinitely, but throughout our careers there are many factors that can disrupt the game plan.

Early mid career doctors

How long does the gravy train last? Will your net worth growth actually accelerate as you reduce debt? It should—your first $100,000 in net worth should be most difficult to achieve, while your second or third $100,000 ought to be easier. As more of your net worth becomes invested, it should grow by itself.
In practice, many mid career doctors end up plateauing their savings rate simply due to life changes or letting the reins loose a little too soon. This is where we are at most risk of a plateauing net worth.

Increasing costs for children — As we had mentioned on a previous article, we don’t always make rational decisions. Sometimes we may be more wiling to splurge on a high price tag for our family members but not necessarily for ourselves. Send your kids to private school, and the math equation changes.
Finding that “forever” home — Many doctors at this point will find a reason to get a bigger and more expensive house. Perhaps the second dog needs a larger yard or the kids need more room for themselves. The second mortgage will dig into your income twice as hard when the first home doesn’t sell.
Taking more lavish vacations — While there is nothing wrong with taking time off from work, many doctors end up overcompensating for having stressful careers through luxurious vacations. Throw in a few five-figure vacations a year, and you realize that it will chew up a chunk of a doctor’s salary.
Making poor financial choices intended to grow one’s net worth — This is where smart people can outsmart themselves. Commercial real estate, fast-food restaurants, family businesses…you name it, there are probably people who have dumped a chunk of change into ancillary investments. Some of these investments are going to flop. Each failed investment will extend your working career a little longer. Just make sure that you don’t make too many of them…

Frankly, any of these situations can happen to us. Many of these choices are made conscientiously, but they can have lasting effects on our net worth trajectory.

Is plateauing your net worth a bad thing?

Late career doctors

There really isn’t much other than catastrophic events or major economic recessions that could derail a well-executed financial plan for late career doctors. Conversely, there are instances at this age where doctors are presented with unexpected health issues or worse yet, death. I have seen a handful of doctors who were unable to enjoy the fruits of their labor due to health issues. You can take your money to the grave, but it might not do you too much good.

The conclusion to all of this? Plateauing can happen even with judicious financial planning simply due to changing needs and desires. What’s important for doctors to realize is that many of us are okay working a “full career” despite a early retirement being a hot trend. Just make sure that the lifestyle changes that you make don’t make you overextend into your golden years.