It’s that time of the year again. Graduating med students have started their first jobs, existing residents have been promoted to a new post-graduate level, and experienced attendings are in the midst of contract renewals. As you continue working, make sure you get the pay and the benefits that you deserve. Be sure to check for these 7 things as you enter the next phase of your career:
1. Look for a salary increase and cost-of-living adjustment. Within this past year inflation has skyrocketed. The price of homes, cars, food, and other items has increased dramatically. In order to keep up with the rising cost of goods, you should receive a cost-of-living adjustment to your pay. This will help you maintain your buying power and standard-of-living over time. A cost-of-living adjustment is automatic in most jobs, but it is not always included in physician contracts. If you haven’t noticed a cost-of-living adjustment to your base pay, reach out to your human resources department to inquire about it. Be sure to negotiate that in your next contract if it is not in your current one.
2. Enroll in health insurance for yourself and your family. Health insurance is something we all need. Although we may live healthy lifestyles, we cannot predict the future. We don’t know if we’ll get sick, get in an accident, or be diagnosed with an illness that requires specialized care. In order to reduce the financial burden of these unexpected costs, we need health insurance. Health insurance can be quite expensive but, most, if not all, of the cost is usually covered by your employer. Be sure to clarify this and ensure that you’ve enrolled. If you have a spouse, children, or other family members that you support, ask about the monthly cost of adding them onto your health insurance plan. Inquire about vision and dental insurance as well. These additions tend to be quite affordable but usually require separate insurance policies that you can get through your employer.
3. Make Health Care FSA and Dependent Care FSA contributions. A Health Care FSA is a flexible spending account. Money in this account is used to pay for out-of-pocket health care expenses like the cost of prescription drugs, surgeries, fertility treatments, and doctor’s visits. While you can pay for these expenses with money from your regular checking or savings account, you may want to consider using a Health Care FSA instead. Why? Because any money you put in this account is exempt from federal, state, and FICA taxes (which could save you hundreds if not thousands of dollars each year).
A Dependent Care FSA is very similar. Instead of using the money in this account for out-of-pocket healthcare expenses, the money in a Dependent Care FSA is used to pay for childcare expenses or nursing home expenses you may have to spend on your children, aging parents, or other dependents. You can put a couple thousand dollars into a Health Care FSA each year and up to $5,000 (per household) into a Dependent Care FSA each year. Any money you contribute is protected from taxes. Just be sure to only put in the amount you will use because any unused money does not roll over to the next year.
4. Contribute a percentage of your pay to retirement accounts and see if you get a match. Another benefit to clarify is retirement. Most organizations will have a 401K (if you work for a for-profit business) or a 403b (if you work for a non-profit organization). You can contribute to these investment accounts with pre-tax dollars and stack money for your retirement over time. Doing so not only allows you to start building wealth but it also helps you to save thousands of dollars in taxes each year. The max amount you can contribute each year changes but is currently at $20,500. Some organizations also have a 457b account, which is similar to a 401K, and gives you a chance to stuff an additional $20,000 in pre-tax dollars into investment accounts each year. Using this account allows you to build even more wealth and save even more money in taxes.
Along with contributing your own money in these accounts, many organizations also offer a retirement match. This is when they incentivize you to invest money for your own retirement by giving you extra money to do so. Oftentimes, they will match what you contribute to retirement up to a certain percentage of your salary. This can result in $10,000 to $20,000 (or more) dollars each year that your organization puts inside of your own personal retirement account. This retirement match is a free benefit you may be eligible for after your first full year of working at that organization so don’t hesitate to ask about it and utilize it. It could net you thousands of extra dollars per year, expediting your ability to reach financial freedom.
5. Check for disability insurance and life insurance. Most jobs will offer long-term disability insurance. This means they will pay you a certain portion of your salary (up to a certain amount) each year, if you were to get disabled and were unable to work. This is a great benefit that is usually free for most people. Unfortunately, it may not be enough. You will likely need to take out your own independent, specialty-specific, own-occupation disability insurance that you can get through an independent insurance agent. (The benefit given by your job is nice but insufficient to meet most people expenses). Along with disability insurance, your job may also offer life insurance. This is a benefit that pays a certain amount of money to your family if you were to die. Similar to disability insurance, this benefit is often free and can be a great addition but is usually insufficient. Most people will need to purchase their own term-life insurance policy and long-term disability insurance policy through an independent insurance agent.
6. Reexamine your malpractice insurance. As a physician, lawsuits aren’t uncommon. Patients may sue for all kinds of reasons, and regardless of whether it was your fault or not, hiring an attorney to defend you can be expensive. All doctors need malpractice insurance. Thankfully, this is usually given to you by your job. Just clarify what it covers and what type of policy you have. If you have an occurrence policy (which is the most protective) then great! If you have a claims-made policy (which is less protective), make sure that they also offer you tail insurance (which will protect you against lawsuits that are filed even after you leave the organization). Unlike life insurance and disability insurance, the malpractice insurance you get from your job should be sufficient. Just be sure to clarify which type you have, what it covers, and ensure you are protected from lawsuits even after you leave the organization.
7. See if you have access to any perks (tuition assistance, mortgage assistance, or discount tickets). Some jobs offer even more perks and incentives than money and insurance. For example, if you work for a large health system that is affiliated with a university, they may offer tuition assistance for yourself and your kids. After you have worked at the organization for a set amount of time, they will pay part of the cost for you to take courses at the university. Many jobs will also pay a portion of the cost for your children if they choose to pursue a degree there. Other jobs have even offered mortgage reimbursement. This is when they pay up to 10% of the cost of a mortgage for physicians who chose to join the organization and stay in the area for a certain number of years. Some jobs may not have the funds to do tuition assistance or mortgage assistance but may be able to offer other perks such as reduced costs for attorney fees to help you set up a living will or trust fund for your family. Others may even offer discount tickets for community events, concerts, and professional sports in your area. Ask your human resources department which perks you may be eligible for.
To summarize, don’t let another year go by without looking at your contract and double checking your benefits. You could be missing out on tens of thousands of dollars each year. Check and see what you’re eligible for and don’t forget to negotiate for what you want.
5 Things to Know about the Sign-on Bonus
When it comes to physician pay, things can get a little nuanced. Many of us take out hundreds of thousands of dollars in student loans for med school, then spend 3 to 9 years getting additional training while being paid much less than we are worth. But after that time period, usually when we are in our 30s, things finally start to improve. We become “attending physicians” which means we are able to work fewer hours and enjoy a drastic increase in pay. As part of the compensation package, many of us will receive lucrative salary offers which include a sign-on bonus. Similar to professional athletes who sign new contracts, the physician sign-on bonus is an amount of money we receive, in addition to our salary, for agreeing to work for an employer for a certain length of time. This sign-on bonus can be a great addition to our wallet, but there are a few nuances we all should be aware of.
1. The amount varies based on specialty. Although most doctors get one, the amount we each receive can vary greatly. Doctors who work in primary care tend to get a lot less than doctors who specialize or perform more procedures. Doctors in private practice may get a lot more than others who are employed by academic centers. A report released by a consulting firm in 2021 showed that some doctors got a sign-on bonus of only $1,000 while others got $75,000.[1] Regardless of how much you are initially given, it is important to ask for more. Oftentimes, this is one of the things that employers will be willing to increase if you ask. The amount may vary from person to person but most employers are willing to increase the amount if you ask.
2. The amount you received is taxed (so you get less than you think). Many doctors see the sign-on bonus amount in the offer letter and think that is how much they will receive in their bank account. Unfortunately, the amount that is given to you is less than the amount on the contract. Why? Taxes. You have to pay taxes on this money and it is usually taxed at your ordinary income tax rate. If you are in the 35% tax bracket, then you’ll have to pay 35% in taxes. If you are in the 24% tax bracket, then you will have to pay 24% of it in taxes. In addition to federal taxes, many doctors will have to pay state taxes on the money as well. My point? Before you start thinking of all the ways you will spend your sign-on bonus, make sure you account for taxes. Also note, that the amount you pay in taxes depends on your tax bracket for the year (so the best time to receive the money is usually in the year you are in the lowest tax bracket).
3. There’s a chance you may have to pay it back. This usually comes as a surprise to many doctors, but it happens much more than you may think. Oftentimes when employers give you a sign-on bonus, it is not just free money for you to keep. Instead, it is often structured as a “forgivable loan.” This means that you get the money as a loan, and if you stay at the company for a certain length of time, usually 2 or 3 years, then the loan is forgiven and you get to keep all the money. However, if you leave the job prior to that set time period, then you have to pay the money back. The unfortunate thing about having to pay the money back is that they usually make you pay back the pre-tax amount. If your sign on bonus was $10,000, chances are you may have only gotten $7,500 after taxes, but if you leave before that set time period you will have to pay back the full 10,000 (the pre-tax amount).
4. You should negotiate how it is structured. To avoid having to repay the full pretax amount of your sign-on bonus if you leave before the stipulated time, negotiate how it is structured. Instead of having the full amount forgiven after 2 or 3 years, get a fixed amount forgiven each month that you are there. For example, if your sign on bonus states you have to stay at the job for 2 years to keep the money (or have the loan forgiven) then negotiate in the contract that 1/24 is forgiven each month. That way if you stay for 1.5 years you aren’t on the hook for the entire amount.
5. People receive it in different ways. To my surprise, there’s a good deal of variability in when a doctor actually receives his or her sign-on bonus. Some docs receive the full amount the day they sign the contract. Other doctors don’t receive the money until the first day they work. Some employers will split it up and give you half the first year and half the second year. There are others who will give you a small portion of it as a residency stipend to help supplement your income while you are still in training. My point? The timing on when you receive the sign-on bonus can vary greatly. Be sure you understand how yours works and negotiate a different structure if you’d prefer to get it sooner or later.
To summarize, there are quite a few nuances involved with physician sign-on bonuses. Make sure you understand how yours work and negotiate a different structure if you desire.