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Moving & Mega Backdoor Roth IRAs

Before any big change in your life (hello, moving!), it's important to get your finances in order. We consider the cost of a move, and we compare our current salary with our future position. But what about saving for your future? It's probably not on your mind when you're thinking about moving. But for my recent move, a Mega Backdoor Roth IRA was something important to consider.

our move to a MCOL. I had less than 2 months before my planned maternity leave to figure out how to make sure I was maximizing benefits, particularly my work-sponsored retirement accounts.

My Work-Sponsored Retirement Accounts

To recap, here are the retirement accounts I have through work:

  • 403(b) – I max out my contribution at $18,000 and receive a generous employer contribution + match. I am currently 40% vested in employer contributions.
  • Private 457(b) – I max out my contribution at $18,000. There is no employer contribution.
  • Cash Balance Plan (aka small pension) – Unfortunately, I am 0% vested, so I will lose it all.

In addition to these work retirement accounts, my Roth IRA for 2017 was funded in January.

Planning Ahead for a Move

Since the leave was planned well before our move to a MCOL, I had already increased contributions to my work's 403(b) and 457(b) so that my contributions would be maxed out by the end of September.

I was unable to get a straight answer from HR if I can continue to make contributions when short term disability pay kicked in for my maternity pay, so I played it safe. I also could not get a straight answer if I would continue to get employer contributions plus the match match if I front loaded the 403(b) and 457(b).

Thankfully, the employer contributions + match have continued!

Now, I will be separating from my job (I am employed until the end of December), some things will change. I am starting a new job in 2018 that only offers a 401(k). That means I'm losing my 457(b) and cash pension plan.

Because of that, I decided to take advantage of the Mega Backdoor Roth IRA (linked to excellent article by Mad Fientist).

What is a Mega Backdoor Roth IRA?

You might be wondering what exactly is a Mega Backdoor Roth IRA?

It is the ability to contribute an additional $36,000 a year into a Roth IRA. This is in addition to the regular or backdoor Roth IRA of $5,500 annually.

I knew this was an option through my work's 403(b) since they allow non-Roth after-tax contributions (aka NRATs). This is not the same as being able to contribute to a Roth 403(b) or 401(k). These contributions are in addition to my $18,000 employee contribution. You can contribute NRATs up to the total limit of $54,000 (for 2017).

Obviously, I want the free employer contribution + match, so I am limited to contributing an extra ~ $15,000 in after-tax contributions. But if you have no employer contribution then you can contribute the difference of $54,000 less $18,000, or up to $36,000.

Understanding Mega Backdoor Roths and Taxes

One caveat is that you want your plan to allow in-service distributions, meaning that you can move the NRAT portion of your 403(b) or 401(k) out of the account and into your Roth IRA. Some plans let you do this quarterly or annually. Mine only allows this upon job separation.

This is not a deal breaker, but this means that I will owe taxes on the gains only. One will still owe taxes on the gains with a quarterly or annual in-service distribution, but it will have less time to make gains, so they should be minimal.

Why This Money Move Was Right Before Our Move

I did not contribute to this in the past since I'm still paying down student loans. But now that I am leaving and losing a good amount of tax-advantaged space with the new job. It made sense to “fill up” this bucket before my move.

Final Thoughts on Mega Backdoor Roth IRAs

To summarize, here is how to tell if you are eligible for a Mega Backdoor Roth IRA. Ask yourself these questions:

  • Does your plan allow non-Roth after-tax contributions?
  • Does your plan allow in-service distributions? How often?
  • If yes to both – you are lucky! And have an additional potential $36,000 to contribute to your Roth IRA

If you're eligible to contribute or you want more information about a Mega Backdoor Roth, make sure you swing by the Mad Fientist's article. Whether a Mega Backdoor Roth is the right financial move for you or not, before you move to a new city or simply change jobs, make sure that you think about your future money situation, too.

Have you heard of the Mega Backdoor Roth IRA? Comment below!]]>

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Why Physician Women Should Strive For Financial Independence

every physician (especially women!) should strive for financial independence (FI) or pFI in a reasonable amount of time.

Why?

1. Carve out the dream job

How many physicians do you know are not happy with their current job but can't walk away because, well, they need the money? The answer is probably a lot.

In fact, one frightening survey said only 6 percent of doctors are happy with their jobs. Yikes!

Attaining pFI or FI gives you the ability to work on the terms that make you happy. It gives you the ability to walk away from a job that isn't working for you. I don't know about you, but I'd love to see less patients per hour and spend quality time with them instead of being rushed so that I meet “my numbers.”

2. Go part time!

Many women physicians would love to work less and spend more time with their families. Or spend time on other priorities. Attaining pFI gives you that ability. This is definitely one of the main drivers for us.

3. Stay flexible when life throws you that curveball

I hear a lot of “I love what I do and will work until I die” among physicians. Not so fast. Your goals and priorities will likely change as you get older. And sometimes, you don't have a choice.

A close family member needs extra care or passes. Your child has special needs or other needs that require your time and attention. Being FI gives you the freedom and ability to take the time you want to address whatever life may throw at you.

4. Enjoy your freedom

To me, FI means total freedom. We have become so used to debt that we are numb to it. We think of debt as “just another monthly payment.”

Final Thoughts on Women Physicians and Financial Independence

Looking over these top four reasons that women physicians should pursue financial independence, it's hard to believe you might have ever thought FIRE wasn't for you. If you're just getting started, no worries. Even if you've made financial mistakes in the past, you can still reach FIRE. To get started, calculate your net worth and check out the other FI resources on this blog to see how the start of your FIRE journey stacks up.

What do you think? Why is financial independence important to you? Comment below!  ]]>

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If You Don't Ask

This is a guest post by Dr. Nisha Mehta. She writes and speaks about physician wellness. She will be a speaker at the first Physician Wellness and Financial Literacy conference taking place in Park City, Utah in March 2018. Follow her on Twitter at @nishamehtamd or on Facebook. Two articles that my readers will love by Nisha include You Know You're a Female Physician When and Babies and Medicine: On Choosing the Perfect Time. As someone who talks to many physicians about burnout and life in medicine, I find myself having a lot of discussions about the circumstances of people’s jobs. Almost inevitably, there comes a point in the conversation where someone expresses dissatisfaction about an aspect of their contract or an additional responsibility that was placed on them. As physicians, we’re groomed to take care of patients. During training, we don’t talk about compensation, work-life balance, or the business of medicine. In many ways, it’s actually frowned upon to do so, and our hierarchical systems discourage open conversation on these subjects. We also very rarely say ‘no’ during the course of our training, and this tendency stays with us for the remainder of our careers. Ultimately, these things hurt us. Physician burnout is multifactorial, and so much of its rise can be attributed to institutional and administrative factors and the changing healthcare landscape. We can’t predict the future, but there are certain steps that we can take to protect ourselves: 1. Don’t be afraid to ask uncomfortable questions. Yes, patient care always comes first, and I certainly don’t advocate a ‘me first’ mentality in the job interview process. However, although being a physician is a calling, it is also a job, and money and lifestyle do matter, not only for your own job satisfaction, but for that of your family. If there are things that are matter to you, such as how many weeks of vacation the partners get, how often you get to eat lunch, or how often you get called in on call, ask these questions. Hopefully, groups are upfront with you with answers, because it’s also in their best interest to recruit someone who will be happy within the framework of their group. If there are certain topics they are avoiding talking about, keep your antenna up and dig deeper. 2. Negotiate. Newsflash: groups expect you to negotiate, and almost always have some wiggle room built into their initial offer. I don’t care how competitive the job market is, if it’s academic or private, or how lucky you feel that they are even talking to you. As long as you do so tactfully, nobody is going to deny you a job for negotiating. This applies to salary, benefits, days off, protected academic time, restrictive covenants, malpractice tails, you name it. The worst they can say is no. If they’ve made you an offer, they’ve already made a decision that they like you, and you should feel comfortable asking. Before you do so, do your research and try and find out what others in the group have been able to negotiate. That will give you more power at the bargaining table, as well as alert you to things that you may have thought were non negotiable. Once you’ve agreed to something, you’ll have a hard time dropping it later, so have the conversations before you sign on the dotted line. 3. Network. The more people you know, the more you’ll hear through the grapevine. Although job boards and MGMA numbers are out there, the best jobs are often the ones that aren’t advertised, and survey numbers don’t do a great job of breaking down salaries by what job requirements are. Posting a job on a board or through a recruiter typically costs money, and groups are understandably more comfortable getting somebody who is a known entity. Finding a job through a contact gives added security on both sides. Even after you’ve taken a job, it’s a great idea to keep up with your connections. It will allow you to keep a pulse on the rest of the market, hear about what steps groups are taking, and what solutions they’ve come up with to problems you may be having. 4. Have a lawyer experienced in physician contracts review your contract. It’s amazing how many people do not have their contracts reviewed since they trust the people offering them the job. Many of those people regret it later. These lawyers have seen the problems caused by exclusions/inclusions in people’s contracts and will alert you to any red flags. Don’t fall under the, ‘well, this is the standard contract’ trap – group contracts are obviously set up to protect the employer and you should do the same for yourself. 5. Know your deal breakers and don’t be afraid to say ‘no’ or ask for additional compensation. This is the one I want to emphasize the most. Before and after contract negotiations, it is always in your employers best interest to get the most out of you, both financially and in workload. I think about it like this: when you call someone to your house for some work you need done, they aren’t shy about billing by the hour or even just to provide a quote. A lawyer isn’t timid about charging an hourly rate just to take a phone call. Why don’t physicians value their time more? We’ve put in a ton of time in training, and yet so much of what we do is uncompensated. Yes, there are things we do out of personal interest, such as teach residents or sit on professional committees, but there are typically a lot of responsibilities added to our plate that weren’t part of our original contract agreements. I’m not saying to say no to them all – but if there’s something that you know will make you unhappy or be a huge time sink, don’t take it on. At the very least, don’t take it on without asking what you get in return. If you flip the situation around and you were asking for more from your employer, I’m fairly certain there would be pushback on that end. If there is something that will actively make you unhappy on a regular basis, such as increasing the number of patients you have to see in a day or having to supervise a midlevel provider without any additional compensation, be willing to walk away from an existing job or wait for a better job in the job search. Of course, it’s important to keep in mind that you’ll ideally be working with your employer/colleagues for a long time, and this is not a confrontation. Good working relationships require some give and take, and there are some battles that are not worth fighting. But please, put some thought into figuring out which ones are, and in those cases, don’t be afraid to do it. Believe in your value and your skillset. If you don’t ask, you can be sure that you won’t get it. Any other negotiating tips physicians should know? Comment below!]]>

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