You Can Afford to be a Family Physician

Mark A. Goedecker, M.D.York Hospital Family Medicine ResidencyClinical CampApril 4, 2009

My Credentials

My wife and I are both family physicians

We had >$300,000 (1997) in student loan debt combined

Max credit card debt reached $47,000

We had no money invested (as of 7/2000)

I finished residency in 2000 and my wife in 2002

How Are We Doing?

Our credit card debt has been eliminated

Our student loan

debt is at $120,000

We own a house

and two cars

We have $200,000

saved for retirement

after the stock

market collapse

And we are still having fun

“Luck is where preparation meets opportunity.”

What We Will Cover

How much will you owe?

What should you do with ALL of your money (once you have money)?

How much will you make and will this be enough?

What is the future of family medicine?

Student Loan Facts

Class of 2008– 87% of graduates had debt– Mean debt was $154,000– 56% of graduates had debt >$150,000

Can I Transfer to a Cheaper School?

In state residents pay $10,234 per year

I Don’t Have It As Bad As Some

Out of state residents pay $74,748 per year

$390,000 for 4 years

So How Much Will I Really Have to Pay Back?

Sample Repayment - $154,000 for 10 years

6.8% interest rate

Monthly payment of $1800

Total repayment of $212,000

But, it could be worse than this….

The Case of Pay Me Some Now or a Whole Lot Later

Student Loan Repayment

10 year repayment– Monthly payment

$1800– Total interest paid

$59,000– Total repayment

$212,000

30 year repayment– Monthly payment $1000– Total interest paid $207,000– Total repayment

$361,000

Difference in amount paid = $149,000

Original Loan Amount $154,000 at 6.8%

But many of you have it worse than this….

Worst Case (without college loans)

Max interest rate of 8.25% (Stafford Loans)

Amount Borrowed $250,000

30 year repayment

Total amount repaid $692,000 ($436,000 in interest)

10 year monthly payment would be $3100

But I can deduct the $436,000 in interest on my taxes, can’t I?

Student Loan Interest and Income Tax Deductibility

Up to $2500 of interest may be deducted yearly if you itemize deductions

Standard deduction is $6400 for single filer and $11,300 for joint filers

Student Loan Interest and Income Tax Deductibility

HOWEVER, there are income limits– Single filer – deduction is phased out between

$60,000 - $75,000 adjusted gross income– Joint filer – deduction is phased out between

$120,000 - $150,000– This is for 2009

What Can You Do Now

Find out:– How much you owe?– Whom you owe it to?– Who services your loans?– What types of loans you have?– Other sources to pay for tuition (more on this

later)– Become very good friends with your student

loan office employees (or Bill Gates)

What Should I Do With All of My Money Once I Start Working?

A. Buy a new car (or cars)

B. Take expensive vacations

C. Buy a new house

D. Invest all of your income in the stock market

“The chief cause of failure and unhappiness is trading what you

want most for what you want now”

Delayed Gratification

It’s OK to enjoy your salary

Avoid running up large credit card debt if possible (spend what you have but not more than that)

Temptation is to spend and not invest

Credit Card Debt

In 2008, the median credit card debt for graduating medical students was $5500

Only 37% of people pay their credit card balance off monthly (women are worse than men)

Average interest rates are around 12%

To Invest or Pay Off Debt?

Paying off consumer debt (credit cards, car loans, etc…) is an excellent investment due to:– Higher interest rates of credit cards (12%

currently)– Monthly capitalization– High amounts of credit card debt can affect

your credit rating– A good investment averages a rate of return

around 8%

Paying Yourself When You Have a Salary

When do you pay yourself any money for all of the hard work that you do?

Paying Yourself First

Take money directly from your pay check for investment or to pay off high-interest debt

Have the money removed before you get your 1st check and you will never know that it is missing

True or False

Physicians are bad with managing their finances

“There is little you can learn from doing nothing”

“Investing Like a Doctor”

Making risky investments – get rich quick schemesNot understanding the basics of financial managementThings that are not taught in medical school or residencyDelayed gratification

Don’t Wait to Invest

Dr. Early and Dr. Late

Dr. EarlyStarts investing at age 28

Invests $2000/year @ 10%

Stops investing at age 35

Contributes $14,000

Dr. LateStarts investing at 35

Invests $2000/year @ 10%

Stops investing at age 65

Contributes $60,000

Who Retires Better Off?

Dr. Early

$331,091

Dr. Late

$328,988

• Dr. Early invests $46,000 less but finishes with $2100 more• If Dr. Early had kept investing until age 65 he would have ended up with $660,079

Dr. Early and Dr. Late

0

50000

100000

150000

200000

250000

300000

350000

28 31 34 37 40 43 46 49 52 55 58 61 65

Early

Late

Lessons from Dr. Early and Dr. Late

Start investing money (or paying of debt) as soon as you have a salary

If You Read Nothing Else

The Wealthy Barber, David Chilton 1998

How Much Will I Make?(And Will It Be Enough?)

Data on Student Loan Debt and Career Choice

Most studies have shown that the amount that students owe in loans does not alter their career choice

“Ideally, students should choose a specialty independently of concern about educational debt and inequities in remuneration, on the basis of the knowledge they have gained from clinical experiences with comprehensive care”

Ruth-Marie Fincher, MD NEJM August 12, 2004

How Much Income is Enough?

What is your current monthly budget as a medical student?

How Much Income is Enough?

An income of $90,000 a year or more would put in the top 10% of household incomes in the United States

How Much Income is Enough?

My parents annual income:

$32,000

How Much Income is Enough?

Ben Roethlisberger’s Salary: $102 million

Raucous applause if you’re a Steelers fan

Other Food For Thought

Everyone Makes the Same Salary in Residency

Residents in primary care residencies may have more time to moonlight

Median Housestaff Stipends 2008

1st year resident $45,659

2nd year resident $47,257

3rd year resident $49,095

A Sample Resident Budget

Tax Brackets for 2008 Single Filers

$0-8350 10%$8351-33,950 15%$33,951-82,250 25%*$82,251-171,550 28%$171,551-372,950 33%Over $372,951 35%

*In your first 6 months of residency you will be in the 15% tax bracket unless you have another source of income

Tax Brackets 2008 for Joint Filers

$0-16,700 10%

$16,701-67,900 15%

$67,901-137,050 25%

$137,051-208,850 28%

$208,851-372,950 33%

Over $372,950 35%

Social Security and Medicare

Social Security 6.2% on all earnings up to $106,800 in 2009

Medicare 1.45% on all earnings

Sample Resident Budget

1st year resident $45,659

After taxes $30,750

After-tax pay= $2500 per month

This is 2 times the average medical student’s budget

Sample Resident Budget ($2500)

Investment (10%) $250

Housing $1000

Transportation $300

Remaining $950

(most student loans will be deferred in residency)

Sample Resident Budget

Remember that paying off credit cards can be a great way to invest the 10% of your salary

Average Residency Lengths

Family Medicine, Pediatrics, Internal Medicine – 3 years

Emergency Medicine – 3-4 years

Anesthesia – 4 years

OB/GYN – 4 years

General Surgery – 5 years

IM, Peds or Surgical subspecialty - 4-9 years

Remember the Lessons of Dr. Early and Dr. Late

If you do a three year residency, you will:– Graduate earlier than most– Begin paying student loans earlier (less

capitalized interest)– Begin investing larger amounts earlier (more

compounded interest)

“Duty makes us do things well, but love makes us do them

beautifully.”

Mean Salaries (in thousands of $)

Peds 159

FM 172 (120-275)

IM 176

Psych 189

OB/GYN 255

ER 240

Gen Surg 321

ENT 362

Anesthesia 336

Derm 315

GI 379

Cards 392

Radiology 401

Uro 387

Ortho 439

Hospitalist 181Merritt Hawkins 2008 Review of Physician and CRNA Recruiting Incentives

Mean Before Tax Income of Family Physicians 2009

$150,000 (after taxes $99,000)

Monthly take home income of approximately $8250

This is 3.3 times the income of an intern (6 times that of a medical student)

Sample Family Physician Budget($8250)

Investment (10%) $825

Housing($250,000) $2000

Transportation($25,000) $400

Student loans($154,000) $1800

Remaining $3225

Assuming 10 year student loan payoff (if you change to a 30 year payoff then remaining will be $4025)

Real Life Example

My wife’s practice:– Inpatient, outpatient, and nursing home (no

obstetrics)– Leaves house at 8 AM and is home by 5 PM– Takes one weekend call per month and two

weekday calls per month– She has every Tuesday off– Income was $211,000 in 2007– In 2008 she took two months maternity leave

and income was still $160,000

Other Sources to Pay for Loans

Pennsylvania Loan Repayment Program

Primary Care and dental

3 years - $41.6K

4 years - $64K

6 years - $114K

Stop by the table in the exhibit hall for more information

Other Sources to Pay for Loans

Loan repayment through your job

State and Federal loan repayment

National Health Service Corps

Military Service

Other Sources to Pay for Loans

The State and Federal Repayment, Loan and Scholarship Data Base – http://services.aamc.org/fed_loan_pub/index.c

fm?fuseaction=public.welcome&CFID=6076304&CFTOKEN=43cd64a-8238d20e-fe06-4ebb-b0ec-24eac66475c8

The Future

Why Is Family Medicine Needed

“Areas of the US with more primary-care physicians have better health”

“Areas with higher ratios of primary-care physicians to population had much lower total health-care costs than other areas”

Barbara Starfield

The Primary Solution

Why Is Family Medicine Needed

“Adults who reported having a primary-care physician rather than a specialist as their regular source of care had lower subsequent five-year mortality rates, regardless of their initial health or various demographic characteristics”

Barbara Starfield The Primary Solution

The Future - Now

National job searches for family doctors have increased 196% from 2004/05 to 2007/08

The average offer made to family doctors is $172,000 which is up 8% from the previous year

Merritt, Hawkins & Associates 2007 Review of Physician Recruitment Incentives

"Demand for family physicians is through the roof and there are not enough of them to go around"

Mark Smith

President of Merritt, Hawkins & Associates

June 19, 2008

http://www.reuters.com/article/pressRelease/idUS127348+19-Jun-2008+PRN20080619

The Future

Shortages of primary care physicians due to decreasing numbers of students choosing this careerSubsequent increases in income, loan repayment, and other incentives (especially for new physicians)Increase in the demand for family physicians due to breadth of training (employers get more for their money)

The Past (and Possibly Family Medicine’s Future)

Radiologists’ average recruiting salaries in 1997 were $189,000

As of 2007-2008, the average recruiting salary was $401,000 (112% increase)

Large increase in salary was related to supply and demand

FAQs

The Nurse Practitioner/ Physician Assistant Question

The Wal Mart and Target

“Quick Clinic” Question

The Obama

Question

Healthcare Reform

The goal of healthcare reform is:– To get the right care– In the right place– At the right time– To the right people

“Other things or people can stop you temporarily. You’re the only one who can do it permanently.”

My Contact Information

Mark Goedecker, MDAssistant Program Director and Medical

Student Clerkship DirectorYork Hospital Family Medicine Residency

1001 South George StreetYork, PA 17405

Office 717-851-5643Email mgoedecker@yorkhospital.edu

Facts About Family Medicine

FACTS About Family Medicine– http://www.aafp.org/x530.xml

Merritt Hawkins and Associates 2008 Review of Physician and CRNA Recruiting Incentives– http://www.merritthawkins.com/pdf/mha-2008-i

ncentive-survey.pdf

Websites On Financial Well-being

AAMC First–http://www.aamc.org/programs/first/

MD2 Financial Planning for Medical Students and Residents– http://www.aamc.org/students/financing/md2/p

hase2/start.htm