retirement planning help [Physician]

[npskumar]

Dear Bogleheads,
I am 36 yr old hospitalist[physicians who takes care of sick people in hospital]
.. I need help/opinions regarding my plan for retirement. I have a regular full time job with 457 without any match for the first year. I also work as independent contractor and do SEP IRA .Also,I work part time with another facility where I can do 403b and 457 as well.I do a backdoor roth. I also maximise my HSA, That I started last year.I am getting divorced and would lose around 25 percent of income to alimony. I hope to still maximise all tax deferred spaces.My questions are as follows.

1. How many 457, a person can have. I hear that you can have a few but you cannot have more than 17500 for 2013.

2. Can I have both 403/sep ira and 457.are there combined limits.?Is it limited to a total of 51000 dollars or they have independent limits like 17k for 403 and 457 and 51 k for SEP/solo IRA.
I earned around 120 k as a independent contractor.I want to put more money into retirement.Is it better if I use solo 401 .Is solo 401 k better than SEP IRA.

Also,I have suffered a heart attack and i dont think i can work until retirement at 69. My goal is to work as long as possible ,but i may not be able to work beyond 55.I spend around 5k each month. I plan to give alimony nearly 7000 dollars for next two years to my ex- wife.
I dont have any life insurance or disability insurance.I have around 120 k as investments and about 60 k equity in a house.My only loan is a mortgage for 185 k at 3.25%.
I want to use collective wisdom of bogleheads to hammer out a financial plan.I plan to meet a financial planner after divorce is finalized.I plan to save around 80 k in next two years even when I am giving alimony. Then I plan to go to fellowship in a low stress field.I need to re[plenish my emergency fund which would be around 8 months of expenses. What would you guys and gals do in my position.I hope to use my car for another 6 years atleast.

[Peter Foley]

My understanding is that you can have multiple 457s but the total cannot exceed $17,500.
I am positive you can have both a 457 and a 403b - many educational institutions offer both. Each has a separate limit of $17,500.
Sorry - I'm not well versed on SEPs or solo 401ks.

[sweep the leg]

I used the format described in http://www.bogleheads.org/forum/viewtopic.php?f=1&t=6212 when posting my portfolio question and got some very helpful answers. Good luck.

[Calm Man]

OP, I feel for you. I hope the MI is a thing of the past. I would not think of the next 35 years but view each day as a blessing. The alimony hurts a lot. One thing you might try to do is see if you can work a lump sum payout. I did after a failed marriage. Even if it's more than it should be and you lose some tax benefits, the lack of having to write a check every month to support somebody you don't want to be with can provide great health and mental benefits. Please don't work too hard.

[zebrafish]

I think trying to reduce stress in your life is a great idea. However, will you be able to afford alimony if you go back for a fellowship?

Your income will likely drop by something like 2/3 while you go back for additional training. That is, unless you moonlight to keep your income up, which will probably be increased stress from being a hospitalist due to the added hours on top of fellowship.

I like the plan to pursue additional training for a less stressful existence, but can you swing this financially? Are there other options, like outpatient internal medicine (or family practice or pediatrics-- I'm not sure what your training background is)?

[zebrafish]

I would also add that meeting with a "financial advisor" might end up being a total disaster depending on what the "financial advisor" is offering you.

I think crafting your own plan based on your own learning is extremely important, so you don't get screwed by someone who is selling product rather than providing you with proper guidance.

[zebrafish]

I'll also add that I'm not a lawyer and I don't have all the details, but you might want to consult with your divorce lawyer and your doctor/cardiologist to determine whether there is a legal way to alter the alimony calculation based on your future ability to continue working full time and whether there is medical justification for this based on your MI history. Obviously, we're not supposed to get into medical advice on this forum, but I see the alimony issue as potentially impairing your ability to change career direction (i.e. go back to fellowship) if your income takes a severe 3-4 year hit. This might be something to explore now, I don't know.

[celia]

1. How many 457, a person can have. I hear that you can have a few but you cannot have more than 17500 for 2013.

You can have multiple 457 accounts, but the total combined contributions going into them would be limited to 17,500 per year.

I am not knowledgeable about SEP accounts.

I dont have any life insurance or disability insurance.

I suggest you check with each employer to see if they offer it. It is usually less expensive to buy it through an employer group as they will handle the paperwork and send in the premiums (withheld from your paycheck) rather than having an insurance company do it. Better yet, this is a good time to find out about all the employee benefits they offer and see if others might be suitable for you. In addition, if your (ex)wife is the beneficiary of any account, through an employer or not, you need to decide if you want your assets going to her when you die or to someone else. If you chose someone else, fill out new beneficiary forms now. (Save a copy for your records showing who and the date the change was made.)

I want to use collective wisdom of bogleheads to hammer out a financial plan. . .I need to replenish my emergency fund which would be around 8 months of expenses. What would you guys and gals do in my position.

Typically, we find it easier to provide assistance if we can see what your assets (and new contributions to them) look like post-divorce. So if you can think ahead till after the divorce is finalized, what assets will remain that we should discuss? I can't tell if your ex will be getting part of your assets or not or if the $7,000 (monthly?) for two years (?) will be the complete package she receives.

I plan to meet a financial planner after divorce is finalized.

There are boglehead threads devoted just to this topic. Many are just salesmen who sell you investments/insurance that gives them big commissions instead of adding to the value of your account.

. . .Then I plan to go to fellowship in a low stress field.

I am reading this as something you won't be doing for 2 years, which others may have understood differently. After you are done with alimony, is it possible that you could be happy working in only one of your jobs? You may be over-working yourself which may have impacted your own health and the health of the marriage--just a guess. If you don't take care of yourself and stay healthy, the rest is irrelevant.

[npskumar]

Thanks for replying.I wanted to go to fellowship after I pay off alimony or take additional training in low stress field like Dermatology or radiation oncology.I am already double board certified in Medicine and Pediatrics.I dont mind taking a pay cut during the fellowship years and I had lived happily with as llittle as 1500 dollars a month in the past.I want to maximize my tax advantaged space as much as possible because I am worried about my future.Men in the family did not live past beyond 50s or got disabled ,due to bad genetics.I plan to go fee only financial planner once things are clearer after the divorce.I would then know my expenses[mine and her lawyer fees] and fees from recent hospitlization in a month or two.I am not splitting my retirement accounts or my house with my wife but,i am buying a new car as a part of divorce settlement.
Most of my SEP IRA/Roth are in vanguard 2040 retirement funds and my taxable are vanguard total stock market fund.My previous 401k is with securian in a target date fund ,while my current full time job has 457b with valic where avaialble funds are suboptimal and expensive.I have talked to the hospital about changing the 457 to a differant provider.I took second job in another big group part time since they have both 403 and 457 with fidelity with access to low cost index funds.Also,I am planning to work with second group until I max out my tax adavanatged retirement and I am planning to work as independent contractor and do a solo 401k instead of Sep ira.
When I was talking to a ER physician,he told me that he have two SEP IRA accounts,one with each hospital group and each with own independent 51k limit.I am not sure about this, but but bogleheads can enligten me about it.
This year god willing,I plan to maximise HSA/403/457 and solo 401k and I bonds.I am not sure if there are more tax advantaged space available for me.Any suggestions is welcome and greatly appreciated.

[letsgobobby]

It really sounds like you work too much!

[obgraham]

I think you may be barking up the wrong tree right now. You seem to be in a stage of life which is quite unsettled -- health, family, stress, etc. Unless you like the life as a resident, I doubt that seeking a new specialty will improve your problem. (The grass is always greener...)

However you are in a particularly flexible field, as a hospitalist. Where I am these folks have vastly varying work loads depending on their desires. Some full time, some only sparse part time. So why not look for other positions within your field, perhaps at a smaller or less intensive hospital? Or, work through a Locum Tenens outfit, and choose your own schedule.

After you straighten out your professional life, that's the time to re-evaluate your retirement planning.

[Calm Man]

OP, I'd stay as a hospitalist. My understanding of the current situation is that unlike many years ago that derm and radiation onc are amongst the hardest to get into. Hospitalists as I understand it usually do 7 shifts of 12 hours on/ 12 hours off alternating with a full week off. Given what you have told us healthwise and family history wise, I think it is well beyond the limits of reason for you to work yourself so hard to save exhorbitant amounts for some unknown future. Also, although this isn't a marriage forum, I would strongly advise not getting married again under any circumstances as one more foul up could really put you in a bad spot. Love her, live with her, treat her like a queen if there is a she but no marriage in my humble opinion. Good luck.

[zebrafish]

Well, you are walking quite a difficult tightrope-- it is almost a catch 22. One wants to work more to save more for retirement, but not work too much given the health/stress issues you're facing.

I guess part of the issue to look at is the source of the stress. One thing I've often thought about med/peds trainees (among the handful I've known) is that they aren't so good about making a career decision, so they sort of decide not to decide (or push off making a decision) by doing med/peds. Are you sure that the desire to pursue another training program isn't more of an inherent (in)decision-making issue (don't take this the wrong way-- I don't mean it as an insult).

What is the source of your stress? Is it the hours? Do you really not like the day to day work of internal medicine OR pediatrics? You have the ability to work inpatient/outpatient and in adult/pediatric medicine-- this is a pretty darn broad choice there. Might it be the place you work or the hours or the schedule rather than the inherent field? I guess the good part of med/peds is that you already have an incredible amount of flexibility. You could pursue less stressful/less intensive aspects of either internal medicine or pediatrics.

I work in a pediatric subspecialty, but I've now been around long enough to know that there are jobs in my field (and in general peds) that are high stress and low stress, and I've been fortunate to find a low stress place to work.

I would wonder whether you might search for a less stressful work environment if you really like doing medicine or pediatrics (or cut your hours as others have suggested-- for me, if I work too much I'm unhappy, period). It would be horrible to pursue a third training (since you have really already done two training programs) and then decide you don't like this, either.

Just a couple thoughts...

[windhog]

I've been thinking about your dilemma, which revolves around your work, your health status and your desire to maximize your retirement savings. You may wish to consider the option of forming your own C Corporation and approaching your employers as an independent contractor, rather than being an employee. While this would clearly complicate your life in some respects, it could solve a number of problems.

As an independent contractor, you would pay yourself a salary from your C Corp and set up a Defined Benefit Plan. Depending on the Defined Benefit, you could put away many more dollars into your retirement plan than any sort of Defined Contribution would allow. It might make sense to delay starting the Defined Benefit plan until your alimony is paid off. The C Corp could purchase your disability insurance, your health insurance, your malpractice coverage and any other expenses, intending to make your corporate income and corporate expenses match up each year to avoid being taxed on corporate income. The main problem with this option is that Defined Benefit plans must be funded at a pretty hefty level each year. Future health problems might complicate your ability to do this, and I do not know what legitimate exceptions might be made for plan funding in the context of ill health.

Another issue you would face (at least this year) is access to health insurance. Your history would make that a problem unless you live in a state that has a medical insurance pool program. The Affordable Care Act should solve that problem, and you might wish to keep your current employment for the sake of medical insurance and use your C Corp for your other income, at least for the remainder of this year.
It seems you have heard plenty of advice to change your work habits, which I suspect you have not found to be very helpful. I did my post-graduate medical training at an institution where the prevailing wisdom was: "If you can't get your work done in 24 hours you might need to stay up late." I suspect you were socialized into medicine in a similar way. What I can say is that my MI at age 60 was totally unexpected, and I am glad to have joined the ranks of the retired at age 61. Had my solo practice not had a Defined Benefit Plan, I would likely still be working today. I think your most important problems will be coming to terms with your sense of identity as a physician, and your (dare I guess here) over-developed sense of responsibility. I'm just about finished with these more than a year after retirement.

I hope you find something helpful here. Good luck.

Paul

[Cucumbers]

How do you perform a backdoor Roth conversion if you have a SEP-IRA? Isn't that subject to the pro-rata?

[zebrafish]

It seems you have heard plenty of advice to change your work habits, which I suspect you have not found to be very helpful. I did my post-graduate medical training at an institution where the prevailing wisdom was: "If you can't get your work done in 24 hours you might need to stay up late." I suspect you were socialized into medicine in a similar way. What I can say is that my MI at age 60 was totally unexpected, and I am glad to have joined the ranks of the retired at age 61. Had my solo practice not had a Defined Benefit Plan, I would likely still be working today. I think your most important problems will be coming to terms with your sense of identity as a physician, and your (dare I guess here) over-developed sense of responsibility. I'm just about finished with these more than a year after retirement.

I think the key difference here is that the original poster doesn't have the luxury of retiring the year following the MI. So, while you say advice on changing how he works isn't helpful, it would seem that you did not exactly follow this advice (you retired!). Since he may need to work the next 20 years, I would argue that changing how work impacts his psyche/body/mind might be kind of important.

[EmergDoc]

How do you perform a backdoor Roth conversion if you have a SEP-IRA? Isn't that subject to the pro-rata?

Yup. You've got to convert the SEP or roll it into a 401K, solo or otherwise.

[windhog]

The point I was trying to make is that telling a younger physician with health problems to dial back is not likely to be very helpful, since doing so strikes at the very heart of the identity and responsibility issues. My situation is different, as a thirty-year career behind me made it easier to recognize that I had done some good and no longer needed to be the doctor for every patient in my world. Even so, choosing to work less was not easy.

I was hoping to offer a retirement/work plan option that would allow the OP the chance to see a way off of the racing treadmill and provide a higher level of control over his future. One of the insights I gained from cardiac rehab was the critical exposure to stress over which I had no control. For me, this had little to do with treating chronic disease, and much more to do with the insults and administrative burden coming from managed care. It sounded to me like the OP was up against the life/financial/retirement wall with no sense of control, rather than the working too hard challenge. (It's certainly possible that the OP enjoys his work so much that advice to dial back is more threatening than another MI. I just don't think any of us can be sure.) Bottom line is to focus on a solution that can be done without a radial personality revision, hoping that dealing with this stress would lead to a more comfortable working life ahead.

Just my two cents.
Paul

[Artsdoctor]

NPSKumar,

I'm sorry to hear about your MI and divorce. I appreciate your frank assessment of your health. I take it that you may have had a pretty strong family history of heart disease? Adjusting your career and financial goals with health issues in mind--including taking family history into consideration--is very insightful.

I wish I could tell you how to position assets best for divorce, but I cannot offer any tips here. However, when it comes to 457s, I can offer my own experience. You will probably be offered a non-governmental 457 plan, right? These 457b plans are offered to high-income employees and, in my opinion, have some significant shortcomings. I started contributing to these many years ago while working for a hospital but then got out once I became aware of some of their problems.

457b plans are tax-deferred plans that CANNOT be roled into any other tax-deferred plans except for other 457b plans. You can't roll them into a 403b and you definitely can't roll them into an IRA Rollover even if you leave the employer. That means that often, you're stuck holding the plan where it is. Also, the 457b is not set aside for your benefit; it is owned by the employer that has set it up for you. That means that the funds are vulnerable to creditors if the employer goes out of business or declares bankruptcy. Admittedly, this would be uncommon, but do you really want to take that risk? You can liquidate the 457b and then pay income tax when you get out, like I did. But that can actually hit you with quite a bit of tax if you've been contributing to it for a few years and there's been a market run-up. I essentially found very little going for the 457b and would really urge you to give it some thought.

(By the way, the GOVERNMENTAL 457 plans are different, so make sure you compare apples to apples.)

Shielding some of your income is always smart. Always go for the employer match. Given your health and potential career changes, though, don't underestimate the benefit of a taxable brokerage account. Sure, you'll be investing with post-tax dollars and you'll have to pay tax on dividends. But the money will be there for you without penalty.

There are other tricks that are available to you as well regarding Roths. You can open a Roth if you go back to do a residency since your income will be back down. You can even later convert a tax-deferred account to a Roth if you want. The Roth money can later be available for withdrawal for emergencies as well. Both those are more nuanced issues you can deal with later.

Hope that helps.

Artsdoctor

[npskumar]

Dear Bogleheads,
Thanks for the advices and opinion.I do have a complex problem.I do 10 24 hrs shifts per month in two blocks with my primary job and work 7-8 12 hour shifts as locums . I do understand the short comings of non governmental 457b ,but i will do it to get matching contributions.I didnt know about SEP-ira and backdoor Roth conversion issue.I did it last 2 years and didnt have issue with it with IRS.I had CPA do my taxes for the last two years.I will definitely enquire regarding it.I dont have the luxury of retiring in a few years,but i can dial back in two years after i paid off my transitional alimony to my wife.I will definitely look going to independent contractor/s corp/Defined benefit plan down the lane.I will explore more into investing more into taxable accounts.

[letsgobobby]

I know you need money; but your heart may not last working two or three jobs. Try to look at things from a wide perspective.

[EmergDoc]

Dear Bogleheads,
Thanks for the advices and opinion.I do have a complex problem.I do 10 24 hrs shifts per month in two blocks with my primary job and work 7-8 12 hour shifts as locums . .I dont have the luxury of retiring in a few years,but i can dial back in two years after i paid off my transitional alimony to my wife

336 hours a month doing rotating shifts? Are you nuts? 84 hours a week? Why do you need so much money? Even at say $125 per hour, that's half a million bucks a year. How much is that alimony?

What makes you think you don't have the luxury of retiring in a few years? Even if you're paying $150K in taxes, you could live off $100K a year and then bank $250K per year. Even if your investments earned a 0% return over the next 10 years you could retire in a decade with an income of $100K per year.

Something isn't adding up here. I don't even see how you have any time to spend any money here.

[npskumar]

Dear Bogleheads,
I dont get paid that much.I work a total of 10 24 hour shifts paid at below 1700 dollars per 24 shift ,as two 5 day blocks.Usually I take phone calls after 1900 hours.As far as locums concerned,I do seven to eight 12 hour gigs only .So actually I do work 17 -19 days a month.I hope this amke it clearer.
npskumar

[fatlittlepig]

this thread caught my eye, since i am exactly the same age and also a hospitalist---

you are double boarded in internal medicine/pediatrics and now you want to go into dermatology or radiation oncology? sorry, but that don't make no sense to me.

what you need to do is find a hospitalist position that is sustainable for the next 10-20 years with good benefits and a sustainable schedule. your current set up provides neither.
hospitalists jobs are a dime a dozen, you could have your pick. I would try and join a large group, and since you are soon to be single you could move anywhere.

-fatlittlepig

[frugaltype]

I am also late to this thread. I'm sorry for what you're going through.

I would think a reasonable court (are there reasonable courts) would take into account your health and the possibility that you should cut back working to protect your health, also the life expectancy in your family, when setting alimony. I would certainly talk to your attorney about that.

Then I would try for a lower stress maintainable work environment. Many people live for decades after a heart attack, but not if they are stressed out and working themselves into the ground, I think.

I also read in the NYTimes recently that it is very hard now to get into dermatology.

[dhodson]

if you think getting into and completing dermatology will be low stress then you should think again.

beyond being one of the hardest specialties to get into, board certification is set such that if you arent studying darn hard (to beat out those very smart people who got in to dermatology) then you are going to have a hard time passing. The hours in the clinic are certainly less than the difficult call of some residencies but the academic workload is designed to make up for that.

[EmergDoc]

I used the format described in http://www.bogleheads.org/forum/viewtopic.php?f=1&t=6212 when posting my portfolio question and got some very helpful answers. Good luck.

Hey, what kind of belt do you have?

Canvas. JC Penney, $3.98. You like?

[SGM]

I set up an S corp and a contract employer plus direct insurance payments were paid to my S corp. This allowed for increased retirement savings in a solo 401k and some income that did not require payment of fica taxes. I did look at setting up a DB which would have greatly increased retirement savings, but had added expense, so the money that would have gone into a DB went to me directly and anything over my self determined salary as an officer of the corporation and other expenses went into after tax investments which will fund my retirement too, i.e., without the expenses of the DB. I may have set up a DB anyway if I had been in my 30s.