Doctors In Debt

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
Topic Author
White Coat Investor
Posts: 15651
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Doctors In Debt

Post by White Coat Investor »

This seemed like a good article for our physician group (or whoever may be interested) to discuss. What mistakes (if any) did this couple make? What did you think of the adviser's recommendations? At what amount of total debt does it make sense to take military/public health/indian health service type "scholarships" to pay for school? Are you (or did you) paying back your loans back as soon as possible, or stretching them out?

http://money.cnn.com/2007/11/16/pf/youn ... 2007111611
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
User avatar
mudfud
Posts: 1223
Joined: Tue Feb 20, 2007 4:34 pm

Post by mudfud »

He was accepted to medical school at the University of Illinois, where tuition would have been just $9,000 a year, but chose instead to go to Midwestern University's Chicago College of Osteopathic Medicine, in large part because he thought it would improve his chances of getting a residency in the Chicago area.
Huh?
"Are you sure you have tested an a priori hypothesis?" | | Image
User avatar
goosecat
Posts: 179
Joined: Thu Feb 22, 2007 11:57 pm

Post by goosecat »

mudfud wrote:
He was accepted to medical school at the University of Illinois, where tuition would have been just $9,000 a year, but chose instead to go to Midwestern University's Chicago College of Osteopathic Medicine, in large part because he thought it would improve his chances of getting a residency in the Chicago area.
Huh?
I agree. That part sounds a little fishy. Pay an extra $20k/yr to go to a DO school?

He picked a good specialty (anes) to make a boatload of money once he's out though. If he lives modestly, the debt shouldn't be a problem and can be paid off within a few years as the article states.
User avatar
mlebuf
Posts: 1916
Joined: Tue Feb 20, 2007 8:27 pm
Location: Paradise Valley, Arizona

Post by mlebuf »

What mistakes (if any) did this couple make?
They chose the wrong careers. With the ability to amass debts like that, they should be in Congress. :)

With the number of physicians we have on the forum, I'd be interested in learning what amounts of debt they incurred during their medical training and how they handled them.

Best wishes,
Michael
Best wishes, | Michael | | Invest your time actively and your money passively.
bolt
Posts: 870
Joined: Wed May 30, 2007 7:19 pm
Location: Boston

Post by bolt »

[removed at request of poster]
bedhead
Posts: 14
Joined: Mon Sep 17, 2007 11:32 pm

Post by bedhead »

Agree with above comments: weird choice of med school but ended up in anesthesia / high-paying field.

IMHO, the couple in the article should not have bought a house so early. The advisor's plan is a good one; delay retirement savings + get term life insurance. "Public health service" types of "scholarship" locks in where you live, what you do, and your potential income for 3+ years (bad idea IMHO).

My wife (lawyer) and I (internist) paid off $200k education loans by 3 years post-my residency, recently. Anesthesiologists can make 4 times what I make, so the couple in the story will do just fine financially if they contain their expenses.

The real tragedy in the story is the lack of life.
User avatar
arrete
Moderator
Posts: 411
Joined: Mon Feb 19, 2007 9:59 pm
Location: NoVA

Post by arrete »

I am not a doctor, only a doctor's mommy. My son did his psychiatry residency in Boston. Almost every one of his classmates from his medical school (MCV) AND his new classmates in Boston were buying houses for their residency term - just 4 years! My son thought they were nuts and rented the whole time.

After moving to his new job, he and his wife rented a year to get an idea of where they really wanted to live. Then they bought a modest house.

I believe this is atypical of most doctors (except financially astute docs on this board) Image.

Kathy
Quando omni flunkus moritati
User avatar
woof755
Posts: 3242
Joined: Sun Aug 05, 2007 2:03 pm
Location: Honolulu

Post by woof755 »

mlebuf wrote:
With the number of physicians we have on the forum, I'd be interested in learning what amounts of debt they incurred during their medical training and how they handled them.
4 years of undergrad at Ohio State--tuition-only scholarship
4 years of medical school at Ohio State--$12k per year

2 parents willing to foot the bill at an affordable institution

Zero debt.

I had classmates who ran up 100 grand in debt (1996 dollars) at private schools and ended up in the same med school class as me and about 15 other OSU undergrads. They were shaking their heads.

Probably still are.
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." | | --Jason Zweig, quoted in The Bogleheads' Guide to Investing
Gregory
Posts: 1554
Joined: Tue Feb 20, 2007 2:26 pm

Post by Gregory »

[quote="goosecat"][quote="mudfud"][quote]He was accepted to medical school at the University of Illinois, where tuition would have been just $9,000 a year, but chose instead to go to Midwestern University's Chicago College of Osteopathic Medicine, in large part because he thought it would improve his chances of getting a residency in the Chicago area.[/quote]

[i]Huh?[/i][/quote]

I agree. That part sounds a little fishy. Pay an extra $20k/yr to go to a DO school?

He picked a good specialty (anes) to make a boatload of money once he's out though. If he lives modestly, the debt shouldn't be a problem and can be paid off within a few years as the article states.[/quote]

----------------------------------------------------------------
Turning down an allopathic school for a DO school? Was he dipping into some of the drugs himself?

Greg
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus
User avatar
LarryG
Posts: 322
Joined: Sun Mar 11, 2007 11:10 am

Post by LarryG »

Medical School ( U. of Chicago) 1952-6 tuition $300/quarter

Internship $50/month (1 child)

Air Force $7000/ year 2 children

Residency $5200/ year 3 children, first house $13,500 down payment from accrued pay instead of leave in Air Force

First job (board certified) 1963 $11,500

Those were the good old days.

Larry G.
User avatar
goosecat
Posts: 179
Joined: Thu Feb 22, 2007 11:57 pm

Post by goosecat »

A huge factor in all of this is when they wish to retire or be financially independent. If he is happy working until a historically typical retirement age of 65, then not only is the $500k debt not a problem, but buying a big house and luxury cars aren't a problem either. With a $400k/yr income (say $250k/yr after taxes), they can easily afford all of those things and still save plenty for retirement. He just needs to hope his career isn't derailed by an excessive number of malpractice suits or patient/coworker complaints. He needs plenty of disability insurance in case of injury. He also needs to hope that he doesn't start to hate his job or get burned out which is not uncommon among doctors.

However, if he wishes to retire as early as possible, then controlling expenses is crucial. He should have gone to a cheaper med school, he should buy a modest house, and he should skip the luxury cars.

So the advice and criticism of these doctor's lifestyles and choices depends a lot on how long they plan to work.
nyblitz
Posts: 354
Joined: Mon Apr 09, 2007 7:33 am

Post by nyblitz »

EmergDoc,
Good article, with many things to discuss.

Wife (family med) and I (EM) owe 250K student loans, despite both went to cheap state undergrad/med school. The decision to pay off loans early or string them out is an interesting question for us as our rates are locked at 3% for 30 years. But, with the laws of the state, only retirement programs and 20k of house are asset protected. Right now, we are saving for a house down-payment. But soon, we will have an interesting dilemma... What have you done, or what would you do for this?

Most of my fellow residents purchased housing during residency (we did not), and I think it was mostly b/c housing was still booming, with unlimited potential. Also, many really think that this is where they plan to live after residency, only to become disillusioned. Residents who purchased only a few years before us made a significant amount of money doing it that way. My class has mostly made money as well, but with significant headaches when selling this past summer. I imagine those purchasing after us will lose significantly when purchasing for a short period of time.

I found this quote humorous:
"I wanted to be able to talk to people," he says. "I didn't like sitting in a lab dissecting rat brains."
Shockingly, during medical school, he selected anesthesia. Of note, this is NOT a dig at anesthesia, I thoroughly enjoyed my rotations (our skill sets are similar) and realize they can spend a lot of time with very frightened patient just when they need reassurance before their surgery.

About the insurance - strongly agree. With a child on the way, life insurance becomes a must. Disability is a must regardless of child status.

About retirement accounts - I was surprised they contributed to 401k's before Roth ira's. Did they have a match? My residency had a 403b, but no match, so we saved during residency and then contributed a significant amount the final year to reduce our taxes.

Thanks again for the article.
strafe
Posts: 1051
Joined: Sat Mar 03, 2007 12:49 pm

Post by strafe »

Maybe I'm missing something here, but how does $17k undergrad loans + $30k/yr med school tuition x 4 years x 2 people add up to $500k?
User avatar
rolleur
Posts: 39
Joined: Tue Feb 27, 2007 3:32 pm
Location: Iowa

The loans cover more than just tuition

Post by rolleur »

strafe wrote:Maybe I'm missing something here, but how does $17k undergrad loans + $30k/yr med school tuition x 4 years x 2 people add up to $500k?
I'm guessing the DO school loans covered more than just tuition. Since the students don't really have time to work they generally take out loans for their books, room, and board.

Looking at the DO school mentioned, the current costs of books, mandatory health insurance, and room & board, and miscellaneous fees are roughly 20K per year. So, you've got 17K + 29K x 4 years x 2 people + 20K x 4 years x 2 people. Throw in some accumulating interest over 4 - 8 years and you get to 500K pretty quickly.

We made it through med school on much less than that, but then this is the diehards board and expenses matter! :)

-Lee
User avatar
Topic Author
White Coat Investor
Posts: 15651
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Post by White Coat Investor »

Thanks to an academic tuition scholarship and working my bootie off during the summers, I made it through undergrad with only $5K in loans. My severe debt aversion helped lead me to a poor financial decision and I took a military "scholarship" to pay for med school. Together with my wife working for part of med school, we made it through without debt. It turned out to be a poor financial decision because 1) I went to a cheap state school, 2) I went into a moderately high paying specialty and 3) I graduated in 2003 when interest rates were at an all-time low, but I figured out once that I came out about $180,000 behind by taking this route. Don't get me wrong, I'm grateful to be able to serve one of the greatest populations in the world, but it was definitely a bad move from a financial standpoint.

I agree that they definitely screwed up doing the 401K over the Roth, unless they were funding up to the match.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
plake15
Posts: 1043
Joined: Sat Oct 06, 2007 8:28 am

Post by plake15 »

well combined they are $500,000 in debt... so it's really $250,000 each..after all medical school..training, etc...I don't think $250,000 is outlandish after so many years of training and medical schools etc...

$200,000 of the 700K was the condo loan they got...

Most of the time when you marry someone,you split bills,share everything,it makes bills easier etc.. but when you are $250,000 in debt and then you marry someone who is in debt about the same amount 250K,then buy a condo together and add 200K more right when you married..700k is a boatload to be in the hanger for.
Ella
Posts: 168
Joined: Sat Jul 21, 2007 7:52 pm

Post by Ella »

Their first and biggest mistake was going to an expensive DO school instead of a more affordable state allopathic school. I cannot comprehend how they thought that would open more doors for them professionally.

By the time I finished residency my total loan debt was about 120K (I'd paid off about 5K during training). I went to a private college and a private med school, and I couldn't afford to pay a penny upfront, but I was lucky to get a lot of scholarship money and only low rate, subsidized loans. Plus I ended up choosing a well-paid specialty. I don't think a medical degree from a private school pays off financially unless some or all of these factors are working in one's favor.

I spent my first year+ out of residency paying off car and credit card (groan) debt. Now I'm putting my extra money toward savings and investments. My loan debt is now 107K, at fixed rates of 3.75-4%. I don't like having it, but my money market emergency fund is yielding more than the loans are costing me - so for now the loans will stay. If and when I get sick of having them around, I could pay them off about 18 months. Lately I'm getting more sick of them - so a payoff may be in my near future.
ataloss
Posts: 887
Joined: Tue Feb 20, 2007 3:24 pm

Post by ataloss »

Their first and biggest mistake was going to an expensive DO school instead of a more affordable state allopathic school. I cannot comprehend how they thought that would open more doors for them professionally.
he got the anesthesia residency- did he have a connection there? Isn't there supposed to be a 10% reduction in medicare payments to physicians for 2008. Will they get the big income needed to pay the debt?
pollendoctor
Posts: 3
Joined: Sat Mar 10, 2007 6:38 pm
Location: Vancouver, WA

Big practice loan

Post by pollendoctor »

I went to a private undergrad, but my parents/grandparents footed the bill.

I went to a state school so I ended up saving at least $20K a year. That did not hurt me getting into residency, but I was willing to cast my net wide geographically for residency.

I did not buy a house in residency, but I spent 3 years in residency, and 2 years in fellowship, knowing I would like move after graduation (which I did).

I ended up with about $45k when I graduated, and paid off the higher interest loan already. Three years out of fellowship, this is $27,000, but I am not in a hurry to pay this off, as the rate will soon go down to 2 7/8.

I started my own practice, and that is the biggest loan. I thought it would be $300,000, but it ended up at about $400,000. I had some trouble with contractors, etc, which always changes the numbers. I really have not made much progress on paying this off. Now that my patient numbers are going up, I should be able to make more progress.

There are so many factors that can change. There is certainly no guarantee that you will be paid well as a doctor. I have had people state they are surprised I am living in modest housing, as they would expect I would have something fancier. Not anytime soon.
biasion
Posts: 1417
Joined: Mon Aug 13, 2007 8:23 pm

Post by biasion »

[removed]
1. Do not confuse strategy with outcome | 2. Those who fail to plan plan to fail | 3. Do not assume the unlikely is impossible, and | 4. Be ready to deal with the consequences if you do.
joelesposito
Posts: 138
Joined: Fri Sep 21, 2007 1:30 pm

Loans

Post by joelesposito »

You guys make all good points about why their school selection was almost dumb. But let's change focus....

Of all of you who have significant loans, what is your strategy toward paying them off? Are you guys agggressive, or do you pay the min and invest the difference? Where is your trade off btwn investing and pay down?

For what its worth, our stuff is now at 5%, staffords, Just south of 6 figures. So its a close call. If it was 10% or something I woudl just pay it down ASAP. Over the long haul I know we can beat that in the market, even after taxes, but risk adjusted...welll its close.
rkbrashear
Posts: 104
Joined: Mon Oct 29, 2007 6:15 pm

Post by rkbrashear »

I have 140k consolidated staffords at 2 7/8 --- can't convince myself to pay more than the minimum b/c our money market acct is at just under 5 and mostly invested in VTSAX/VGTSX which I feel good about. We paid my wife's law school loans (5-7%) ~45k off in a hurry though. Just doesn't seem to make sense paying off unsecured cheap debt like this --- even though it would feel good to have it gone.
Gregory
Posts: 1554
Joined: Tue Feb 20, 2007 2:26 pm

med school & residency programs

Post by Gregory »

[quote="bettega"]It's hard when you're a resident because you make what amounts to little over minimum wage when you factor in the overtime and sometimes the occasional double time. I might get some flak for saying this, but I think doctors in general aren't that bright when it comes to life choices. It's a pretty stressful life/occupation, but most people going into medicine still act like they are going into something not as difficult or malignant and don't take the time to make their personal/financial lives as easy as they should.

All these kids going into medicine think they are going to do all great thing this and that by "Seeing another area of the country" or "going to a high power school", but really, these are expensive and worthless pursuits. The hard part is getting into med school. Once you have that piece of paper, unless you develop some nasty life habits like a heroin hobby, make really bad choices, or just have bad luck, you're pretty much golden. Even if you are ranked last in the last ranked med school across the country, you will get a residency somewhere and people are still going to call you "doctor". Why all this pursuit of prestige? The thing is, the real money lies in private practice, and when you set up your own shingle no one cares where you went to school or what you did.

Regarding personal life, as a resident, you are now limited to about 80 hours a week which is still a lot. If you're lucky you get one day off a week every week, but it's not a lot of time to "see another area of the country". You get home with your tongue hanging out and you just want to eat and go to bed! It always amazed me why all my med school colleagues wanted to leave their social support systems and spend all this money during what will likely be the hardest time of their lives.

Still, although I am cheapo extraordinaire, I still think it was a great idea to do the state school thing. I did my freshman year at a private university and despite an academic scholarship, it was still 20,000 dollars. OUCH! What a waste. However, the combined rest of my college cost about 9,000 dollars for the last three years including two summers of summer classes (took orgo after my 1st year to get a jump). That was great. I got in where i wanted for residency (so I could keep living at home with parents) and I have hit the ground running this year in private practice. My life therefore is very easy, at least from that point of view. I have other personal problems which have forced me to take stock of my situation and take the path of least resistance. Perhaps it's just laziness or I am tired of fighting my own chronic illness, but John Lennon put it perfectly:

[i]Everybody seems to think I'm lazy. I don't mind, I think they're crazy! Running everywhere at such a speed 'till they find there's no need![/i][/quote]
-------------------------------------------------------------------------
Sorry, but I have to disagree with your statement: "Seeing another area of the country" or "going to a high power school", but really, these are expensive and worthless pursuits."

I've been out of fellowship for about 15 years and I know for a fact that attending a "high powered" private med school (and therefore had the chance to meet, work with, do biomedical research under and publish with "high powered" prof's) greatly helped me garner a residency slot in what was the most competitive residency specialty the year in which I applied -- at what's considered one of the two most "high-powered" programs in the nation. And when I was looking to join a group (in a desirable metro area) the academic pedigree was most helpful. Yes, it gets you in the door, and you have to be able to back it up with excellent clinical care. Over the years many patients have commented that they chose to initially consult with me because of the pedigree.

Trust me, having sheepskins from big names on your wall doesn't keep patients out of your waiting room, nor inhibit other physicians from referring to you -- far from it.

Greg
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus
nyblitz
Posts: 354
Joined: Mon Apr 09, 2007 7:33 am

Post by nyblitz »

Theoretical scenario:
So Chris and Meg have taken the advice and now completed residency and have a healthy baby girl. They have solidified their life/disability insurance and completed wills/poa, etc. After yearly expenses (minimum payments on loan and mortgage), they have an extra 200K each year.

Say they have kept their 401K/403b at same levels (no new contributions since article) and now have a good, but not 401K available.

Say they now have debts:
500K 30year fixed mortgage (lost $ on condo, bought another house) at 5.9%.
50K student loan at 9%
200K student loan at 3%
200K student loan at 2 7/8%
20K car loan at 6.9%

Say all interest rates (money market, muni bond, st/lt bond) rates are the current rates.
They are subject to AMT.
There is no practice that needs to be built up, but one of Chris's surgical colleagues has offered Chris an "opportunity" to buy into his practice to make a "killing".

How would you have them allocate the money?
Pay loans (which)?
401K's?
Muni-bonds?
ETF/mutual funds?
MM funds?
Practice opportunity?
529?
T-IRA?
Mortgage?
Gold?
Real-estate?
Other?
Jack
Posts: 3254
Joined: Tue Feb 27, 2007 2:24 am

Post by Jack »

I wonder about the wife who spent all those years in training and hundreds of thousands of dollars in expenses and at 28 years old wants to work part time.
grumel
Posts: 1629
Joined: Fri Mar 30, 2007 1:38 am
Location: Germany

Post by grumel »

Jack wrote:I wonder about the wife who spent all those years in training and hundreds of thousands of dollars in expenses and at 28 years old wants to work part time.
She gained a Degree in medicine, that means she gained her social status, she has done her work. Now its up to the social status apropiate husband to earn the living.
Valuethinker
Posts: 44974
Joined: Fri May 11, 2007 11:07 am

Post by Valuethinker »

EmergDoc wrote:Thanks to an academic tuition scholarship and working my bootie off during the summers, I made it through undergrad with only $5K in loans. My severe debt aversion helped lead me to a poor financial decision and I took a military "scholarship" to pay for med school. Together with my wife working for part of med school, we made it through without debt. It turned out to be a poor financial decision because 1) I went to a cheap state school, 2) I went into a moderately high paying specialty and 3) I graduated in 2003 when interest rates were at an all-time low, but I figured out once that I came out about $180,000 behind by taking this route. Don't get me wrong, I'm grateful to be able to serve one of the greatest populations in the world, but it was definitely a bad move from a financial standpoint.

I agree that they definitely screwed up doing the 401K over the Roth, unless they were funding up to the match.
As a citizen of a country whose soldiers you may well be treating at this moment, I'm glad you made the 'mistake'.

My concern is that it is a financial downside for you. Because if it's a financial downside, then other talented young medical people won't take that route.

It should be possible to structure a system where young doctors find it attractive to either work for a period in isolated communities that are underserved (I would include some inner city communities in this, but mostly I mean isolated rural areas) or in the military, and in return receive significant help with their personal debts/ cost of education.
ataloss
Posts: 887
Joined: Tue Feb 20, 2007 3:24 pm

Post by ataloss »

these are expensive and worthless pursuits. The hard part is getting into med school. Once you have that piece of paper, unless you develop some nasty life habits like a heroin hobby, make really bad choices, or just have bad luck, you're pretty much golden. Even if you are ranked last in the last ranked med school across the country, you will get a residency somewhere and people are still going to call you "doctor". Why all this pursuit of prestige?


I am not sure his choice of school was necessarily bad. He paid more to go to what most of you all see as a less prestigious school but he got into a residency in a high paying specialty. If the gates to residency are controlled by an osteopath maybe he did what he needed to get where he wanted to go. I am thinking that it must be very competitive to get into these higher paying specialties. It is hard for me to see how one could financially justify taking big financial risks and massive borrowing to go into a low paying field. But maybe I just don't understand.
Valuethinker
Posts: 44974
Joined: Fri May 11, 2007 11:07 am

Post by Valuethinker »

ataloss wrote:
these are expensive and worthless pursuits. The hard part is getting into med school. Once you have that piece of paper, unless you develop some nasty life habits like a heroin hobby, make really bad choices, or just have bad luck, you're pretty much golden. Even if you are ranked last in the last ranked med school across the country, you will get a residency somewhere and people are still going to call you "doctor". Why all this pursuit of prestige?


I am not sure his choice of school was necessarily bad. He paid more to go to what most of you all see as a less prestigious school but he got into a residency in a high paying specialty. If the gates to residency are controlled by an osteopath maybe he did what he needed to get where he wanted to go. I am thinking that it must be very competitive to get into these higher paying specialties. It is hard for me to see how one could financially justify taking big financial risks and massive borrowing to go into a low paying field. But maybe I just don't understand.
I think as we see more 'medical tourism' and outsourcing of medical services (radiographers in other countries reading XRays, etc.) that doctors' incomes are going to come under pressure.

probably like most professions the 'Pavarotti effect' (aka the 3 Tenors effect). The top surgeons will get paid ever more (if you are a multimillionaire, it's nothing to fly to New York to have the top surgeon in the world operate on you, or more to the point, your child). But the general level of pay of medical professionals in the developed world will come under increasing pressure.

It's already cheaper to have major dental work done in Eastern Europe, and to fly there, than to have it done in London. Ditto plastic surgery.

Havana will become a serious centre for medical tourism, I suspect, in my lifetime. They have good doctors, good facilities (if you can pay in US dollars), and it's 90 miles from Miami.
Ella
Posts: 168
Joined: Sat Jul 21, 2007 7:52 pm

Post by Ella »

ataloss wrote:
these are expensive and worthless pursuits. The hard part is getting into med school. Once you have that piece of paper, unless you develop some nasty life habits like a heroin hobby, make really bad choices, or just have bad luck, you're pretty much golden. Even if you are ranked last in the last ranked med school across the country, you will get a residency somewhere and people are still going to call you "doctor". Why all this pursuit of prestige?


I am not sure his choice of school was necessarily bad. He paid more to go to what most of you all see as a less prestigious school but he got into a residency in a high paying specialty. If the gates to residency are controlled by an osteopath maybe he did what he needed to get where he wanted to go. I am thinking that it must be very competitive to get into these higher paying specialties. It is hard for me to see how one could financially justify taking big financial risks and massive borrowing to go into a low paying field. But maybe I just don't understand.
In general, the "gates to residency" are certainly not controlled by osteopaths. Even if the specific program he applied to was run by a DO, having an allopath degree would not have hindered him. There is really no scenario I can imagine where the DO would have been better than an MD degree, even if in some specific situation it doesn't end up hurting him. If he was able to get an anesthesia residency coming out of an expensive DO school, he would have been able to get an anesthesia residency coming out of a cheaper state allopathic school.

IIRC, he entered anesthesiology at a time when the field was in flux - it looked like nurse anesthetists would be allowed to work independently, which would make the field much less lucrative for doctors. So it may not have been that difficult in his year to get a residency position in anesthesia. Not sure if this is the case for his year, but it was the case around 2000-2001.

I also have to disagree with Bettega's statement about high-powered schools being worthless pursuits. A high-prestige school will most definitely open doors. Of course, you also have to do well in school (duh) - but having that degree means: opportunities to work with famous and distinguished scientists and physicians, and to get invokved in outstanding projects that lead to publications in high-impact journals; letters of recommendation from people who are well-known in the field; and not having your application tossed out in the first round when highy competitive residency programs are trying to weed down their applicant pool.

HOWEVER - if you are planning to go into family practice or a similarly less competitive and lower-paying field, a high-powered but expensive degree may not pay off. And an expensive degree from a middling private school (as opposed to a cheaper degree from a state school) is almost always a dumb decision.

Ella
User avatar
goosecat
Posts: 179
Joined: Thu Feb 22, 2007 11:57 pm

Post by goosecat »

Ella wrote:
ataloss wrote:
these are expensive and worthless pursuits. The hard part is getting into med school. Once you have that piece of paper, unless you develop some nasty life habits like a heroin hobby, make really bad choices, or just have bad luck, you're pretty much golden. Even if you are ranked last in the last ranked med school across the country, you will get a residency somewhere and people are still going to call you "doctor". Why all this pursuit of prestige?


I am not sure his choice of school was necessarily bad. He paid more to go to what most of you all see as a less prestigious school but he got into a residency in a high paying specialty. If the gates to residency are controlled by an osteopath maybe he did what he needed to get where he wanted to go. I am thinking that it must be very competitive to get into these higher paying specialties. It is hard for me to see how one could financially justify taking big financial risks and massive borrowing to go into a low paying field. But maybe I just don't understand.
In general, the "gates to residency" are certainly not controlled by osteopaths. Even if the specific program he applied to was run by a DO, having an allopath degree would not have hindered him. There is really no scenario I can imagine where the DO would have been better than an MD degree, even if in some specific situation it doesn't end up hurting him. If he was able to get an anesthesia residency coming out of an expensive DO school, he would have been able to get an anesthesia residency coming out of a cheaper state allopathic school.
Ella
I am under the impression that DO school is mostly (if not completely) filled with people who couldn't get into an MD school. I have yet to see a recent DO graduate actually care much about the "osteopathic" side of their training. An anesthesiologist isn't doing anything osteopathic. You can't trust everything you read in these articles and I don't trust that he actually was accepted to an MD school.

It has gotten to the point that I don't see any reason to have DO schools. They should be forced to become MD schools or simply not exist as a backdoor way to becoming a doctor.
User avatar
grabiner
Advisory Board
Posts: 32092
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Loans

Post by grabiner »

joelesposito wrote:You guys make all good points about why their school selection was almost dumb. But let's change focus....

Of all of you who have significant loans, what is your strategy toward paying them off? Are you guys agggressive, or do you pay the min and invest the difference? Where is your trade off btwn investing and pay down?

For what its worth, our stuff is now at 5%, staffords, Just south of 6 figures. So its a close call. If it was 10% or something I woudl just pay it down ASAP. Over the long haul I know we can beat that in the market, even after taxes, but risk adjusted...welll its close.
My normal recommendation is to pay down a loan if you cannot earn the same amount risk-free. Thus, if you have a 6% tax-deductible loan and are in a 25% tax bracket, or a 4.5% non-deductible loan you can earn 4.5% by paying down the loan, with no benefit realized until the loan is paid off, so this is an intermediate-term or long-term investment. If you can earn at least 4.5% on intermediate-term Treasury bonds in your 401(k) and are not maxing it out, then you will come out ahead if you max out your 401(k) rather than paying down the loan. If you are maxing out your 401(k) and can earn 4% on insured municipal bonds, you should pay down the loan rather than adding to your taxable invesments.

You don't need to invest in bonds matching your loan, but this gives a fair comparison because the risk of your whole portfolio is the same. You can choose to pay down the loan or invest the money, and you have an independent choice whether to have more stock, or less stock, or the same amount of stock.
Wiki David Grabiner
biasion
Posts: 1417
Joined: Mon Aug 13, 2007 8:23 pm

Re: med school & residency programs

Post by biasion »

[removed]
1. Do not confuse strategy with outcome | 2. Those who fail to plan plan to fail | 3. Do not assume the unlikely is impossible, and | 4. Be ready to deal with the consequences if you do.
User avatar
Topic Author
White Coat Investor
Posts: 15651
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Post by White Coat Investor »

goosecat wrote: am under the impression that DO school is mostly (if not completely) filled with people who couldn't get into an MD school. I have yet to see a recent DO graduate actually care much about the "osteopathic" side of their training. An anesthesiologist isn't doing anything osteopathic.
I am sitting next to one right now who hates internal medicine (which he did his residency in) and plans to build an osteopathic musculoskeletal practice upon finishing his military commitment. I send him all the chronic lower back pain patients he will take! I don't care if he calls them Somatic Dysfunction so long as they're happy with what he does for them. Heaven knows allopathic medicine doesn't have much to offer them.

I know lots of good physicians who happen to be D.O.s, but I would have to agree that there is very little osteopathic stuff going on in the practices of most D.O. school graduates.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
User avatar
Topic Author
White Coat Investor
Posts: 15651
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Post by White Coat Investor »

nyblitz wrote:Theoretical scenario:
So Chris and Meg have taken the advice and now completed residency and have a healthy baby girl. They have solidified their life/disability insurance and completed wills/poa, etc. After yearly expenses (minimum payments on loan and mortgage), they have an extra 200K each year.

Say they have kept their 401K/403b at same levels (no new contributions since article) and now have a good, but not 401K available.

Say they now have debts:
500K 30year fixed mortgage (lost $ on condo, bought another house) at 5.9%.
50K student loan at 9%
200K student loan at 3%
200K student loan at 2 7/8%
20K car loan at 6.9%

Say all interest rates (money market, muni bond, st/lt bond) rates are the current rates.
They are subject to AMT.
There is no practice that needs to be built up, but one of Chris's surgical colleagues has offered Chris an "opportunity" to buy into his practice to make a "killing".

How would you have them allocate the money?
Pay loans (which)?
401K's?
Muni-bonds?
ETF/mutual funds?
MM funds?
Practice opportunity?
529?
T-IRA?
Mortgage?
Gold?
Real-estate?
Other?
1) Fully Fund 401K/403bs
2) Fund tax-protected education accounts for children
3) 9% Student Loan
4) 6.9% Car loan
5) Stretch out other loans and invest additional dollars in tax-managed or index funds within taxable account.

I would also consider a business loan to buy into the practice if further careful analysis seems to indicate it would be a good investment. How fast I would pay it off would depend on the interest rate.

As far as what asset classes to invest in, I would follow general Boglehead practices. If you have a specific question for about asset allocation for this "hypothetical" situation start your own thread with the word "Laura" in it and you'll get some good suggestions.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
pwesben
Posts: 44
Joined: Thu Oct 11, 2007 8:45 pm

Doctors in Debt

Post by pwesben »

I did my first year of Med School (Case Western Reserve 1975-9) from savings. The final three years thru a great program with the Navy. Tuition, books and a stipend (which easily covered room and expenses).

In return I had to apply for and accept a Navy Residency (three years), and I then owed three years active duty payback. This was a great option for me (Family Medicine) since the training was great.

To my knowledge this program no longer is available since the Military opened up the Military Med School. Too bad because this got me graduated and trained with no debt.

Paul
User avatar
Vig Oren
Posts: 818
Joined: Wed May 09, 2007 8:38 am
Location: NC (near Raleigh)

Post by Vig Oren »

From above post, say they now have debts:
500K 30year fixed mortgage (lost $ on condo, bought another house) at 5.9%.
50K student loan at 9%
200K student loan at 3%
200K student loan at 2 7/8%
20K car loan at 6.9%

Total debt: $970K

Say all interest rates (money market, muni bond, st/lt bond) rates are the current rates.
They are subject to AMT. There is no practice that needs to be built up, but one of Chris's surgical colleagues has offered Chris an "opportunity" to buy into his practice to make a "killing".

How would you have them allocate the money?
Reply: Let them go see a CFP. There are thousands of CFPs in the US dealing with physicians. It’s an easy “challenge“ to solve. Just bear in mind that in a few years Chris will be making $3 to $4 million a year. And in a decade, $5 to $10 million. Assuming that the average interest rate of the present total debt is 7%. Then in 5 years the $1million debt will accumulate to around $1.5 million when Chris will be making $3 to $4 million. So what’s the problem? $1.5 to $2.5 million would NOT be enough for Chris’s other annual expenses?

Chris does not need to invest money until all debts are paid- up except invest in:

1) Current minimal debt obligations
2) Life insurance
3) Disability insurance
4) Malpractice insurance
5) Retirement sheltered accounts
6) In the business
7) Assets protection

and work diligently but not too hard :!:

Do I make any sense? :roll:


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ | "One of the greatest piece of economic wisdom is to know what you do not know"{John Galbraith}
User avatar
goosecat
Posts: 179
Joined: Thu Feb 22, 2007 11:57 pm

Post by goosecat »

Vig Oren wrote: Reply: Let them go see a CFP. There are thousands of CFPs in the US dealing with physicians. It’s an easy “challenge“ to solve. Just bear in mind that in a few years Chris will be making $3 to $4 million a year. And in a decade, $5 to $10 million. Assuming that the average interest rate of the present total debt is 7%. Then in 5 years the $1million debt will accumulate to around $1.5 million when Chris will be making $3 to $4 million. So what’s the problem? $1.5 to $2.5 million would NOT be enough for Chris’s other annual expenses?

First of all, a CFP would love to "manage" his money by selling him whole life insurance and loaded funds.

Second, how is his salary going up a million dollars a year? Doctors don't have it THAT good.
Last edited by goosecat on Sun Nov 18, 2007 11:54 pm, edited 1 time in total.
markh
Posts: 215
Joined: Sun Apr 22, 2007 7:13 pm

Post by markh »

To Vig Oren

A busy, fantastic anesthesiologist in LA makes between 300 and 400K per year. In 1987 in Laguna Beach I made 1.5 million a year, that was private indemnity before HMO and Medicare cut backs.
User avatar
Ruprecht
Posts: 559
Joined: Fri Aug 17, 2007 10:34 pm
Location: a very nice cardboard box
Contact:

Post by Ruprecht »

.....
Last edited by Ruprecht on Sun Jul 12, 2015 10:45 am, edited 1 time in total.
User avatar
Topic Author
White Coat Investor
Posts: 15651
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: Doctors In Debt

Post by White Coat Investor »

[response to deleted post removed by admin Alex]
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
User avatar
Topic Author
White Coat Investor
Posts: 15651
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: Doctors in Debt

Post by White Coat Investor »

pwesben wrote:In return I had to apply for and accept a Navy Residency (three years), and I then owed three years active duty payback. This was a great option for me (Family Medicine) since the training was great.

To my knowledge this program no longer is available since the Military opened up the Military Med School. Too bad because this got me graduated and trained with no debt.
The program is still available, it is called HPSP-Health Professions Scholarship Program, however, the changes in military medicine in the last ten years have been mostly for the worse and neither the training nor the practice situation is considered top notch anymore, even in family practice. The surgical specialties and emergency medicine are particularly bad, as few military training hospitals see any trauma anymore and the caseload has dropped off dramatically. The real downside to the program is the military match. Lots of people aren't allowed to do the specialty of their choice, and so get shuffled off into General Medical Officer land after a 1-year internship to finish their commitment, get out, and go back to residency.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Valuethinker
Posts: 44974
Joined: Fri May 11, 2007 11:07 am

Re: med school & residency programs

Post by Valuethinker »

bettega wrote:
Did you know that the average primary care doctor, who only sees about 18 patients a day, is worth 1.5 million dollars to the local hospital? This was calculated sometime around the turn of the millenium and was published in Medical Economics, surely it is more than that now.
I think all the evidence from other national systems shows that an effective primary care system is the best way of assuring good healthcare outcomes and controlling medical costs.

Most disease is chronic (diabetes, heart etc.) and what patients need is regular monitoring and adherence to treatment schedules, help addressing their lifestyle issues etc. This delays the onset of (very expensive) acute and interventionary care.

At least this is my understanding from a cursory reading of relevant literature.
User avatar
Vig Oren
Posts: 818
Joined: Wed May 09, 2007 8:38 am
Location: NC (near Raleigh)

Post by Vig Oren »

Dear doctors,

I made a mistake in my post above when I meant NET WORTH and NOT annual income. Sorry.

I took it from this survey:

“Physicians goals:

From:

http://www.financial-planning.com/pubs/ ... 01007.html

Excerpt:

“According to Prince, who surveyed 941 affluent doctors, nearly all of them (88.2%) were age 45 or older. Also, most (84.3%) had a net worth of $5 million to $10 million. The rest (15.7%) were even wealthier, with more than $10 million in net worth.

And yet, despite all of their wealth, physicians are not fully satisfied with their financial situations. In fact, every single doctor surveyed had at least some level of dissatisfaction, and more than half said they were highly dissatisfied with their financial situation.

What's the problem here? The answer lies in the biggest concern among affluent doctors: losing their wealth. Consider that 95.1% of those surveyed said that losing their wealth is a primary concern. What's more, this issue intensifies along with physicians' level of affluence. A full 98.6% of doctors whose net worth exceeded $10 million said they're concerned about losing their wealth.”

-------------------------------------------------------------------------
Please notice that as a past Biomedical Engineer (M. Sc) I love doctors! But what’s wrong with the above survey? When I showed the above article to my local internist he laughed and said “well, my NW is less than $5 million yet but I know cardiologists who whose NW is much higher ($10 million).“ BTW, my internist invested $10K in CHINA MEDICAL and told me to do the same! I do like him, but not M* report on this company :cry:

In my above post I meant that essentially your future HUMAN CAPITAL is immense. As long as you’re alive and healthy you’ll easily pay those damn debts in a few years. So what is the problem?

As to investing, please notice that you should protect assets with your investments. This means investing in 401(k), Variable Annuities which also protect against creditors (per State law), Homestead acts, etc.


Last edited by Vig Oren on Mon Nov 19, 2007 11:28 am, edited 1 time in total.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ | "One of the greatest piece of economic wisdom is to know what you do not know"{John Galbraith}
User avatar
jh
Posts: 1917
Joined: Mon May 14, 2007 11:36 am
Location: USA

Post by jh »

...
Last edited by jh on Thu Jan 17, 2008 4:28 pm, edited 1 time in total.
Alex Frakt
Founder
Posts: 11374
Joined: Fri Feb 23, 2007 1:06 pm
Location: Chicago
Contact:

Post by Alex Frakt »

Complaints about doctors, the medical system or anything else unrelated to the question of investing and financial planning will be removed from the investing forums.
User avatar
mudfud
Posts: 1223
Joined: Tue Feb 20, 2007 4:34 pm

Post by mudfud »

Vig Oren wrote:Dear doctors,

I made a mistake in my post above when I meant NET WORTH and not annual income. Sorry.

I took it from this survey:

“Physicians goals:

From:

http://www.financial-planning.com/pubs/ ... 01007.html

Excerpt:

“According to Prince, who surveyed 941 affluent doctors, nearly all of them (88.2%) were age 45 or older. Also, most (84.3%) had a net worth of $5 million to $10 million. The rest (15.7%) were even wealthier, with more than $10 million in net worth.



Hi Vig,

The survey defined "affluent" doctors as having a net worth of > 5 million......and found that they all indeed have a net worth of >5 million! It tells us nothing about the prevalence of doctors with a net worth of >5 million.

The median physician net worth (including house) is more like $800,000.

http://mediwire.skyscape.com/main/Defau ... eID=165292

The liquid or monetary net worth is probably much lower.

Mud
Last edited by mudfud on Mon Nov 19, 2007 11:17 am, edited 1 time in total.
"Are you sure you have tested an a priori hypothesis?" | | Image
User avatar
Vig Oren
Posts: 818
Joined: Wed May 09, 2007 8:38 am
Location: NC (near Raleigh)

Post by Vig Oren »

Thanks Mud for the link, which also states that:
Survey respondents in all age groups typically anticipate a $2 million net worth at 65. If present economic conditions prevail, that doesn't seem unreasonable. The median net worth of doctors in their 50s, for instance, is $1.2 million. With an average of 10 more years in practice, an annual growth rate of just 5.25 percent would put them over the $2 million mark. Actually, one doctor in five has already reached or passed that point.
So why with even $1 to $2 million NW, could not they pay their debts within a few years of pratice?

As to my suggestion of seeing a CFP BEFORE making those mistakes, IMO it's still holding.
User avatar
Topic Author
White Coat Investor
Posts: 15651
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Post by White Coat Investor »

Diehard Physicians vs Diehard Engineers

Undergraduate loans are equal
Engineer enters work force at 23
Physician enters work force at 31
Both plan to retire at 55 and want $80K/year of gross income to live on in retirement
Physician picks up an extra $150,000 loan at 3% real
Engineer's investments earn 5% real after-tax and expenses
Physician's investments earn 4.5% real (higher percentage of investments are in a taxable account)

Engineer's salary $80K
http://www.evaluationengineering.com/ar ... ineers.asp

Physician's salary $160K
http://www.deltamedcon.com/mhc/MHC2.asp

Both are married to non-working spouses, have two kids, defer $15K of income, and use the standard deduction.

Engineer's income tax $5356
Physician's income tax $23073

Engineer's net income $74644
Physician's net income $136927

Engineer must save $33200/year to reach goal (or 44% of net income)
Physician must save $56100/year plus pay $8614/year in additional student loans (47% of net income)

So not only does the physician have to put up with additional years of schooling and feeling poor, but he has to save a larger percentage of his income to reach the same level of retirement income. Meanwhile, even during his peak earning years, his post-tax, post-retirement-savings income is only $31K/year more than the engineer's.

Is it a good living? Sure, but not nearly as good as one might imagine when just looking at salary figures. This also assumes the physician gets right into med school and residency and doesn't do a long residency or any fellowship training. This also neglects the effects of social security, which would favorably skew results toward the engineer (physician pays more for little additional benefit)
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
tekton12
Posts: 8
Joined: Sat Jul 28, 2007 5:17 pm

Post by tekton12 »

Do keep in mind that a lot of my risk aversion to competition, going away from home etc had to do with my suffering from a chronic illness. Still, when all is considered, why go through so much aggravation when primary care is so much fun and possibly even more remunerative?
_________________
Hi,

I'm an internist, 10 years out of residency training. Thanks to my parents who paid for my entire undergrad and med school tuition, I didn't have student loans to speak of. The only debt I had was $10k in credit cards which I paid off within 1 year of starting private practice. The lack of significant debt burden enabled me to pursue internal medicine as a career - a relatively low paying specialty. There was just no need for me to go into the high paying, high stress subspecialties like anesthesiology or neurosurgery. I agree with your comment that primary care can be "remunerative" if you start off with a low debt load. As a result, I am looking to retire in my early 50s. I could never thank my parents enough for this gift. They were just frugal, solidly middle class folks who were always there for us kids. My late dad was an engineer and mom was a nurse.
Post Reply