Q.
Have you given any thought to a post on financial issues for docs to consider when changing jobs? Many of us employed docs are often on the move.
A.
I've written before about the perils of job change, when I lumped it into other financial perils such as divorce. However, those perils are much smaller for employed doctors than for a practice owner, especially if the employee can avoid having to move and can minimize any gap between jobs. Here are some considerations for those in this situation.
8 Things to Consider When Changing Jobs
#1 Read Your Contract
Contracts are generally pretty useless until something goes wrong. My employment contract for my current group simply didn't matter much, because they liked me and I liked them and I moved on to partnership. The purpose of a contract, however, is for when things do not work out. If you're changing jobs, things by definition aren't working out, so your contract may be the best place to start.
Figure out how much notice you're required to give, and what happens if you don't give it. Also, consider if there is some buyout or bonus you will lose by leaving. Perhaps sticking around a few more months will allow you to get that. Be sure to read the section about malpractice insurance.
If you have an occurrence policy, great. If you have a claims-made policy, better figure out how much tail will cost and who is going to pay it. In Emergency Medicine, tails can cost upwards of $50K, which may make that new job considerably less appealing than the old job.
#2 Get Your New Contract Reviewed
Many people change jobs because they mistakenly got into a bad job last time. Try to avoid being a repeat offender. Have your contract reviewed by a local health care attorney or a national service such as blog advertiser Jon Appino's Contract Diagnostics. It's not that expensive, even if you hire these guys to do your negotiating for you.
#3 Try To Avoid Moving
Moving is expensive. Try to avoid it. A much longer commute (even an airplane commute) may be worthwhile to avoid the financial and personal costs of moving. Expect to pay 10% of the value of your home to sell your old one, and 5% of the value of your home to buy a new one. Plus moving costs. Plus the lost earnings. It adds up in a hurry.
#4 Try to Minimize the Unemployment Period
Just as moving is expensive, so is being unemployed, although you may turn it into a sabbatical of sorts. Ideally, you walk out of your old job on Friday afternoon and walk into your new one on Monday morning. But it can take 6 months to get licensed in a new state or credentialed in a new hospital. So plan ahead to minimize this gap. You may also be able to fill it with some locums work. If you have to pay moving expenses and cover months of no income, you're going to need a big emergency fund.
#5 Retirement Plan Issues
Check into the retirement plan at your new job. You may not be eligible for the 401(k) for a year or more. If that is the case, be sure to max out your old 401(k) and other retirement accounts before leaving the old job. You don't want to lose that opportunity. Otherwise, you may be limited to using Backdoor Roth IRAs and a taxable account. Truthfully, you'll probably need the cash to pay for the change in houses, the unemployed period, and other moving-related expenses.
You will also need to figure out what to do with your old retirement accounts. 401(k)s and 403(b)s are relatively easy. The old answer was to just transfer them into an IRA. However, with the advent of the Backdoor Roth IRA, that's likely to screw up your pro-rata calculation. The solutions are either to convert it to a Roth IRA, leave it with the old 401(k), move it to the new 401(k), or move it to your individual 401(k) (you do have one, right? Surely you had some 1099 income somewhere along the way.)
When deciding between your old 401(k) and your new one, consider the benefits of keeping things simple as well as costs and investment options available in each one. For example, I still have my military TSP account due to its rock-bottom expense ratios and unique investing options. I roll money into it periodically so keeping it is worth the additional hassle to me.
457s are more complicated. Read your plan document. You may be able to transfer it to a 401(k) or another 457. Alternatively, you could be forced to take that money out over a very short time period. Look at your available options, and choose the best one. Every 401(a), cash balance plan, and pension plan has its own rules. Learn them BEFORE giving your notice.
#6 Health Insurance
If your employer was providing your health insurance, and your new employer will also be providing it, be sure to cover the gap. One great way to cover it is by COBRAing your current insurance. Although often expensive, there is a little loophole worth knowing — you can do it in retrospect. If you don't get sick or hurt, don't pay COBRA. If you do, then pay for the COBRA. Stupid law, I know, but might as well take advantage.
#7 Don't Burn Bridges
Unless you're the lead dog, the view never changes. Christian Feinauer, MD, trying not burn his bridge while canyoneering
I've been surprised to see many doctors leave employment only to return a few months or years later. If nothing else, you may need references down the road. While it may be tempting to tell your boss off, now is probably a good time to maximize your professionalism.
#8 Work Out 1099 Income
Even if you will be an employee (paid on a W-2) at your new job, see if you can't work out a way for you to get at least some of your income on a 1099. The biggest benefit is being able to open an individual 401(k), but there are plenty of others.
What do you think? What advice do you have for a physician changing jobs? Comment below!
Dr. D,
Two questions from this post.
Where do I go to figure out the mechanics of rolling money into my TSP from the outside?
Residency currently has no Roth option for its 403(b), conversion to Roth IRA after graduation is a viable and potentially worthwhile endeavor, as far as you know?
Thanks
Dr. JB
Dr. JB,
The link for information on rolling money into the TSP is here:
https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/RolloversTransfers/index.html.
On that page there are two links to the TSP-60 and TSP-60-R which are the forms needed.
I did this for my wife a couple years back and it was fairly straight forward.
Good Luck,
Nick
Yes, if you can’t do Roth contributions during residency, or in-plan Roth conversions, then at least convert it all the year you graduate.
Dear WCI–
I am a huge fan and have read your blog religiously for years! I have learned so much– thank you. This post applies to me because I am thinking of leaving a very lucrative private practice (where I am a partner) to move 1 hour away to be closer to family (large metro area– worse job, better lifestyle). I am considering commuting. I work as an anesthesiologist, and could probably clump my shifts together to maximize family time. Could you do a post about doctors who commute? You mentioned it in todays post and I would love to hear about how physicians accomplish this. Thanks as always for the great post.
I have found that a long commute is the greatest tax of all, the tax on your time. You can always make more money, but you cannot make up for lost time.
I am not sure I understand the circumstances completely, but if you (or anyone else) is considering leaving your family behind for a week at a time to work an out-of-town job, returning on weekends, I have not known a marriage to survive such an arrangement.
One hour away? It seems like a lot of folks in metro areas commute that long twice a day just to get across town and back home. Not always fun but I had a 10 minute commute to one work site and 45 minute to the other.
What exactly are you looking for in a post like that? I guess there’s the trade-off of time and expense commuting to a better job weighed against the hassle and expense of moving or sticking with a worse job. We could talk about how to buy a car that you’re going to wear out rapidly. Or maybe about the risks of driving long distances after night shifts or long calls. Not sure what else to put in.
What I am looking for is how to evaluate the financial trade off. For example, where I work, I make 600k/y gross and have access to occurrence malpractice insurance. Public schools are awful, there is no shopping or nightlife. Very few educated people in the area. Then in the metropolitan area I would make 350k gross, with rare possibility of ever becoming partner… but ability to expose my kids to more educated, diverse, and sophisticated environment is important to my husband and I. The only reason I bring it up is because you mentioned it in the article: “A much longer commute (even an airplane commute) may be worthwhile to avoid the financial and personal costs of moving.” And actually, I have heard of lots of physicians who work “long-distance” in one way or another to optimize their job/lifestyle. Just a thought! Its a relevant issue to physicians since factors such as state laws/payor mix can greatly affect income, even just 50 miles away…
You can do quite a bit of travel, shopping and diversity training for $250k each year.
Commuting/time away would be a good topic of discussion.
Hard to put numbers on all that stuff. Certainly impossible to do it for someone else. It really comes down to values-based financial planning. For me at my stage of life and portfolio, putting my kids into a “sophisticated” environment isn’t worth $250K to me. But if I had to choose whether to make $100K less and live near mountains, or make $100K more and live in Flatland USA, that’s an easy decision for me. I guess you should try to determine how much those things are worth to you, and realize that may change as your portfolio grows.
Are you a pain MD? for most regular anesthesia jobs dont pay 600K
PK– Nope. Just lucrative PP in a rural area substantially subsidized by the hospital. Kind of a “supply and demand” type of position– where supply of MD’s is very low, and demand is there so incomes are inflated to adjust. It worked great to repay my husband & I’s student loans and build up our nest egg but there is a reason supply of MD’s is low here. Not a pleasant place to live, really.
WCI– it is DEFINITELY flatland usa. Rural flatland usa.
Anyways thanks as always for sparking a good discussion. Maybe if I discover some pearls of wisdom I will submit a guest article! I’m a very devoted reader and as such (+ this crappy/amazing job) am now rather wealthy! But as I wrote, considering moving to a less lucrative, more attractive location. You are lucky your family and interests coincide with a state/location where practicing medicine is still a moneymaking opportunity.
Yes, luck definitely plays into it. I wish I was lucky enough to love Indiana. 😉
I wouldn’t mind knowing where you gross 600k, as I’ve resigned an abusive position recently and am considering my options in the flatlands. I’ve found 450k with 8 weeks vacay, but you’ve done considerably better! Any way we could chat offline a bit?
Also, for WCI: any way to quickly figure out if you’ve already fully funded your tax deferred accounts? I’m not sure if I can manually contribute to my IRA etc before the tax year is up (left my job in Nov, might be able to make up the difference somehow?)
If he gives the okay, I’ll send him your email. Or you can simply post yours here.
I agree with the comments regarding not burning bridges. There is an art to making a graceful departure, and even if you are leaving under difficult circumstances, ones in which you feel that you have been wronged, stay classy.
I left my first job, two years after starting, at the precise time that I would have been made a partner in my group, to take a job in a “more desirable” location, 2000 miles away. I left on very good terms–they even gave me my share of the bonus!
Well, I hated the new job from day 1 (including living in the “more desirable” location), gave notice in two months, and within six months, I was back in my old job, as a partner. I learned a lot from this experience, but at the top of the list of lessons was not to burn any bridges.
Could you expand on the COBRA aspect? Especially for all residents who will be graduating and have a several-month gap in coverage, this is something that could save residents lots of money! I was planning on asking my future employer to cover COBRA costs, and this might be a bargaining chip to let them know I am healthy and don’t plan on needing it, but if I do, then have them cover it.
It’s nice in that you don’t have to buy it until/if you need it. Not sure what else to expand on.
My wife and I are thinking about doing COBRA for a few months after she graduates fellowship in June while she’s on a few months of maternity leave before starting her first job as an attending. That’s a good idea, to ask a future employer about covering these extra costs. Matt, curious as to your situation and what your plans are.
The way Cobra always worked was that you had 60 days from the end of coverage to opt in. Surprisingly, as long as you elect the Cobra coverage within that 60 day time frame, there is no coverage gap. I believe it still works this way, unless the ACA has impacted the rules.
What I did after residency graduation was to write out and sign checks to pay my COBRA premiums for the 2 months when I was going to have the coverage gap. I ensured that I had enough money in my checking account to cover this. I also addressed and stamped the envelopes to the payment entity/ address. Then I told my next of kin that if I got sick or injured enough where I was not able to send these myself, that they needed to put them in the mail for me. You don’t have to pay your premiums in advance, you can pay them later, but paying back to the date of starting gap coverage. For example, if you graduate on June 30, your gap starts July 1st. If you get seriously ill on August 15th and decide to get COBRA, it’s not just August coverage you have to pay for, but also July. COBRA coverage would cost you the un-subsidized amount (ex – if your employer paid 75% of your insurance and you paid 25%, your own COBRA premiums would be 100% as employer no longer pays for this).
If you have to move….don’t forget the tax deduction….and MILK IT!
Moving jobs and locations has been the very best financial choice for my family. Remember that moving expenses are tax-deductible if over 50 miles away. Sign-on bonuses can easily offset the expenses incurred as well. I highly recommend that people move in order to experience the ” good-better-best” gradient of jobs out there. I strongly disagree with the statement “If you’re changing jobs, things by definition aren’t working out”. That is simply not true and shows your lack of experience in testing the job market. It is a job not an eternal companion. With experience comes more opportunity to get leadership and administration positions which have absolutely no bearing that the previous job wasn’t “working out”.
I will share one quirk that has caused some hours of my life this life this year with the IRS. First, thank you for writing in your book about having confidence during an audit. The situation which the IRS said they didn’t understand, but I believe should not be too uncommon for doctors: W2 job for first 6 months, then separate W2 job for the second half of the year. Social security taxes were taken for the max amount of income (~115k) from the first job….and then again from the second job. I requested this second half money to be repaid at tax time…and thus a lengthy audit and discussion period. Does that make sense? Twice the amount of social security was taken out because of two jobs. It seems to me that this would be common for doctors to experience but the IRS was amazed.
this happens all the time if you have more than one job. according to the IRS, the extra SS should be credited to your fed tax for the year.
This happened to me as well, it was a non issue, our tax accountant put it in as an overpayment and we got it back as a refund. No audit, or grief. I would think this kind of thing would happen all the time in all kinds of employment. Seems surprising that the IRS would find it confusing.
Thanks for you comment about SS tax overpayment, since I changed jobs in 2015 I will face the same issue at tax time.
I am glad to hear that the process was smoother for some others…I think you just had bad luck and randomly got tabbed for the audit. I cant imagine changing jobs is a trigger for audit.
Most people aren’t smart enough to realize that occurred to them.
I too have had similar experiences. Left a job without burning any bridges, moved to a new job for the location. The new job was not a good fit and two years later relocated back to the original job. We lost money on our house sale due to timing, made up for it in some retention bonuses. Moving expenses were paid both ways. If you are employed by a large group or hospital, it is worth asking about moving expenses- they will often have this type of bonus all ready in place to slip into your contract. In terms of a tail some organizations will pay you a sign on bonus to help offset that, but it can be a huge expense. I took off two weeks between jobs, it was hard to move and be right back at work but minimized income stream loss.
I also have considered the “airplane commute”, block shifts and spend the time not working in another part of the country with family. I would appreciate any experiences others have had with this type of arrangement.
It depends how far the airplane commute is, and what you mean by family. I am single with no kids and currently work in an awesome practice in CA that pays well, while my family (parents and siblings who I am extremely close to) lives in the NYC/DC area. I do the airplane commute (4-5 hour flight, 2500 miles each way) about every 2-4 weekends. For the first 2-3 years, since I didn’t have much vacation time, I would fly out Friday night on the red eye, get there Saturday early AM, and leave back to CA on the last flight Sunday. It sounds crazy but it’s actually not that bad–it really just depends on your attitude. I tend not to waste time so I maximize my quality time while I’m with family on the weekends and get a ton of work done on the plane or just catch up on sleep. Also regular exercise is crucial to prevent the travel from taking a toll. After becoming partner and having established myself, I was recently able to negotiate a 4 day weekend every other weekend which will hopefully make things much easier. However, I would say that this is NOT sustainable in the long-term, and it would never work if I were actually married and/or had kids. In the near future I plan to eventually take a pay cut and just relocate to be closer to family.
I am leaving my current employer at end of this year and starting a new position Jan 4. Here are some things I considered when comparing the positions:
1. Commute time and cost–my current job is a 12 minute highway drive. New job–40 minutes, back roads. However, since the new job is a 35 hour/week position and the one I am leaving is 40 hour/week, my door to door time (leaving home to returning home) stays the same. Calculate your commuting cost using standard mileage reimbursement calculation. Consider the age of your car and the effect of more wear and tear. Also consider the impact on your wallet if gas prices rise.
2. 401K match–my new employer is not as generous as my current one with this. This could make a big difference over time, if it weren’t for other factors that I think will make up for the loss of the larger match.
3. Tuition reimbursement–if you are part of a university-affiliated academic medical center, research whether your kids might be eligible for a partial tuition break at that school. A doctor I know who almost recently left his position with a university for a new job decided to stay for this reason alone, all other things being equal.
4. Health insurance cost–both the premium and the deductible will be much lower at my new job, in fact, it almost cancels out the loss of the 401K match. I made sure to canvass some employees at the new job to see if anyone actually uses their insurance plan and likes it, I was happy to get good feedback about this.
5. Compare paid time off and CME reimbursement–my new job is surprisingly more generous with both.
6. Where are you going in life? Think big picture…I am overall losing a few grand a year by moving to a new job, also driving further, and yet moving from a cog in the wheel at a huge public institution to a medical director position at a smaller company. This move positions me, I believe, for greater job (and income) opportunities down the road. There was no potential for movement in my current position and many, many stressed out and unhappy employees. It helped that a nurse manager I knew well at my current employer left and joined my new employer a few years ago, she is very happy and feels respected and effective in her work now. I also know several nurses who used to work for my new company who loved it there. Like the Mastercard ad, “Autonomy, respect and professional satisfaction? Priceless.”
Forgot to add: new job also gives an end of year bonus, usually amounts to 3 or 4K, based on the year’s financials. It has been very eye-opening for me to compare public vs private employment. Public was more generous with 401K match and salary in general, the private company offers competitive compensation in some other ways, such as more PTO, year end bonus, covers more of health insurance premium.
Re # 4- Insurance plans change, often every year.
what about this situation: a professional couple, a doc is given a great opportunity, a real step up, elsewhere (say, across the country), but his/her wife/husband, who is making a 6-figure salary, may loose the job or else take a pay cut.
I understand its not really a financial question ( more of a behavioral science ha ha), but the input/opininions are appreciated
I’ve been in a similar situation my entire career thus far. It is tricky, and someone in the relationship has to compromise. The deciding factors for me were: (1) determining who liked their job more and possibly had more reasonable hours and (2) who could contribute more to the family in alternative means by having a less desirable job.
Good luck!
Sounds like a great time to have open communication between spouses about career timeline, financial goals and overall vision.
There is not one right answer here. But it is worth the investment of time to talk to each other.
With a two income couple, you’ve got to factor both incomes in for sure. Makes job hunting really complicated.
My husband and I recently went through this. I was looking for primary care positions and his specialty was more challenging to find a good match. Primary care can have some pretty huge variations in pay and work load so it was more important for me to find the right professional fit then him. We had to weigh each location as our combined salary in the location and whether we would want to live there. We did try letting some large healthcare organizations know that we were both looking for positions together but that did not really pan out. We ultimately picked a locations that was more rural (my husband’s preference) but that had a better job for me (my preference).
I think that for two high income couples where one is a doctor and the other is non-medical like a manager for a tech company, you really cannot ask the non-medical spouse to move to a location where they cannot find a comparable job.
Yes, unless you’re hyperspecialized or academic, it’s usually easier for the doc to find a new job.
1099 solo 401k question.
Theoretically, how much income do you need to have on 1099 to open a solo 401k-if the sole reason of opening the solo 401k is to provide yourself the space to roll over a malignant/high ER 401k from a previous employer?
I think I’d try to have at least $6. That way the 20% contribution would be at least a full dollar.
This article is written from the perspective that you are going to change your job because xyz and here is what you should consider. You can always try to bargain with your employer to change your work environment so that you don’t actually need to move.
When my wife got into residency, I knew that I would be having to move, but was at a company that I liked and making an impact. Instead of immediately quitting, I worked with my employer over 3-4 months to talk about their needs and mine. We decided to have me commute by airplane every week as a short term fix (6-18 months) and be compensated very well. Not the most fun thing in the world (but hey, almost A List Preferred). This sacrifice will help make my next job search easier or I could end up working from home and solving the age old issue of how to have and take care of kids in a dual earning couple.
Obviously, doctors can’t do what I did, but spouses and other high earning couples can. This is the type of thing that I think is missing when WCI writes (to no fault of his own) since doctors don’t have the same work options that other high earners can have.
My very good friend has seven children and conducts his medical practice at home via conferencing and telephone. He flies down to a village once a month for two days. It was a way to have him home more.
What about if the college/university in the new state is cheaper for the children? And you get to keep the same job via Telemedicine. We have 3 children, and the cost difference for college and graduate school, especially medical school is very big. A rough estimate of savings for total education is between 100k-200k per child, may be more. Not only that, the level of competition is much less to get into professional schools in many other states.
Definitely worth throwing into the equation.
I am a fellow that just signed with a large medical group and I will be getting a sign on bonus, $20,000, which for tax purposes will be 1099 income. Once working I will be paid with W-2 income. Can the 1099 sign on bonus income be treated like I am an independent contractor? Meaning I can fully deduct all business expenses (like board exams and moving). Can I open a solo 401 K from this one time payment?
I will otherwise not be getting any other 1099 income anytime soon, so I want to maximize it when I can.
You can open a solo 401(k). I think the other deductions are more gray. But I tend to call a lot of gray stuff in my favor.
I thought that the deductions would be more legitimate than the solo 401k. The deductions – board certification and moving – are required for the job. The reason for the signing bonus was to help cover those expenses, so I thought it would make sense to deduct those expenses for tax purposes.
I’d deduct them. I agree they sound legit. But it wouldn’t surprise me if an auditor disagreed. That wouldn’t keep me from deducting them though.
You don’t need 1099 income to deduct moving expenses.
Definitely the SOLO-K. I’d probably prorate the rest, including mileage to negotiate for bonus and other perks. As WCI said, you don’t need SE income to deduct moving expenses, but any that goes on sch C lowers your Medicare tax of 2.9%. On the other hand, if you can get your new employer to document in your contract that your sign-on bonus is specifically to offset certain expenses, I would fully deduct on the sch C. Would at least be worth asking and that would provide legitimacy for the deduction.
Just remember that the less sch C income you have, the less $$ you’ll be able to contribute to SOLO-K.
But the expenses still have to be legitimate business expenses, right? You can’t have your employer send you a letter saying the “The Sign-On Bonus is to pay for the moving truck” and then move your moving expenses on to schedule C, can you? If you can, why not have the employer write “The sign-on bonus is to pay your grocery bill.”
Of course they do. But KJ had already stated that the bonus was to pay for job-related expenses. I simply asked that he get documentation. As an employer, I wouldn’t dream of writing phony contract terms at the whim of a new employee and I presume a “large medical group” would handle the paperwork correctly.
What exactly is the best way to leave on good terms. I am considering leaving my job as a hospitalist employed by my hospital to another city. Would you interview for jobs prior to telling your current employer you are leaving or would you tell your employer first that you will be leaving? How many months in advance should I tell them?
It depends on why you would like to leave. I’d imagine that if you told your hospital administration that you want to leave but don’t actually have an alternative employment option, you’d put yourself into a potential unemployment scenario. Always a good idea if you have a means to negotiate a better contract.
Get the other job first. Look at your contract for required months in advance, but the more the better as it takes 6 months to hire a doc.
What exactly is the best way to leave a job on good terms? I am currently a hospitalist employed by a hospital. We have about 30 employees. I’m looking to move to a bigger city but sticking around here for another year to pay off most of my debt. We are currently renting and dont have a house but we will need to buy. My thought process is to first scope out the availible jobs in the city I will be moving to. I would line up a few interviews. Before I actually interview, I would tell my current employer that I will probably be leaving in the next 6 months or so. Once I have a job lined up I would then look into buying a house. What do you guys think?
Why would you tell your employer before signing your new job contract? I would also recommend making sure the job is working out BEFORE buying a new house.
Good Morning,
Looking for data on the movement of ER physicians. Based on most recent data, how often do ER physicians change positions? I’m running an analysis of our physician movement, relative to projected recruiting needs. Thanks in advance for your assistance.
Scott
Dunno, I would guess YOUR company would have more data on this than me! You might want to check with Barb Katz.