[Editor's Note: This is a guest post from regular WCI reader and physician Sanghamitra Sadhu, MD. We have no financial relationship. I've been wanting to write some posts about unique issues faced by FMGs and IMGs for a long time, but being neither one of them personally, I lack the expertise and experience to write a solid post. Dr. Sadhu has relieved me of that responsibility and I welcome further guest posts on these issues.]
My title refers to those of us who are foreign medical graduates (FMG). If you think the average resident/fellow in this country is not so well-versed with some of the basics of personal finance, then FMGs are well-behind their American-born and raised counterparts. We originate from different parts of the globe, each with our own cultures and work ethos. A good part of the first year (or two) of training is spent figuring out this cultural divide apart from grappling with what is usually a strenuous work load. So, understandably, personal finance, beyond the basic needs of day-to-day life, is nowhere on the radar of a FMG.
I was there myself, a little over a decade ago. The newness of this country in every single way consumed what little time I had over the first two years I moved to the US, apart from taking the USMLE tests in rapid succession and then applying for residency and preparing for interviews. Once those things passed in a whirlwind, I was flung into internship. And you are familiar with the rest… a blur of years going by. Not a word about personal finance or how to manage it was breathed anywhere by anyone.
Trainee doctors everywhere are disadvantaged in this regard- being short on time, having devoted years to study of their craft, and now honing their skills for the career that lies ahead- where errors or misjudgments are just not an option most of the time. It is hard to spend any time on oneself during these rigorous years, let alone think about money matters. It is just not on the radar, except maybe for the few who are genuinely interested in finance or have received enough coaching at home to know how vital it is for them.
Now imagine one who not only has no financial clue, but is new in the country. The words IRA, Roth, and 529 trickled into my vocabulary within the last few years, well out of training. Maybe it took me even longer than it usually takes because I’m a woman and women are generally known to talk about money matters far less than their male counterparts, even for those outside of medicine. I'd heard of “401(k)” perhaps because all the big companies in tech and other fields in the news talk about it. I thought it was for those with a real job. Training wasn’t a real job, was it? Well, I found the answer to that last week. After all these years, I wrote back to one lady in the Graduate Medical Office, who had been especially nice, asking her if we had had any retirement savings plan available to us when I was in training.
“Yes, we did,” she replied.
A 403b, which was optional. I did not want to increase my pain any further by asking whether there had been an employer match. As far as my memory serves me, we were not made aware of its existence at any point in time, without specifically asking for it. It would have been easy to mention it any time during the mandatory two or three day orientation we had, both at the beginning of residency and at the beginning of fellowship.
The two things that really help most of us FMGs be in a good place with money is a strong proclivity to saving and (usually) not having student loan debt. Many of us originate from developing countries around the globe which have a culture of saving rather than the culture of consumerism prominent in the US, especially in the era in which we grew up, before the opening up of developing economies. Culturally, we are also not as comfortable spending money that is not ours, and so don't usually rack up high credit card bills. And I need hardly expand on the student loan bit- the freedom that comes from not being tied to such a huge loan helps us get started on the right footing once we reach attendinghood. One other thing may help, too. Since most of us are not US citizens, immigration law restrictions often require us to take jobs outside of major metropolitan areas. As we know, many of these jobs in areas of less demand have better pay and lower costs of living. Of course, these are broad generalizations of a very diverse group.
If we can combine these benefits with the benefit that comes from sound knowledge in personal finance, we will be in great shape early enough in our careers to afford us many freedoms down the line- with choice of geographic location, nature of job, work hours, and anything else that we prioritize.
I would not suggest anyone choose a training program based on the presence of a retirement plan option or the availability of an employer match; the quality of training and other personal factors matter far more. However, it would be prudent to know enough to ask these questions once you do start training.
Some of this responsibility also rests on the employer; where there is a will, implementation is rarely difficult. At the very least, new trainees should be informed about any retirement plan the employer offers- along with basic details such as employer match, if any. The employer also has a fiduciary responsibility to their employees. This means they are legally required to provide investment options within the retirement plan that are the best in their asset class and are low cost. If more time can be alloted to the basics of personal finance during orientation or even the occasional noon conference, so much the better for young folks embarking on an amazing journey.
What do you think? What unique financial advantages and disadvantages do FMGs face? How do these differ from those faced by IMGs (who know the culture but usually have HUGE loan burdens? Is there anything that can be done to promote financial literacy specifically among these physicians before, during, and after medical school? Comment below!
Could you perhaps add a word of explanation regarding the designation “IMG” (International Medical Graduate) vs FMG? I don’t understand the difference…
IMG would be an American who went to medical school outside the U.S. There are several schools in the Caribbean that cater to students from the U.S.
FMG is someone who was born, raised, and educated through medical school outside the U.S.
D’ooh! Thanks PoF.
Thank you for sharing your story. It’s unfortunate that at new intern orientation, they didn’t talk about the option of a 403b along with the other benefits (e.g. Health insurance) available to residents. Ideally, new residents would be given a copy of WCI’s book or be led to the many physician personal finance sites that can help new interns with their finances.
Very nice post. Thanks for sharing your story!
Nice post. I don’t think there was a retirement option when I trained in the 80s. It was never mentioned if there was one.
As I understand, a young colleague followed this clever financial strategy: He immigrated to the US with parents, grew up in Chicago, did college and med school in Syria for free. Then he did a family medicine residency as an FMG in the US. Thus, he started residency with zero debt.
Have most FMGs received their med school education for free?
JZ, Many FMGS have their education for free. Denmark e.g. is free for EU citizens, but not all are free. But if not free, you don’t pay the outrageous fees you pay here. I started out with an interest free loan with 30 year term, no repay until 2 years after graduation. Why bother paying off faster! It was supposed to cover tuition, books, and cost of living. The government changed the rules when I was halfway, interest would be charged (still starting 2 years after graduation) at market rate plus 1% (hence continuously changing). At that point I got offered to pay off my first part with a 30% discount. Jumped on that quickly. It was in the neighborhood of $5000 (in the late eighties after 3 years in) and came here with a similar amount after finishing school. Easy to pay off in one swoop. Now it starts from year one, but your tuition is 1984 euros (about $2,100) annually. More if you come from outside the EU, up to $12,000 for med school. Still a bargain. You can borrow more for cost of living but that is capped.
As far as coming here. Nobody told me anything about finance. Didn’t even pay into SSI for the first year as a post doc and my Ivy institution certainly didn’t allow us to pay into retirement, although some class mates, allocated to (i.e. paid for by) affiliated hospitals did get that plus generous bonus. I became faculty as a fellow, due to grants I got. Of course I was not told by HR that my benefits changed as a consequence. Hence, I missed 6 months 403 contributions and generous match. That, and extensive moonlighting during residency made me look into ways to save for retirement. Internet as it is was not available and our then CPA was (incorrectly) countering everything I had found. So I’m mostly self thought and found WCI after finding out about notice 2014-54 and trying to get more info. Had this site been around when I started out…..
I think FMGs have an advantage as Dr Sadhu states. Indeed, many also don’t come from a background of living on credit cards. If you don’t have it, you can’t buy it, or you have to work hard for a line of credit. Debit cards are the choice of pay; you don’t have enough in the bank? Out of luck. I had to get a cc when I came here (debit cards/ATMs were non-existent here mid-nineties). Automatic pay/transfer the way to do business. In other countries cash was (still is) king for many.
What I also had to get used to, pension contributions were a shared responsibility between employer and employee. Everyone over 23 had, by law, automatically premium withheld from their paycheck. No negotiation, step-ups etc. Fixed amount according to salary. I found myself on my own here. For me the plus side was that I at least was aware that I had to save and certainly since I was well behind due to coming here.
Thanks for sharing your story!
Some programs are doing a great job. Vanderbilt required us to choose from one of three companies for our 403b, and I think there was a match. My memory is fuzzy, but I believe we were required to choose an option or fill out a form to decline, so we couldn’t just ignore it.
I did a residency at Vandy too. No info on a 403b came my way. I think it was not offered in the 80s.
I don’t think Vandy offered that in the 80s when I was a resident.
Taking appropriate amount of risk in the stock market might make or break your long game, but those of us who grew up abroad might be too conservative in their investments, having grown up on the stories of our parents and g-parents not dying of starvation during war(s) only because someone had a gold coin or a diamond ring to trade for bread/ticket for a last boat etc.
Good point S. It’s easy for those of us in families that have been here in US for generations to forget that the stock market has been a catastrophically bad investment in some countries over the last century or so.
Also, for a number of ethnic groups and faith traditions, indirect ownership of stocks would have occasionally been really problematic… You can maybe get gold or diamonds out of the country. Not much else.
Hello to both Physician on Fire (not sure if you wrote this) and White Coat Investor (I follow you both on twitter). I am not of the white coat profession (am accountant) but my SO who will be starting pharmacy residency this summer is. I’ve been on board with FIRE for about a year now but I have not gotten my SO with it. How applicable are your blogs, respectively, to her? And how might I get her to dive in? I was thinking your book but am unsure. Please advise. Thanks
This post was not written by PoF as noted in the editor’s note at the beginning.
I would start with a conversation about what you want out of your financial life. I doubt very many people who are still in school/residency have much interest in FIRE. That becomes more interesting after you’ve been working for a while when you start realizing some things you can’t do because you’re working. Or when you start hating your job. Or both. But if early retirement is really important to you, and it isn’t important at all to her, that’s going to be a problem. You don’t have to be on the same page, but you need to be reading from the same book.
Cool post. Being an FMG, I can vouch to all those things that are being listed in this post. To add to this, I also feel most FMG struggle with “vehicles” of investment. Investment “back home” is usually savings in a bank account that pays interest. I grew up with understanding the notion that real estate and bank accounts are the best savings and investing vehicles. Stock market is a “gamble”.
Fast forward to US– Stock market and your asset allocation form the back bone of your investments.
Because FMG inherently and culturally often compare stock market to gambling, they loose out on developing a proper asset allocation plan for many years through their residencies/Fellowships and even early earning years. I still remember how I missed Roth IRA for about 4 years of my low earning years as resident as i wanted to hold on to the money in my account without understanding the concept of investing , time and letting it grow.
Well, I think I am a bit smarter now 🙂
Let me speak from a different experience.
I am an FMG, and so is my best friend- we have known each other since Medical School. We came to the US in the late 90’s.
I had seen my parents buy Government bonds in India that used to pay 12-15% depending on what money was being used – tax deferred vs. taxable, and there were limits as far as I remember. This was all before Indian economy opened up to the world. I grew up learning about the power of saving, and compounding.
Almost independent of each other, my friend and I started learning about Finance in the United States, and then pretty quickly we shared information. I did Roth IRA the first year I was in United States and 457b the first year in training.
My friend and I read on the Internet first, whatever was available. And we read a lot of books – Bogle, Millionaire mind, Bernstein, and the ilk – too many to list here, lots of bad ones too.
I was more adventurous and made a few foolish investments, Motley Fool style, and then quickly learned about the long term advantage of Index funds. I had even subscribed to a newsletter of a stock picking Guru, never followed his advice because it sounded so terrible. My friend, on the other hand, doesn’t get carried away this easily.
My Roth IRA’s with TD and individual stocks, Vs. my 457b with Vanguard and automated index funds taught me a lot in a few years, and I avoided the same mistakes later on.
By the time we finished our training, automated finance was my second nature, and since then it has just been easy auto-pilot for me and my wife – RA’s maxed, 401k maxed, added HSA maxed after I found WCI, haven’t touched the 457b from the training, 529’s, and iBonds- that’s it.
I shared the story form another perspective. All this while my in-laws, who had lived in the United states since mid-80’s, had very different ideas than me and continue to be so- more like how Stephen Nelson is describing here.
My story and my friend’s story may not be typical, but it is a story. Kinda boring story without any sensational life changing fireworks- only a life being lived with learning, and in moderation.
Thanks for sharing your success story.
Thanks for this post. I totally agree with this post . As a woman, FMG and now an attending radiologist I have slowly learnt the ropes. Thanks to whitecoat investor. It is my go to website before making financial decisions. I also want to add that most FMGs have additional options of investing in their home countries. Ultra safe investments in terms of fixed deposits which are around 8% is something that should be considered. The absence of a huge loan is another big advantage.
Many of those countries with “safe 8% returns” also have inflation rates of 6-10%. Remember to think in real terms.
This is a very important point, and most FMG’s don’t get it. And keep on getting suckered into these 8% returns, or other things like real estate deals, or while life Insurance, that seem like a sure bet – here in the US, or back where they came from.
Thanks for this post. I was just now considering investing in FDs in India. Accommodating inflation was a net negative 2% annualized.
I would like to point out one thing about estate taxes which I haven’t read in any of the books written on financial planning for doctors. The federal estate tax exemption of $5 million only for US citizens. For non US citizens it’s only $100,000. Since about 20% of practicing physicians like me are not US citizens and it takes between 5 to 15 years to become a US citizens, there is a significant risk of paying estate taxes on money received from term life insurance (which is what my wife/children would receive from my estate).
We met with an estate planning attorney and opened a irrevocable trust which would not be subjected to estate taxes and plan to take the the insurance out from the trust once we become US citizens in about 10 years.
You learn something new every day. Thanks for teaching that to all of us. I never realized that.
But I don’t understand how you plan to take anything out of an irrevocable trust. That’s the whole point of “irrevocable.”
Red Ash:
You bring up an excellent point about taxation on term life insurance for non-US aliens.
https://www2.deloitte.com/content/dam/Deloitte/us/Documents/Tax/us-tax-state-and-gift-taxation.pdf
Can you please elaborate more on how you went about thinking this through in terms of options to avoid heavy taxation and to reach the decision of setting up an irrevocable trust? My wife is a green card holder but my minor kids are US citizens- would having them as beneficiaries obviate this tax.
Thanks
~pat
Beneficiaries of the trust? Yes. Beneficiaries of an insurance policy outside the trust? No.
But in this scenario, the irrevocable trust is a great idea to eliminate the estate tax. I just don’t understand how red ash can remove the policy from the irrevocable trust (or why he would want to other than to reduce trust expenses.)
I just checked what the attorney set up and it was a qualified domestic trust (QDOT) and not an irrevocable trust as initially mentioned.