Nate Reineke (00:01)
Hello, physician moms and dads. I'm Nate Ranicki, certified financial planner and primary advisor here at Physician Family Financial Advisors. Normally I have Chelsea with me today, but as we head into Mother's Day weekend, it feels fitting that she is dealing with things that only mothers deal with right now. So ⁓ I am ⁓ doing a solo episode. And in fact, because it's almost Mother's Day weekend, we thought
We're going to only take questions from emergency medicine doctors. I think I really think that's fitting. Both roles require 24-7 being on 24-7, high tolerance for mess, and the ability to stay calm when everyone else is panicking. shout out to all the moms out there. Physician moms, we see you. We know it's tough.
but you seem to handle it very well. So the first question comes from an emergency medicine doc in Arizona. says, am eligible to join this defined benefit plan, but I am not maxing out my 401k yet and I need the cash flow for a variety of other things. I don't see the pros for contributing to this. The only caveat is that once I opt out, I can never elect to contribute to this plan in the future.
⁓ This is actually a very common question because when you work at a big hospital, they tend to give you a one-time opt-in to define benefit plans. And it's an interesting one because a lot of times early in your career, which for somebody who is not maxing out their 401k yet, ⁓ that tells me that generally they're early in their career and they have things to pay for like house, ⁓ kids, maybe even a new couch.
if you're early enough into your career to need that. ⁓ But the defined benefit plan does have benefits. It obviously is being offered to you and many of your colleagues are taking advantage of it. And generally the reason is tax related. So you contribute to a defined benefit plan, you defer the taxes, much like, at least the tax to viral portion, much like your 401k.
So ⁓ we've talked about this before on the podcast where the growth rate inside of defined benefit plans is not as generally as strong as what you might get in your 401k, but ⁓ the tax benefit is still there and you may want the option to contribute to this plan later on in your career. So, you know, I know a lot of things are pulling at your money and kind of you have a lot of competing goals.
as an early career physician. But in this instance, I believe that most of the time what you should do is opt in to the defined benefit plan and contribute the minimum amount possible. Sometimes that is ⁓ just a couple thousand dollars. So everything is again, ⁓ pulling at your income. But this is something that you will
⁓ celebrate that you did in the future, even if it doesn't feel like it right now. So takes a tax break. You can increase contributions as it makes more sense for you. But if you don't, you'll still be okay. You can fill up your 401k, can do your backdoor Roth IRAs, you can do brokerage contributions and be fine. There's a lot of physicians out there that don't have the fine benefit plans. They're still on track for college and retirement. So, ⁓ you know,
There's some nuance to this, but ⁓ if I had to give a broad based answer, would say contribute the minimum.
Next question is from an emergency medicine doctor in California. I'm 39 years old and I already feel like I can't do this work for another 15 years. How should I plan to get out of the meat grinder before I'm in my mid 60s? Okay, I have to admit I added the meat grinder part because emergency medicine is exactly that. But I hear this from emergency medicine doctors a lot. ⁓
And so I have spent a lot of time thinking about what are emergency medicine docs going to do about the immense amount of stress and work that they have to deal with on a day-to-day basis. So I can tell you what has not worked for the many emergency medicine docs that I have worked with over the years. And that is fire. We haven't said fire in a while. It seems to be slowly going away.
⁓ Physicians still use the words around fire, but they don't actually mean financial independence retire early. They sort of mean ⁓ financial independence retire a little early. ⁓ But obsessing over fire, obsessing over passive income, I have seen this create even more stress in the lives of ⁓ our emergency medicine doctors that we serve.
So I recommend against it. This isn't something that I recommend lightly either. I have seen it over and over again just ⁓ weigh you down even more. So I would ask you, all the emergency medicine doctors out there or even doctors who are just burning out to consider the opposite. This is particularly true for emergency medicine docs because they don't make enough money.
to let's say ⁓ live a normal life and save hundreds of thousands of dollars a year so that they can truly retire early. But the opposite would be to consider something like slowing down or working at a slower pace ⁓ in maybe 10 years. So you ⁓ accept the meat grinder for a shorter period of time.
Now here's what I've seen people be successful at in this, in the emergency medicine world and sort of what fits the bill for slowing down. I have seen doctors go to locum tenants. The hourly pay is higher, you have more control over your schedule. You can still make a very good living doing locum tenants without burning out.
And another piece of this is a lot of people are nervous to go locum tenants ⁓ when their kids are young. And this is because they value sort of stability and they value ⁓ their benefits. And I have some things to say about that. mean, you can get the benefits you need being 1099 worker. just takes some, it just takes knowledge on how to continue to save for retirement, get health insurance and all that. But all that to say is, ⁓
Many times people don't want to leave their ⁓ W2 job to go to locum tenants because of that. So ⁓ it's worth pointing out that those tend to be slightly less valuable to physicians when their children get older. So locum tenants, you could do that. You can control your pace. You control how many days you work. You can also go to urgent care.
still involved with patients, but sort of removes the chaos of the ER. And then ⁓ another example, among many, by the way, there's lots of things you could do that isn't as stressful, but you could go into hospital administration. And I don't know a lot of doctors that went, that became doctors ⁓ to get into the administration part of this. In fact, a lot of them, it seems like they're allergic to it. But transitioning into hospital leadership,
you have a chance of fixing the system that causes burnout in the first place. And this isn't for everyone, but you will have a more ⁓ reasonable ⁓ stress level, I would say. ⁓ And a lot of people are raising their hands and saying, when are we going to fix the system? And there's going to be a few of you out there that might be able to get into the system.
of medicine and make changes there. I don't love fire. You've heard us talk about fat fire, is nice. Financial independence, retire early, but with a big pile of cash so that you can live the life that you deserve as a physician with money. ⁓ But if you still want to be financially independent and retire early,
You need to seriously consider living a more modest lifestyle. And I don't mean modest in terms of physician. mean modest in terms of the average person in America. This is a core concept of fire that when fire was first introduced to the world in the blog sphere, ⁓ was filled up with people who really wanted to be frugal.
I mean, it was filled up with people who were counting almonds in their lunch. So they knew exactly how many almonds were going into their lunch pail and maybe they'd count out 10 because that's what they could afford. This was just a very core, at the core of FIRE was frugal people. So ⁓ if you truly want to ⁓ be financially independent and retire really early,
you must consider your lifestyle. It's not just saving money. ⁓ And I mean, nowadays I hear physicians say they want to be financially independent, retire early. And in the same phone call, the same one hour phone call, they also told me they wanted a country club membership. So it's one or the other. We can't have it all. ⁓ And with physicians, know, a lot of times you can have all
⁓ have it all, but not all at once. So you can be financially independent, you can retire, but how much you spend plays a big part in when you can retire.
So if you don't want to be that frugal, which doesn't sound appealing to me, doesn't sound like a life that most physicians I talk to really consider living, just consider slowing down and working until your early 60s, but at a more reasonable pace.
Next question comes from an emergency medicine doctor in Utah. I saw that my TSP allows for in-plan Roth conversions. Does this mean I can do a mega backdoor Roth? ⁓ The answer is no. It does not mean you can do a mega backdoor Roth. What it means is that the mechanism that is required to do that mega backdoor Roth is now in your TSP. So, ⁓
The TSP allows for these conversions to happen, but it does not yet allow for after-tax contributions. So really all this means is that the pre-tax contributions you've been making to your TSP can be converted over to Roth. That's not all that helpful to most physicians. You would have to pay the taxes to convert it to Roth, which would defeat the purpose of why you deferred the taxes in the first place.
Now, there are some scenarios, some planning scenarios where you might consider converting some of your pre-tax money to Roth. For example, let's say you took a year off of work and your income was going to be really low for one year. I had a family that took a year ⁓ sabbatical and they considered this as well. ⁓
Well, you could fill up your tax bracket, the low tax brackets that year, with ⁓ Roth conversions. Another situation where this might be helpful is if you're keeping your TSP, meaning not rolling your TSP out into an IRA during retirement, when you would consider Roth conversions during retirement from an IRA, you can now do that your TSP. And the TSP has a great bond fund in it, so ⁓ some people do.
keep their TSPs even in retirement. They don't roll it out into an IRA. So still a cool ⁓ mechanism inside your TSP, but does not mean you can do the mega backdoor Roth that you hear everybody talking about.
Last question of the day, only fitting for Mother's Day to talk about kids. Emergency medicine doctor in Georgia. What kind of things should my kids be paying for themselves? For context, this doctor has ⁓ children in their early 20s, but I'm going to try to address ⁓ all ages. At the end of the day, we do get this question every so often.
And it is a parenting question mixed with finances. So the reason we're asked as financial planners, financial advisors is really we get this question when you're not saving enough. So I'm not saving enough. Where do I find money? A lot of my money goes to my kids. My kids are older, ⁓ maybe considering ⁓ letting them pay for their own stuff. ⁓ Should I cut them off? That's kind of the nature of this question.
But starting from a young age, if I have to give parenting advice to you all, which many of you do not need it, but some of you ask for it, ⁓ I would say that children should pay, you, sorry, you as the parent should pay for what your children need. Food, clothes, schooling, housing. You should pay for everything your child needs. But as early as your child can stand it, and you can stand it,
you should have them paying for everything that they want. That is how ⁓ I raise my children. They pay for the things they want, unless it's their birthday or Christmas. ⁓ And then I pay for the things they need. Now, at a younger age, really, I'm paying for the things they want because I'm giving them money to do chores around the house that I might otherwise pay someone else to do those things. But they're not all that good at the chores.
They're just building that muscle of working to earn money to pay for things that they want. And the older they get, the more real that work should become. But it gets more complicated when your children are in their early 20s or even, you know, 18, 19 years old. And I see more and more parents funding their young adult children's well into their 20s.
few conversations just in the last couple of weeks about paying for a 23 year old's car, paying for their car insurance, paying for their health insurance, paying for their phone bill. And while I understand that urge to do so because technically you do have money coming in and you could choose to pay for their stuff rather than saving it, ⁓ you need to be on track for retirement before you would even consider this.
You need to put your own oxygen mask on first before you can save your children and continue to pay their bills. ⁓ Everyone's situation, every child is a little different. But if you're asking a financial advisor for parenting advice, it would be to let your children struggle a little bit so that they can walk tall in their own shoes as they enter adulthood. ⁓ The reality is your children have had a leg up
for 20 years. And ⁓ that's a great thing to be able to provide them. You most likely paid for college. You most likely gave them a great upbringing. And to pull the plug on that, I think is ⁓ very, very acceptable. At some point, you want your children to self-maintain and at exactly what age, it's hard to say. Every child is different, like I mentioned.
But at some point they have to struggle on their own. And that is what is going to give them this feeling of independence from you and the ability to take care of themselves and their future family for years to come.
Thank you everyone for listening. ⁓ Appreciate everyone tuning in for the solo episode. If you liked this episode, be sure to subscribe so you don't miss when a new episode is released every Wednesday. You can also leave us a rating wherever you're listening. And if you'd like to work with us, you can visit physicianfamily.com to schedule an interview. If you're not ready for that, can send us a question at podcast at physicianfamily.com and we promise to answer every question even if it doesn't make it on the show.
Until next time, remember, you're not just making a living, you're making a life.
