Second in a series.
So, you’ve landed that first big job out of residency or dental school. All the long hours and training have paid off, and you’re finally enjoying a rewarding salary and benefits.
The trick now is to make some smart moves to maximize the value of your new status as an employed physician or dentist. Here’s how:
Utilize all employer benefits for which you are eligible.
The overall value of benefits packages can add up to 36 percent of pay for health care providers, according to data from HR consulting firm Towers Watson. But to take full advantage of your benefits package, you’ll need to understand the scope and effective date of each benefit. Does disability insurance provide long-term coverage — or only short-term? If your employer has provided an allowance for continuing education, when and how can it be used? Likewise, are paid vacation days a use-it-or-lose-it proposition, or can unused days be banked?
Claim reimbursement for all employee business expenses allowed by your contract.
Unreimbursed business expenses generally will not provide a tax benefit, since you can only claim expenses that are more than 2 percent of your adjusted gross income. So make sure that your employer pays for — or that you are reimbursed for – things like office equipment and supplies, professional dues, medical equipment, and business meals and entertainment.
Think about retirement now.
Employed physicians and dentists should sign up for their employer’s 401(k) as soon as they are eligible and start contributing on a monthly basis — at least enough to receive any employer match. The trick is to start early and let the incredibly powerful effect of compounding work in your favor.
Have a plan for debt.
Of course, any contributions to the company retirement plan should be balanced against the need to pay down debt. Review all your debt, interest rates and due dates. Here, it’s important to review your options for refinancing credit card debt and school loans. Ultimately, you’ll want to prioritize debt reduction so that the highest-rate, non-deductible interest is paid off first.
Obtain adequate disability insurance coverage.
Employer-provided disability coverage may leave dangerous gaps. Review coverage with an experienced agent and consider beefing up coverage with policy riders to ensure that you obtain benefits specific to your needs and for as long as possible. Common riders include coverage for own occupation, residual disability and future purchase options.
Obtain adequate term life insurance coverage.
Insurance experts suggest you carry life insurance benefits equivalent to at least five times your annual income, and in some cases as much as nine times. Of course, early career is the ideal time to lock in long-term life insurance since you are young and healthy. If your employer-sponsored policy is not sufficient, consider increasing coverage.
Understand your professional liability insurance.
Make sure you understand the policy limits. Is it “claims made” or “occurrence made”? Likewise, determine if tail coverage is provided if employment ends.
Consider umbrella liability protection.
Finally, protect yourself against non-occupation-related liability. Typically, that entails increasing the liability limits on your personal insurance policies (e.g., homeowners, auto, boat, etc.) and then adding on an “umbrella policy”.
In the end, understanding the issues and economics of employment can help providers make wise choices. Contact our office for assistance with “running the numbers” and evaluating your options as an employed physician or dental professional.
