Most residents aren’t thinking about retirement when they begin their careers. But the employment model you choose can have a significant impact on how early you retire and how secure you will be in retirement.
Many millennial job seekers are drawn to physician employment, lured by the idea of a balanced, predictable schedule and a steady paycheck. However, the biggest mistake senior residents make is not considering the after-tax ramifications of their employment decisions.
When evaluating an employment opportunity, you must consider the full benefits package, not simply the salary. Being an owner in a physician partnership, for example, can provide significant tax advantages that corporate employment doesn’t offer.
For example, while corporations can cover some expenses like healthcare and continuing education, they do not allow you to take any tax deductions outside of a 401(k).
By contrast, partnerships permit you to deduct expenses such as CMEs, health plan premiums, home office expenses, and business-related cell phone, travel, and internet costs.
Also, if you would like to incorporate to take further advantage of vehicle depreciation or pass-through income, you can do so within a partnership.
At Vituity, physician partners can shelter $86,000 a year between a 401(k) and a Defined Benefit Plan, while most corporate groups only let you set aside between $18,000 and $36,000 per year in a 401(k) (including matching funds).
