Monthly Archives: May 2017

7 Reasons Physicians Need To Send Their Children to Private School

If you have school age children, investing in your children’s education is one of the wisest investments you can make.  There is no greater investment for your children’s future than education.  However, education is also one of the most expensive decisions you can make.   There are seven reasons why physicians spend tens of thousands of dollars a year to send their children to private schools despite the high costs.

In today’s world of increasing college education costs, is the cost of private school for your children worth the investment?   Like most financial decisions, the answer is, it depends.   Let’s look at two young physician families with three children at home.

Our first family is the Tutelage family.   The Tutelage family is a few years out of residency.  They recently purchased a house and are still paying down their medical school debt, now about $150,000 combined.   They have three school-aged children, ages nine, seven and five.  Mrs. Tutelage went to a private religious school and would like the same experience for their children.  The Tutelage family firmly believes in investing in a good education and make many sacrifices to send their children to the best private school in the city.    Luckily they don’t live in New York City and the private school in town is a bargain at around $20,000 per year per child.Private School Tuition

Despite private education for their children costing over $60,000 per year,   the Tutelage family continues to prioritize their children’s education over other luxuries.  With a combined income of $320,000,  The $5,000 / month they have to save just for school is a considerable outlay,  almost 30% of their take-home earnings each month.

Can a school really be worth 30% of your take-home income each month?   For the majority of Americans, the choice of public vs. private doesn’t even enter the equation because they cannot afford the tuition. The question for us today is, are physicians in that group?

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Should Physicians Invest in a 457(b) Plan?

The Hidden Danger In Your Hospital’s 457(b) Plan

As an employed physician, are you tired of seeing half your paycheck go to taxes?  Employed physicians face a lack of tax-sheltered savings space compared to their business-owning counterparts.

After you max out your 401k/403b, there are few options for tax-deferred savings.  There is an option offered by some hospitals and health systems, the 457(b) plan.

On the surface, the 457(b) plan appears to be just what employed physicians need,  more tax-deferred savings space!

An Introduction To The 457(b) For Physicians

The 457(b) plan is an employer-sponsored, tax-deferred deferred compensation plan.   The information found online can be very confusing because the same section of Internal Revenue Code covers the 457(b) plan offered to 2 different types of workers:

The first type of 457(b) is provided to state and local government employees. Think teachers, police officers, firefighters, and other civil servants. These are known as governmental 457(b) plans

The second type of 457(b) is offered to high paid (top-hat) employees of nonprofits like hospitals and charities.  Think physicians and administrators.  These are known as non-governmental 457(b) plans.

Although they have the same name and fall under the same section of the tax code, they have very different rules that apply.  If you left a non-profit hospital to work for the VA, you cannot roll a non-governmental(hospital) 457(b) plan into a governmental(VA) 457(b). They are separate programs with the same name.

For example, If you left a non-profit hospital to work for the VA, you cannot roll a non-governmental(hospital) 457(b) plan into a governmental(VA) 457(b). They are separate programs with the same name.

For the rest of this post, I will be referring to non-profit 457(b) plans.

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