Are there less competitive ROAD-lifestyle specialties for the average student?

[a runner]

Allow me to illustrate why all this talk about income, income taxes, loans, etc. is relative to the discussion about specialty choice for many (if not most) DO students. Here is why $150,000 may not be enough for a lot of students:

$150,000 income, family of 4, state of California
- Federal income tax liability of $24,138
- Social security tax (6.2% up to $117k) of $7,254
- Medicare tax (1.45% of all income) of $2,175
- California income tax of $9,075
- CA state disability insurance tax of $1,016
= $106,342 after taxes

Now, lets say you have $30,000 in loans from undergrad (pretty standard) that is now about $40,000 after 9 years (2 undergrad, 4 med school, 3 residency) of interest on the unsubsidized portions at 6.5%. Lets say you took out $300,000 in loans for DO school (a reasonable amount that many students must take out), which are now at $420,000 after 5 years (2 years of med school and 3 of residency) of interest at 7% (average of 6.5% for Stafford and 7.9% for GradPLUS). So you have a total of $460,000 in loans post-residency and you are placed in the standard 10 year repayment plan. You wish to pay them off sooner, but you are being realistic here.

Monthly payment of student loans at 7% interest on 10 year repayment plan: $5,341 x 12 months = $64,092
= $42,250 left after taxes and student loan payments (or $3,520 monthly)

Now you get to pay for health insurance, and since your income is $150,000, you don't qualify for any subsidies (while the person making $45,000 and paying $90 in income taxes sure does qualify), disability insurance, life insurance, and forget retirement savings for the next 10 years. Lets say all these insurances cost you $800 per month, now you're down to $2,720 to pay for rent/mortgage, food for 4, clothes for 4, cars, gas, auto repairs, car insurance, personal items, entertainment, travel, utilities, cable and internet, and everything else you and your family want or need. Sounds doable? Sure, if you live like a resident for 10 more years, but not exactly worth the investment.

That's why factors like living in a state with no income tax is important. This wasn't even considering owning a home (in this financial situation, it would be a bad idea) which would add property taxes, private mortgage insurance, and home repairs to the budget. This is why choosing a specialty that makes more than $150k or even more than $200k or $250k, depending on your unique circumstances, is important. Once you are a 3rd or 4th year, you cannot change what kind of debt you will have by much anymore, that is a fixed variable, so it does no good to say "well, you should have somehow taken out less loans" at this point. Better advice would be to consider income when choosing a specialty. Nor can you change how much taxes you will pay. That is also fixed. The only thing you can really change is your income.

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[DocEspana]

Federal income tax absolutely does NOT apply to many, many jobs in existence. Take a job paying $45,000 for a family of 4:
Tax liability (http://www.calcxml.com/calculators/federal-income-tax-calculator): $798
Earned income tax credit (http://www.bankrate.com/calculators/tax-planning/earned-income-tax-credit-calculator.aspx): -$706
Total tax liability: $90, or an effective tax rate of 0.2%

Compare that to someone making $250,000. Same situation, family of 4:
Tax liability: $51,706 (of course at this income, all tax credits have been phased out)
This is an effective tax rate of 20.7%

So, clearly you are absolutely wrong that income tax impacts high earners less than lower income earners as a proportion of income. The person who makes $45k pays 0.2% of their income vs. the person who makes $250k pays 20.7% of their income. And this doesn't even include other tax credits like the home mortgage or student loan interest deduction which would get the $45k person down to $0 (in fact, the $706 earned income tax credit is refundable, so they will take away a net profit of $706 if they use any credits to negate the $798 liability) and make them part of the 47%. Unfortunately the person making $250k won't be able to use any of these credits because they are all phased out at their income level and they will be stuck at the 20.7% rate.

Rather than take theoretical examples, as you have, why dont you click the links I listed in the post you disagreed with and see that the actual reality is that increasing income (beyond a certain point, its curved) leads to decreasing tax burden. Not the "lets look at one isolated aspect of it and assume nothing else has any impact on what you end up paying", and instead the actual functional tax rate the people see.

 

[DocEspana]

Who in the world pays off their loan on a 10 year 100% repayment plan? you're kidding right? You realize you can do a 10 year income-based (which can become 20 year income contingent if you fail to qualify during the 10 years) and count 3-7 years of residency towards that repayment program. At which point your payments range from $0.00 a month to about a max of $500 per month at rough fellowship rates.

Even at attending rates. If we are using the make believe $150,000 figure its going to be your post-tax income... $103,000.... and 10% of that: $10,300, per year. So about $850 per month.

infinitely more affordable than the >$5,000 you quote.

 

[a runner]

Rather than take theoretical examples, as you have, why dont you click the links I listed in the post you disagreed with and see that the actual reality is that increasing income (beyond a certain point, its curved) leads to decreasing tax burden. Not the "lets look at one isolated aspect of it and assume nothing else has any impact on what you end up paying", and instead the actual functional tax rate the people see.

DermViser already answered this point. Didn't you read it? I'll repeat it. Doctors don't get to use the capital gains tax rate of 15%, nor are they privy to the tax deductions of rich and wealthy investors. But don't worry, Obama raised it to 20% for next year. Yes, a doctor who makes $150,000 or above will pay a higher effective tax rate than an investor who makes double, triple, or even in the millions. The reason is capital gains.

 

[DocEspana]

DermViser already answered this point. Didn't you read it? I'll repeat it. Doctors don't get to use the capital gains tax rate of 15%, nor are they privy to the tax deductions of rich and wealthy investors. But don't worry, Obama raised it to 20% for next year. Yes, a doctor who makes $150,000 or above will pay a higher effective tax rate than an investor who makes double, triple, or even in the millions. The reason is capital gains.

This is getting way off topic. But I can only assume you didn't bother reading the article at all. And it's fine to have dissenting opinions. But a little lame to comment as if you read the links when you didn't

 

[a runner]

Who in the world pays off their loan on a 10 year 100% repayment plan? you're kidding right? You realize you can do a 10 year income-based (which can become 20 year income contingent if you fail to qualify during the 10 years) and count 3-7 years of residency towards that repayment program. At which point your payments range from $0.00 a month to about a max of $500 per month at rough fellowship rates.

infinitely more affordable than the >$5,000 you quote.

Who in the world? Who in the world indeed. That would be everyone so far. As of today, there is not one person who has received forgiveness, so everyone who has done it has done it by paying it 100% off. That's the way they used to do things, you know, by actually paying the loan off.

1) Most (we're talking >95%) physicians don't qualify for the "10 year income-based" plan (Public Service Loan Forgiveness) because their employment doesn't qualify. So that leaves the 25 year plan (or 20 year plan if you qualify... I don't, and many of my classmates don't either... we had loans before Oct. 2007).

2) If you don't want to wait 20 or 25 years for your loans to be forgiven, the 10 year standard repayment plan is what you're left with.

3) There is no absolute guarantee of loan forgiveness being around in 25 years (although I think - and hope - it will).

 

[a runner]

This is getting way off topic. But I can only assume you didn't bother reading the article at all. And it's fine to have dissenting opinions. But a little lame to comment as if you read the links when you didn't

I posted above why I think the loan and income information is relevant to specialty choice for this generation of DO students. It must be nice to come into a thread, post a bunch of misinformation, and then say any dissent or factual repudiation of that misinformation is "getting off topic."

Yes, I read the article. The fact that I read the article leads me to question whether you yourself actually read your own article. Either you did not, or you failed to understand the content of it, if you are referring to the NY Times article you posted entitled "High Income, Low Taxes, and Never a Bad Year" which I can only assume. The article talks about... capital gains! Yes, the very thing which I'm talking about. Answer me honestly, did you read the whole article you posted? If you did, you should understand what I mean when I say that it all revolves around capital gains.

All of these high income earners paying relatively "low" effective tax rates are not doctors. Unless they have become a rich doctor that invests a lot and gets most of their income not from clinical activities, but from investments. Now can we accept the fact that doctors are just going to have to pay some of the highest effective tax rates in the US and get back onto the topic of specialty choice?

 

[a runner]

Here is my own list of lifestyle specialties with good income for the average student:

Pathology - can't beat the lifestyle and the pay can be well above primary care ($250k+) if you are willing to do a fellowship and move anywhere for a job, also a completely uncompetitive specialty for US seniors (both MD and DO).
Psychiatry - ok, this is the only specialty that beats pathology as far as lifestyle, the pay and job situation is more stable than path because there is a shortage, but pay is lower on average than path, obviously you have to have the personality for it.
Anesthesiology - this is not a competitive field anymore, and the below average student should be able to get in somewhere if they apply broadly, great pay, mediocre to not so great lifestyle.
Internal Medicine (primary care) - about the same competitiveness as anesthesiology, the pay isn't very good, so if you have average loans or live in a high cost of living, high tax state, not a great option, but the lifestyle can be pretty good in outpatient practice, probably better than FM.
Rheumatology - one of the least competitive IM subspecialties, the pay is a little better than general IM, and the lifestyle seems better too.

All in all, for a below average student, I think (based on your interests) that pathology, psychiatry, and anesthesiology are the best options. IM and some of the subspecialties such as rheumatology can be good options if that really interests you more than the others, but the pay/lifestyle equation probably is not as good.

I guess you could say that the below average medical student is still right on PPAR to make it to happiness.

 

[DocEspana]

I wanted to get back on topic four posts ago. Haha. And I'm glad to be back on topic. Arguing this stuff always breaks along ideological lines that don't need to be here.

 

[DermViser]

Actually what DermViser said is not false at all. He/she specifically said 47% pay no federal INCOME tax and said nothing about payroll tax. You changed the discussion to include payroll taxes, which is a separate program entirely, as are sales taxes and property taxes. Nobody is saying that 47% pay NO TAXES AT ALL. There is no possible way to tease out all the ways we are taxed. That $5 burger? You just paid part of the corporate taxes that business pays through the costs being passed on to you. You just paid part of the employer portion of the payroll tax. You just paid part of the property taxes on the building that serves the burger, not to mention the property taxes on the company's corporate headquarters building. You just paid part of the sales taxes that the burger joint paid for any supplies it uses. Not to mention sales taxes on the burger itself, which is easily visible and calculable.

The reason payroll taxes are considered separately are because they are "supposedly" paying towards your future retirement and there are caps on how much social security will pay. If you make $300k per year on average during your career, you are not going to get more in social security than the person who made $50k average over their career, so why should they pay so much more? That is why there is a cap at around $117k, and going up every year (even though the median income is stagnant at best).

And wow, you are actually the one who has it completely false. That 47% figure has nothing to do with overpaying on taxes during the year and receiving a refund at tax time. It has nothing to do with whether or not you get a refund. Like you said, refunds only have to do with whether or not you overpay or underpay during the year. This 47% figure is not referring to that, it is referring to the simple fact that when taxes are calculated after the end of the year (regardless of whether or not a person gets a "refund"), 47% of them owe $0 taxes. Not everyone who gets a refund owes $0 in taxes. You could have paid $2000 in federal income taxes during the year and at the end of the year your tax liability is only $1500, so you get a $500 refund. That DOES NOT mean you are in the 47%, you would in fact be in the 53% who paid taxes ($1500 to be precise). The 47% owe $0, absolutely nothing, nada, in federal income taxes, and most of them actually have a net gain in money because of refundable credits. It's really simple, isn't it?

Yup it's an easy non sequitur for people like @DocEspana to revert to. I never said they don't pay ANY taxes. I said they don't pay ANY federal income taxes. Most doctors are not paying a lower income tax than their bracket puts them in, bc nearly their entire tax comes from salary.

 

[user3]

Allow me to illustrate why all this talk about income, income taxes, loans, etc. is relative to the discussion about specialty choice for many (if not most) DO students. Here is why $150,000 may not be enough for a lot of students:

$150,000 income, family of 4, state of California
- Federal income tax liability of $24,138
- Social security tax (6.2% up to $117k) of $7,254
- Medicare tax (1.45% of all income) of $2,175
- California income tax of $9,075
- CA state disability insurance tax of $1,016
= $106,342 after taxes

Now, lets say you have $30,000 in loans from undergrad (pretty standard) that is now about $40,000 after 9 years (2 undergrad, 4 med school, 3 residency) of interest on the unsubsidized portions at 6.5%. Lets say you took out $300,000 in loans for DO school (a reasonable amount that many students must take out), which are now at $420,000 after 5 years (2 years of med school and 3 of residency) of interest at 7% (average of 6.5% for Stafford and 7.9% for GradPLUS). So you have a total of $460,000 in loans post-residency and you are placed in the standard 10 year repayment plan. You wish to pay them off sooner, but you are being realistic here.

Monthly payment of student loans at 7% interest on 10 year repayment plan: $5,341 x 12 months = $64,092
= $42,250 left after taxes and student loan payments (or $3,520 monthly)

Now you get to pay for health insurance, and since your income is $150,000, you don't qualify for any subsidies (while the person making $45,000 and paying $90 in income taxes sure does qualify), disability insurance, life insurance, and forget retirement savings for the next 10 years. Lets say all these insurances cost you $800 per month, now you're down to $2,720 to pay for rent/mortgage, food for 4, clothes for 4, cars, gas, auto repairs, car insurance, personal items, entertainment, travel, utilities, cable and internet, and everything else you and your family want or need. Sounds doable? Sure, if you live like a resident for 10 more years, but not exactly worth the investment.

That's why factors like living in a state with no income tax is important. This wasn't even considering owning a home (in this financial situation, it would be a bad idea) which would add property taxes, private mortgage insurance, and home repairs to the budget. This is why choosing a specialty that makes more than $150k or even more than $200k or $250k, depending on your unique circumstances, is important. Once you are a 3rd or 4th year, you cannot change what kind of debt you will have by much anymore, that is a fixed variable, so it does no good to say "well, you should have somehow taken out less loans" at this point. Better advice would be to consider income when choosing a specialty. Nor can you change how much taxes you will pay. That is also fixed. The only thing you can really change is your income.

what about exemptions, deductions, credits, etc? iirc, the state income and state payroll taxes are deductible, in addition to personal exemption/standard deduction for each spouse + the dependent tax credits for the children. and mortgage interest (and property taxes?).

 

[a runner]

what about exemptions, deductions, credits, etc? iirc, the state income and state payroll taxes are deductible, in addition to personal exemption/standard deduction for each spouse + the dependent tax credits for the children. and mortgage interest (and property taxes?).

These are good points, and some of these things I've thought about before or have experience with. Maybe others know more.

1) Exemptions are included in the above calculations (the website I used asks for them, and the deductions are based on a family of 4).
2) State income and local sales taxes are deductible only if you itemize your taxes. In most cases, people are better off taking the standard deduction, which was already included in the calculations. You can either take the standard deductions or itemize, not both.
3) Tax credits: in general, doctors will not qualify for many tax credits because most tax credits are completely phased out by ~$110k -$150k for married filers filing jointly.
4) It was assumed someone in that situation would rent, but if they did own a home, property taxes would be additional costs that would increase the total tax burden. Again, they wouldn't be deductible on federal taxes unless itemizing taxes.
5) Child tax credit: this person wouldn't qualify because it is completely phased out at $110k.
6) The home mortgage interest deduction is one of the few deductions a doctor might be able to use, although it does start phasing out at $166k, albeit slowly.

 

[da Vincis World]

This is getting way off topic. But I can only assume you didn't bother reading the article at all. And it's fine to have dissenting opinions. But a little lame to comment as if you read the links when you didn't

This isn't a case of dissenting opinions. And before you ask....no, I did not read the article. I did however read your posts and they prove that you just don't know much about how taxes work.....certainly not enough to be giving your opinion and arguing with someone who does.

 

[romanjetfighter]

Wouldn't 30k borrowed at 6.5% interest be 52k after nine years?

 

[ChineseKid]

This thread got some good information!

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[GUH]

Wouldn't 30k borrowed at 6.5% interest be 52k after nine years?

Yes, assuming you make no payments.

 

[a runner]

Wouldn't 30k borrowed at 6.5% interest be 52k after nine years?

Yeah, it would. I didn't want to be overly pessimistic so I assumed that since it was undergrad, that a lot of students would have ~1/2 off their stafford loans subsidized and pay no interest during school at least. I mistakenly assumed subsidized stafford loans don't accrue interest during residency... they do (unless you're under IBR, then I think they the interest is paid for 3 years, only on the subsidized portions though).