In a culture of ‘more is better’ it can be hard to develop healthy external breaks. Seeing more patients, having more kids, exercising more, reading more books, adding one more hobby into the mix and saving a little more for retirement, are all thoughts that are propagated by that go-getter inner voice.
The same voice tells you that you cannot get rid of your car and just use a bicycle, you cannot move into a studio with children and be happy, you cannot leave your state and move to a lower cost state and you cannot get by on a $3,000 per month budget.
So when could a doc drop down to part-time work and still be able to meet their financial goals?
Your Passion For Your Work
Sure, you may say “I love what I do, why would I cut back?”. If you are in that category then you probably aren’t reading this post. But, there is more to life than working. I recently wrote about how it could be very beneficial to work hard the first few years out of residency to use ‘money momentum‘ in order to build a strong financial base. However, at some point you may want to spend more of your day doing the things you want outside of work. You can still be passionate about work without working most days of the month at your job. You never know what other passions you might discover just beyond your job.
What Happens To Your Money When Your Income Drops
So that’s the meat (vegan meat, of course) of the question isn’t it? We are worried that by dropping down to part-time our income potential will drop drastically which could adversely affect our savings for retirement. After all, who wants to live off cat food in their retirement years.
But let’s play this out as an example. If you have $250,000 saved up with no debt and you drop down to part-time, your money will continue to grow as long as you invest it. You may decide to add nothing to it or just add whatever you can. Even if you added the current limit for a deductible IRA ($5,500/yr) you could see your savings grow to nearly $750,000 after 20 years. I am assuming here that you will have your money invested in the broad stock market with a healthy asset allocation possibly including some bonds. I used 4% as the compounding interest rate.
Realistically, you will max out your tax-deferred limits which means you will probably add $18,000/yr to your 401(k) and add the $5,500 to your IRA which may be deductible now that your income is lower. With this new total annual addition to your savings you could expect to have approximately $1.2 million saved up after 20 years.
Things To Consider Before Dropping Down To Part-Time
Larger medical groups, in order to recruit docs, will give you full benefits up to a certain percentage of full-time work. My medical group allows you to drop down to 50% and still will pay for full health benefits similar to that of a full-time employee. Life insurance and disability insurance are also the same whether full-time or part-time. The only thing that’s affected is vacation and educational time accrual since you accumulate those based on the number of hours worked.
Some medical groups don’t allow you to get below a certain percentage. Even worse, some may allow you to get to a certain percentage but will make it almost impossible for you to get approved for the change. This is a good time to ask more seasoned colleagues to get a feel for management.
Advantages of going part-time is that you may now qualify for a deductible IRA as mentioned above. You may drive your car less, so lower commuting costs. You may have more time to exercise, which means better physical and mental health. I also find that employees who are part-time are less likely to get dragged into work drama. And I don’t know if this is true but seeing fewer patients might decrease your risk of a bad outcome.
In Summary
Cutting back to part-time work doesn’t mean that you have to live off your savings. It also doesn’t mean that your money stops growing. If invested wisely then your money can still grow even with little addition from you. And remember, you can always switch back to full-time work if you find that the numbers don’t work out well for you.
Have you tried going part-time at your job?
Are you considering switching to part-time sometime in the future?