Company Match Q&A Part I

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Anyone who enjoys getting 100% instant return on their invested dollar is excited about getting a company match. However, the information on how exactly the employer match works is not easy to obtain, especially for a large organization like UAHN or BUMC. Adding additional complexity is the transition from UAHN to BUMC employees.

I spent 30+ hours trying to get the answers to my following questions about the up and coming Banner employee match for our 401k. Much of this was spent finding the right person who really knows what they are talking about, in this case, it’s Jan White at Banner Health (System Coordinator for the Retirement Plans who has been with Banner for 43 years now.)

Another part of this pursuit for answers is to persist and not mind repeating myself, asking the same questions in different ways to get clarifications. Since it took me numerous emails and phone calls over several months just to get to the right contact person, Jan White, I complied a Q&A for you all so that you don’t have to waste your time.

 

This Q&A is long, so there will be part I, II, and III. Check back next 2 weeks for Part II and III.

 

Question 1.

What is the date that residents/fellows transition to Banner employees & become eligible for the BUMC employer 401k match?

July 1st, 2016.

 

Question 2a.

Starting 7/1/2016, how will we qualify for Banner match our retirement contribution?

You will be entitled to a match from Banner Health as long as you have been employed with UAHN for at least one year by July, 2016. 

So if you are a pgy1 who is staring with Banner 7/1/2016, you will need to wait a year. But if you have been employed by UAHN for > 1 year prior to 7/1/2016, Banner will match your contribution starting the first paycheck of July 2016.

DFD DRB

Apply to DRB by clicking here, you will get $300 cash bonus and WCW will get a referral fee when you sign your contract. Win-win!

Question 2b.

For those who started working at UA/banner later than 7/1/2015, how long do they have to wait until they can get the 4% banner match?

The company match begins the first pay period following your 1 year anniversary.

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Apply to Earnest by clicking here, you will get $300 cash bonus and WCW will get a referral fee when you sign your contract. Win-win!

Question 3a.

When we transition from UAHN to Banner employees, can I continue to contribute to my current 403b Roth & still get the Banner match?

Banner only offers the 403b/403r to registry staff.   Banner does not match either the 403b or 403r plans.  All other employees are eligible for the 401k/401r plans only and Banner only matches the first 4% of contribution to the 401k (pre-tax portion, not the post tax 401r portion).  In other words, Banner does not match 401r (Roth).

 

Question 3b.

Who are the registry staff? Are all residents/fellows NON-registry staff? Will residents/fellows be qualified for 403b/403 roth at any point?

Registry is generally nurses who serve all and may or may not work very often depending on staffing needs.  Yes, I [Jan] do not know of any resident that would be in a registry position. No you would not be eligible at any time for the 403b/403r.

There are 2 more posts re the Banner Match coming up in the next few weeks. Stay tuned.

All I ask is if you find out anything else about benefits, please comment below so all of us can “benefit” from your quest for knowledge.

 

“Sharing is caring.”

 

Best of Both Worlds: More Cash Now & Lower Costs

I have been hearing from many of my co-residents that they are barely making ends meet each month, paying for rent or mortgage, student loan, food, childcare costs, etc.

Wouldn’t it be nice if somehow we can free up some cash either to address our current needs or to save for future?

Every academic year, we get a pay raise of a few thousand dollars. With that, came higher taxes and higher monthly student loan payments (majority of my peers has selected income based repayments). Some of my peers have even opted to defer (not pay a dime) because they rightfully think that a couple hundred bucks/month is too valuable to now to be throwing at their student loans undergoing negative amortization (ie. the income based repayment that they pay does not even cover the interest accrued each month on their principle debt.)

So most of us PGY’s line up at two ends of the spectrum.

One end: Give me my money now…

and I will deal with my ballooning student loan snowballing at 7+% interest rate and delay my retirement savings for another half a decade. I will make so much more money as an attending than as a PGY. What little I can do today is both PAINFUL to me NOW and NEGLIGIBLE in the long run.

The other end: Give me money later…

I have a plan to help me reach financial freedom. No matter how little my current income seems compared to my future income, I will use a portion of my current income to build my net-worth via a combination of investing and paying down debt. Knowing the time value of money and the nature of compound interest, I know what little I do now makes a big difference in the long run.

But what if you can balance the 2 approaches?

Give me the money NOW and charge me less interest for it.

Refinancing your student loans as a PGY (resident/fellow) was unheard of prior to 2015. But DRB decided to refinance PGYs’ student loans as early as a 4th year medical student with a contract in hand (a few weeks after Match Day.)

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DRB also requires only $100/month payment until 6 months after training completion. A lower interest (DRB rates above) than 6.8% government loans and 7+% private loans save you money effortlessly regardless what you choose to do with your student loans while in training (pay down aggressively or only the monthly minimum or any style in between.)

$100/month is almost always less than income based repayment plans offered by our government ($345 for Repay; $517 for IBR for a single resident in AZ making $59,000). You can check your personal case here at the federal student aid website.

So by refinancing, you free up a couple hundred dollars/month to do as you wish while allowing your loan to compound @ a lower interest rate, saving you 10’s of 1000’s dollars over the life of the loan.

Click here to submit DRB application.

Now that you have this newly freed up cash, you can put it in your 401k (starting 7/1/2016* for UAHN transitioning to Banner employees) and get instant 100% return as Banner will match your contribution dollar for dollar up to 4% per paycheck.

What does refinancing your student loan get you?

  • You lower your interest rate from 7%.
  • You lowered your minimum monthly student loan payment to $100/mo.
  • You consolidated all your government and private student loans for simplicity and potentially free up even more cash (if you wish.)
  • You may now direct your freed up couple hundred dollars to get instant 100% return (from Banner match) AND enjoy additional daily growth in the investment instruments you choose (available via your company).

When you borrow $1 at <7% interest, and make $1 instantly from match, then plus 5% annual growth going forward that on 2 dollars, the impact of this small amount is tremendous in the long term.

*If you work somewhere else, check with your Human Resources Department, you may already have a employer match for retirement savings. Start taking advantage of the match now. It is salary left on the table if you don’t claim it.

As calculated in a prior post, $5.5/day + dollar for dollar company match (up to 4% per check) during pgy2-pgy6 will likely grow to $23,466 upon training completion.

That’s $10,000 you re-directed from your refinanced student loan (@ the new, lowered refinanced rate), which got you 134% gain over 5 years.

A pretty nice graduation gift to yourself, won’t you say?

  • Have you applied to DRB to refinance your student loans?
  • Do you plan to pay off your student loans or to get Public Service Loan Forgiveness?
  • Do you have private loans that can not be forgiven and yet you have not refinanced?
  • For those in deferment, with the PGY pay raise coming in less than 6 months, can you afford the $100/month DRB repayment? (*hint, this $100/month is great investment, as over 6 years, it can save you 40k.)
  • What would you do with the extra cash you get from paying only $100/month in student loans rather than the couple hundred dollars you are now paying under IBR, REPAY, or PAYE?

 

Where to put limited PGY dollars?

As we become aware of how the time value of $ works against us (student loan interest), we will also learn about how it works for us.

After refinancing your student loan, not only do you enjoy paying off an overall smaller student debt but also re-directing freed up cash flow to build your net worth more effectively.

If you have not refinanced your student loan and are quite sure that you are not going for PSLF, please do so now (interest rate is rising.)

The following slides suggest where you can put your limited PGY dollars to work most effectively for you. My current employer Banner offers 4% for retirement contribution, I highly recommend that you find out about and take full advantage of your company match. Instant 100% return through a employer match, on however small an investment, goes a long way. 

 

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Since Banner offers 4% annual salary match to residents/fellows, a pgy2 can get approximately 2k match for 2k contribution. To claim all the 2k Banner offers, PGY needs to redirect $5.5/day of cash flow towards retirement savings.

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*So cut the daily Starbucks Latte out and get the hospital coffee instead (free with our meal cards), you will have 40k more in retirement.

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The following slides explain why I recommend ROTH (post-tax) contribution over traditional (pre-tax) contribution /taxable brokerage accounts.

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Why I don’t recommend buying MORE clothes with our limited PGY dollars.

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  • Where are you putting your PGY dollars?
  • After you see the impact of time value of money, how would you re-direct your cash flow?
  • Looking back to years in medical school, how would you have used your “borrowed” cash differently?

Student Loan Refinance 101

After writing up my first peer-to-peer presentation on personal finance for PGY’s, I decided to divide the presentation up into 2-3 posts as these slides illustrate important points.

Since high interest rate student loan is one of the MAJOR way (aside from high interest consumer/credit card debt) that time values works AGAINST us, this first post is focused on how to turn this adversity around by refinancing student loans. 

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* Assuming no payments since payment styles vary by individuals. Given any particular payment style, lower interest rate still translates into savings and becoming debt free sooner.

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In summary, refinancing your student loan means

  1. lower interest rate– effortless savings
  2. increased cash flow–$100/mo payment in training is much less than IBR payment
  3. for many pgy’s, this may be the ONLY way to fund retirement/ get company match or simply to make ends meet (without dipping into more consumer debt/higher interest debt)
  4. the only thing you forgo is the opportunity to your loans forgiven. (except for those who are willing to limit their job options and to take a smaller paycheck working for 503c, you are not missing much.)
  5. For those currently deferring (not paying a dime), it sure is a deal hard to reject, when you get 40k in return for 7k investment towards your student loan (detailed in the last slide above.) i’d say yes to spending $100 less per month in a heartbeat if it meant I get nearly $500 in return for the $100 I pay towards a refinanced student loan.
  • Have you refinanced your student loan(s)?
  • What was your experience doing so?
  • Why have you NOT refinanced your student loan(s)? How is that working out for you?

$1 Goes a Long Way Today

A few co-residents/ attendings have suggested that I present a talk on personal finance for doctors. Though not a fan of public speaking, I finally drummed up the courage to do so. My supportive program director gave me Friday 1/29 lunch conference time for this talk.

Although I don’t have a degree in accounting, tax law, or business, I firmly believe in DIY personal finance. For the simple reason that no one else will care to maximize my hard earned dollars more than I do.

I am also learning each day that doctors are targets for financial exploitation by innumerable sectors of the financial industries (from real estate, car dealership, insurance sales rep, to financial advisers, you name it, whenever you sign, charge, or write a check.)

The goal of this site and discussions are to raise some awareness regarding personal finance in my professional community so that we can take charge of our financial lives, rather than becoming lambs roasted for the feasts of financial professionals.

Here’s an illuminating post by White Coat Investor on financial advisers. I hope the numerous attending physicians who commission financial advisers to manage their hard earned money read this post and learn about the opportunity cost of paying (especially commission based) “professional(s)” to manage their money.

 

I decided to title my talk, hopefully the first of many, “A Dollar Goes a Long Way Today/in Training”. This post will be an outline for a series of presentations.

The series will cover,

  • How does a dollar go a long way today/in training?
  • Where do I put my dollar?
  • How do I make an extra dollar?
  • How do I stretch my dollar?
  • The true value of a dollar.

 

  • How does a dollar go a long way today/in training?
    • Time Value of Money
    • Lowest tax bracket in our lives going forward
    • Refinance student loan to a lower rate Pronto

 

  • Where do I put my dollar?
    • Get company retirement contribution match (1 dollar becomes 2 instantly)
    • Pay off student loan (high interest debt reduction = guaranteed high return)
    • Contribute to ROTH space (pay taxes now and never again)

 

  • How do I make an extra dollar?
    • Moonlighting
    • Credit cards with cash rewards
    • Embrace your inner nerds (be a tutor or a consultant)

 

  • How do I stretch my dollar?
    • Refinance your student loans (lower interest means faster pay off and/or greater cash flow per month to put your dollars elsewhere)
    • take advantage of 0% interest offer from credit cards (interest free money gives you Time Value of money for free.)
    • Monitor and optimize your credit score (high score means better deals-interest rates, terms- on all major purchases from a house to a car)
    • only use credit cards that pay you back: in tax free dollars, miles, or gift cards

 

  • The true value of a dollar.
    • Recognize your values.
    • Acknowledge your priorities.
    • Spend your dollar on what makes you the happiest.

 

Any other topics I should include for this introductory series? Any request on additional topics?  If you are giving a talk on personal finances in training, what would be your take home points?