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Retirement Planning for Locum Tenens Physicians: Understanding Defined-Benefit Plans

Retirement Planning for Locum Tenens Physicians: Understanding Defined-Benefit Plans

Today more than ever before, locum tenens is the career path of choice for physicians seeking greater independence and career flexibility, as well as a wider range of prospects and opportunities. However, one question persists: What kind of retirement planning should physicians working locum tenens pursue?

In the past, locum tenens professionals were largely perceived as mostly retired or semi-retired physicians interested in continuing their careers on a more part-time basis. However, today's typical locum physician represents a much wider — and younger — demographic. These are the physicians who are embracing locums work as a means to enjoy a variety of unique benefits, including:

  • A more flexible career, with the chance to take breaks in employment between assignments
  • The opportunity to gain experience in a greater variety of practice settings over a shorter period of time
  • The chance to gain new skills by working in a wider variety of facilities

Visit this page to learn more about the benefits of a locum tenens career.

But for these younger physicians, one of the central benefits of locum tenens work — the independence and freedom it allows — can also present something of a challenge. Namely, how do locum doctors make up for the financial security of a regular, full-time job? How can they build a retirement portfolio without a 401(k) to rely upon?

Retirement Planning for Locum Physicians: The Details on Defined-Benefit Plans

To begin with, locum tenens and retirement planning for physicians are not strangers to one another. After all, many physicians pursue locum tenens work to make additional money in the first place. For many younger doctors, those financial incentives are often tied to a desire to more quickly pay off medical school loans. But for many others, the ability of locum tenens work to provide an additional source of income — i.e., the chance to earn a secondary wage on top of one's full-time position — is precisely in pursuit of a more comfortable retirement.

Nonetheless, effective retirement planning without a 401(k) can be tricky. Luckily, physicians do have several attractive options. Foremost among them is likely a self-employed retirement plan, also known as Keogh retirement plans or SEP IRAs.

While these self-employed/Keogh retirement plans come in a number of forms, the most commonly used by physicians is the defined-benefit plan. This type of retirement plan "acts as a traditional pension plan, but for one key fact: you fund it yourself," explains CNN Money. "You pick the annual pension you want, then contribute (and deduct from your taxes) whatever amount is needed to reach that goal."

Because defined-benefit plans are designed specifically for those who are self employed and earn a high income, that are often cited as effective for physicians, and especially late-career physicians.

The New York Times tells the story of Dr. Timothy Georgelas, a Texas radiologist who credits the plan "with giving him financial security after 32 years as a doctor in the Army and Air Force."

Dr. Georgelas, who was 61 at the time of the article, "said that when he retired from the military in 2001, he went into private practice and within three years was making nearly triple what he had made in the Air Force. With that and his military pension, he said, he was earning more than he and his wife needed to live on, so he wanted to find a way to save some of it for retirement."

“It was really appealing to set aside a good chunk of money every year,” he said. “It was mind-boggling.”

"The I.R.S. allows a maximum annual contribution to the plan of about $255,000 for people in their 50s," the Times article adds. "Total holdings in the plan are limited to $2.3 million to $2.4 million, enough to cover the maximum allowed payment in retirement of $200,000 a year." (It's worth noting that this article dates from 2012, and may reflect slightly outdated figures; however, the legal basis remains in place.)

Defined-benefit retirement plans can be "complicated to set up, and the paperwork required if you own one is considerable," the CNN Money article points out, recommending consultation with a financial adviser for those who pursue this type of retirement planning for locum tenens positions. (This guide from The Charles Schwab Corporation is a great starting point as to what is and isn't allowed.)

These are just three of the most utilized methods of retirement planning for physicians who work locum tenens assignments (as well as those who run their own practice). If you're interested in learning more about the retirement planning options available to you, we encourage you to speak with your Staff Care recruiter, who will be able to walk you through more of the available options and determine which will best suit your own personal goals and career aspirations.

Looking for more information? Contact a Staff Care representative here. Or, if you're looking for new physician career opportunities, you can search all available locum tenens jobs from Staff Care here.

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