Highly Recommended Reading on Letters of Recommendation
You know how Netflix or Amazon recommendations sometimes make you feel like, wow, they’ve really nailed me? Well, fortunately or unfortunately, there is no such algorithm (yet) when it comes to education or career candidacy. A letter of recommendation (LOR) is a required and important component of an application for medical school, residency, and fellowship. It may be requested in written or verbal form for radiology jobs and is a key element of promotion packets.
Potential-newsflash: they actually really do matter! While it might feel like just another box to tick, don’t check-out when it comes to this important piece of the process. The quality of the letter can mean the difference between getting a position and not being considered. Maximum effectiveness of LORs depends on actions taken by both the person asking for the letter and the person writing the letter.
I’ll discuss each in succession, followed by a handy recap of key points. And as a bonus, I’ve provided a sample LOR. Feel free to plagiarize any part of it; I pinky-promise not to rat you out (technically it won’t be plagiarizing since I’m giving you my permission!). Whether you need to procure one or pen one, I’ve got you covered with the following helpful tips:
If you are asking for a letter of recommendation
Develop relationships
This should happen months or years before you need a letter of recommendation and is good practice for career-building in general. Although trite, the cliche “it’s not what you know but who you know that matters” is no less true. Ideally, a candidate will develop relationships with those who have influence in the field they wish to pursue or with those who can support a candidate’s promotion from a place of authority (e.g., section chief, department chair).
Don’t limit your support team to people in your own department or at your own institution. Email and social media has made it easy to develop relationships from afar. LORs from people outside the candidate’s institution may even be more highly considered by hirers or promotions committees because they speak to a candidate’s motivation and initiative.
Choose the right person
Choose people who can genuinely and with passion provide positive and meaningful comments about you. If anyone seems hesitant to serve as a reference, it’s probably best to exclude them from your list. Likewise, it doesn’t serve you well to ask a department chair or anyone else that you don’t have a relationship with to write a LOR. If they do agree to write a letter it might be short and impersonal. Ideally, a writer will be someone who can speak to your suitability for the role beyond which can be determined from reading your curriculum vitae (CV). A soon-to-be graduated trainee should only include supervisors as references (e.g., program director, chair, other faculty members, or research director)—those who are able to speak objectively and with authority about the trainee’s performance.
Prepare your CV
A radiologist’s CV should include contact information, licensing and board certification, past education and training, work experience (including dates, names, and locations of all prior radiology positions), professional appointments, awards and honors, teaching experience, publications, grants/other funding, research experience, and other career achievements as they are relevant to the job for which one is applying.
In the case of a new graduate, the CV should document the relevant education and training up to the time of the interview, including dates, degrees earned, and names of colleges and training programs going back to undergraduate college. Prior work experience should be included if it was professional in nature (e.g., working in a medical research laboratory, working as a school teacher or other profession prior to entering medical school).
Ask nicely
Pretty-please. It’s considered common courtesy to personally ask someone to write you a letter of support. This can be in-person or via email but should come from you. Personal requests demonstrate maturity and respect for the writer’s time and effort. A request from a third party (e.g., dean’s office, chair of a promotions committee) is impersonal and may lead to rejection or worse, to a less than glowing letter. Note: Some promotions committees require arms-length LORs and don’t allow the candidate to solicit the LOR. This doesn’t prevent you from giving a heads up to anyone you might have suggested as a possible reference.
Anything you can do to make the job easier for the letter writer will increase the odds of getting the letter you want.
Suggest language
Do some of the heavy-lifting first. Outline your most relevant accomplishments and share them with the letter writer. You can even draft a complete letter. Anything you can do to make the job easier for the letter writer will increase the odds of getting the letter you want. It also sends the message to the letter writer that you are organized and respectful of their time, both of which will make a good impression.
Provide instructions
If there is a deadline, be sure to share that. And make your request well ahead of the deadline. I suggest a heads up of 4-6 weeks. Writing a quality LOR requires ample time for consideration, reflection, and composition. Asking late in the process may suggest a lack of seriousness. Tell the letter writer about the position, why you want it, and why you are a good match. This will allow the writer to include specific supportive information. If the letter is for a faculty position, the writer should receive a copy of the published job description. If it’s for a promotion, the writer should receive a copy of the institution’s promotion criteria.
If there’s anything in your training/work history that could be construed as negative (e.g., a large time gap between jobs or leaving a job before securing another job), it’s best to address it head-on with the writer should they be asked about it.
Say thank you
Acknowledge the writer’s time and effort by thanking them for their support. When accepted into a medical school, matched into a residency, offered a job, or gotten the promotion, inform the writer of the good news. This closes the communication loop and demonstrates more than anything else the value of the writer’s contribution to your success. This kind of feedback fuels a writer’s motivation to help you again in the future and to help others.
If you are writing a letter of recommendation
Accept only if you are a good fit
Do you know the candidate? How much influence is your experience and role likely to have on the candidate’s success? You may agree to write a LOR even if you don’t know the candidate well, but you should draw a hard line at agreeing to write a letter if it will be negative. You know that saying, damning with faint praise? Well, it’s also true.
Only agree to write a LOR if it can be positive.
Make it honest and positive
Offer honest praise. Don’t exaggerate. State fact. Effusive letters about every candidate you write a letter for lessens your credibility as an honest and fair evaluator. Only agree to write a LOR if it can be positive. If that’s not the case, you can politely refuse, citing that you don’t know the candidate well enough or are otherwise not the best person to write a LOR.
Make it professional
Follow a professional template using professional stationery/letterhead. Although there is no one right way to pen a LOR, there are elements that every letter should include:
- Opening - an introductory statement describing the reason for the letter and the writer’s role and relationship to the candidate (e.g., teacher/student, colleagues, co-authors, shared committee work)
- Body - separate paragraphs that speak to the qualifications of the candidate as they relate to specific requirements for the role; if a promotion letter, each requirement for promotion should be specifically addressed
- Closing - a short 1-2 sentence summary of the candidate’s fit for the role or qualifications for promotion, often accompanied by how the candidate compares with other others who have applied for similar positions or gone up for promotion; a strong closing statement will rank the candidate as the “best” the writer has known or someone who would “definitely be promoted at the writer’s institution”
- Signature - a formal hand-written signature is often required and should be followed by the writer’s professional title (contact information should be included on the letterhead)
Make it personal
Ideally, the writer is familiar with the program the candidate is applying to, or has read the job description, or has reviewed the promotion criteria. The writer can then match a candidate’s unique skills and accomplishments to specific features of the program, job, or promotion requirements.
Referencing specific examples of a candidate’s behavior, performance, achievements, and awards as they relate to the job description or promotion requirements makes a stronger letter than one that provides only generalities or only information provided on the candidate’s CV. Tip: spend some time reading through the candidate’s CV and supporting documents, underline and jot down key items that can be emphasized and expanded on, and mull it over for a while before committing “pen to paper.” Seek and find brief but memorable ways of bringing the applicant to life.
For example, a letter can cull a few articles from the CV and discuss how they provided new information to the academic literature and how they impacted the professional community. This is particularly important if the candidate is going up for promotion based on scholarly activity and needs to show that they have pursued a focused area of research.
A description of the candidate’s teaching abilities can be personalized when they have been directly observed by the writer. This can be accompanied by audience comments and ratings. Online teaching can be documented by the number of students logged on and their geographical locations. This data will support the candidate’s national or international reputation.
Review the final product
A letter that is full of spelling and grammatical errors suggests less than full support from the writer. It may even indicate that the letter was drafted by an “assistant” and signed by the writer. A writer may choose to share the final draft with the candidate before it’s submitted. This allows the candidate an opportunity to correct inaccuracies or suggest additional supportive statements. Candidates are generally very grateful for this opportunity.
Recap
- Develop relationships throughout training and practice that can later be tapped for LORs
- Choose writers who know you
- Personally ask a potential writer for a LOR
- Discuss your CV, the position you seek, and why you want it with potential writers
- Thank the writer and let them know if you got the position or promotion
- Agree to write a LOR only if it can be positive
- Write letters that are professional yet personal, citing specific examples
- Describe why the candidate is a good fit for the position
- Carefully proof the LOR before it’s submitted
Sample promotion LOR
This example shows one way of organizing a LOR for someone pursuing promotion. A LOR for a student or trainee applying for medical school or residency/fellowship or a job will be different but still include the same basic elements: a brief description of the writer, her relationship with the candidate, and the reason for the letter; paragraphs describing the candidate’s specific attributes and achievements that support their fit for the role or justify promotion; and a strong summary statement that ranks the candidate with others.
DIY Guide to Writing Good Multiple-Choice Questions
Do you write multiple-choice questions (MCQ) for the American Board of Radiology, or the American College of Radiology, or for CME meetings or online/printed CME materials? Do you create exams for medical students, residents, or other learners? Perhaps you’ve been writing MCQs for a number of years. Or maybe you’re just getting started and haven’t had any training in creating effective items. Either way, you might benefit from reading this post, if only to validate your mastery of the process.
Preamble - a personal perspective
I’ve chaired committees tasked with writing MCQs for high-stakes radiology exams. I’ve taught the art of writing good MCQs both locally and nationally. I’ve published articles on the topic. I’ve personally written hundreds of items. One thing I’ve learned is that writing good MCQs is difficult and time-consuming. Radiologists often have had little experience or training in item-writing, and, as a group, they are incredibly busy. It’s no wonder that you see items on exams and CME materials that are poorly written (just ask any resident if you don’t believe me).
Q. Why should you care about whether MCQs are effective?
A. The MCQ is the most commonly used test item in radiologic graduate medical education and continuing medical education exams.
MCQs - the devil is in the details
MCQs have their critics, and rightly so. They’re often constructed to measure only rote memorization. They test recognition (choosing an answer) rather than recall (constructing an answer), they allow for guessing, and as I’ve already said, they are difficult and time-consuming to construct.
In addition, MCQs are not the most effective way to test everything worth testing. For example, they are not the best way to test a radiologist’s ability to communicate effectively. An MCQ that asks the learner to recognize benign dermal calcifications on a mammogram does not test the learner’s problem-solving ability or ability to communicate the findings to a patient. Note: A question that provides specific patient information and imaging data and that asks the learner to choose the most appropriate management IS an example of an item that tests problem-solving ability.
When used appropriately, MCQs offer several advantages over other types of test items. They can be used to assess a broad range of learner knowledge in a short period of time. Because a large number of MCQs can be developed for a given content area, which provides a broad coverage of concepts that can be tested consistently, the MCQ format allows for test reliability. If MCQs are drawn from a representative sample of content areas that constitute predetermined learning outcomes, they allow for a high degree of test validity. It’s worth noting that the criticisms of MCQs are more often attributed to flaws in the construction of the test items rather than to their inherent weakness.
Note: MCQ guidelines should be viewed not as absolutes but rather as best-practice principles. In some circumstances, it may be appropriate to deviate from the guidelines. However, such circumstances should be justified and occur infrequently.
Also note: This post does not cover Bloom’s taxonomy of cognitive learning, which is a hierarchy of knowledge, comprehension, application, analysis, synthesis, and evaluation. An MCQ should be written to test at the same level of learning as the objective it is designed to assess.
Anatomy of an MCQ
Characteristics of effective MCQs can be described in terms of the overall item, the stem, and the options. The “item” is the entire unit and consists of a stem and several options. The “stem” is the question, statement or lead-in to the question. The possible answers are called “alternatives”, “options”, or “choices.” The correct option is called the “keyed response.” The incorrect options are called “foils” or “distractors.”
Ideally, the item should be answerable without having to read all of the options.
Stem
The stem is usually written first and is best written as a complete sentence in the form of a question. Direct questions (e.g., Which of the following is an imaging feature of lymphangiomyomatosis?) are clearer than sentence completions (e.g., Lymphangiomyomatosis…). Even a stem that incorporates radiologic images should be accompanied by a complete statement. Ideally, the item should be answerable without having to read all of the options.
The stem should include all relevant information, only relevant information, and contain as much of the item as possible. If a phrase can be stated in the stem, it should not be repeated in the options.
The stem should be kept as short as possible. It should not be used as an opportunity to teach or include statements which are informative but not needed in order to select the correct option. The purpose of an MCQ is not to teach. It is a tool used to determine whether the learner achieved a particular objective, and in some cases, to test the effectiveness of instruction.
Stems should not be tricky or misleading, such that they might deceive the examinee into answering incorrectly. The level of reading difficulty should be kept low using simple language so that the stem is not a test of the examinee’s reading ability.
To test application of knowledge, clinical vignettes can provide the basis for the question, beginning with the presenting problem of a patient, followed by the history (duration of signs and symptoms), physical findings, results of diagnostic studies, initial treatment, subsequent findings, etc. Vignettes do not have to be long to be effective, and should avoid verbosity, extraneous material and “red herrings.”
The stem should be stated so that only one option can be substantiated and that option should be indisputably correct. If the correct option provided is not the only possible response, the stem should include the words “of the following.” When more than one option has some element of truth or accuracy but the keyed response is the best, the stem should ask the examinee to select the “best answer” rather than the “correct answer.”
Questions should generally be structured to ask for the correct answer and not a “wrong” answer. Negatively posed questions are recognizable by phrases such as “which is not true” or “all of the following except.” Negative questions tend to be less effective and more difficult for the examinee to understand. When negative stems are used, the negative term (e.g., “not”) should be underlined, capitalized or italicized to make sure that it is noticed.
The terms “may”, “could”, and “can” are cues for the correct answer, as testwise examinees will know that almost anything is possible.
Absolute terms, such as “always”, “never”, “all” or “none” should not be used in the stem or distractors. Savvy examinees know that few ideas or situations are absolute or universally true. The terms “may”, “could”, and “can” are cues for the correct answer, as testwise examinees will know that almost anything is possible. Imprecise terms such as “seldom”, “rarely”, “occasionally”, “sometimes”, “few”, and “many”, are not uniformly understood and should be avoided.
Eponyms, acronyms or abbreviations without definition should be avoided. Consider the acronyms AAA, RCA, TBI, and BBB. Examinees may be unfamiliar with these terms, and each term has more than one meaning. In such cases, the item becomes a test of whether the examinee understands the meaning of a term, or the item is faulty because a term can be interpreted in more than one way.
The ability of an item to discriminate (i.e., separate those who know the material from those who don’t) is founded in the quality and attractiveness of the distractors.
Options
The most challenging aspect of creating MCQs is designing plausible distractors. The ability of an item to discriminate (i.e., separate those who know the material from those who don’t) is founded in the quality and attractiveness of the distractors. The best distractors are statements that are accurate but do not fully meet the requirements of the problem, and incorrect statements that seem right to the examinee. Each incorrect option should be plausible but clearly incorrect.
Implausible, trivial, or nonsense distractors should not be used. Ideal options represent errors commonly made by examinees. Distractors are often conceived by asking questions such as, “What do people usually confuse this entity with?”, “What is a common error in interpretation of this finding?” or “What are the common misconceptions in this area?”
Distractors should be related or somehow linked to each other. That is, they should fall into the same category as the correct option (all diagnoses, tests, treatments, prognoses, disposition alternatives). For example, all options might be a type of pneumonia or cause of right lower quadrant pain.
The distractors should appear as similar as possible to the correct answer in terms of grammar, length, and complexity. There is a common tendency to make the correct answer substantially longer than the distractors.
The options should not stand out as a result of their phrasing. Grammatical cues, such as when one or more options don’t follow grammatically from the stem, lead the examinee to the correct option. If the stem is in past tense, all the options should be in past tense. If the tense calls for a plural answer, all the options should be plural. Stem and options should have subject-verb agreement.
Because an item writer tends to pay more attention to the correct option than to the distractors, grammatical errors are more likely to occur in the distractors. Note: These problems do not occur when the stem is written as a question.
Options should not include “none of the above” or “all of the above.” “None of the above” is problematic in items where judgment is involved and where the options are not absolutely true or false. It only informs about what the examinee knows is not correct and not what is correct. “All of the above” is a problem because the examinee only needs to recognize that two of the options are correct.
Options should be placed in logical order, if there is one. For example, if the answer is a number, the options should begin with the smallest and proceed to the largest (it is also acceptable to begin with the largest and proceed to the smallest). If the options are dates, they should be listed in chronological order. Also, options should be independent and not overlap with each other.
Summary
If you write a lot of MCQs, especially for high-stakes exams, you can check your items using this “crib sheet”:
Stems
- Provide a complete statement (preferably in the form of a question)
- Include only relevant information
- Contain as much of the item as possible in the stem
- Keep stems as short as possible
- Ask for the correct, not the “wrong” answer
- Avoid absolute terms such as “always”, “never”, “all”, or “none”
- Avoid imprecise terms such as “seldom”, “rarely”, “occasionally”, “sometimes”, “few”, or “many”
- Avoid cues such as “may”, “could” or “can”
- Define eponyms, acronyms, or abbreviations when used
Options
- Keep options grammatically consistent with the stem
- Write incorrect options to be plausible but clearly incorrect
- Link options to each other (all diagnoses, tests, treatments)
- Write distractors to be similar to the correct option in terms of grammar, length, and complexity
- Avoid “none of the above” or “all of the above”
- Place options in logical order (numerical, chronological)
- Write options to be independent and not overlapping
If you want to watch a video on the topic:
ACR video: https://appcenter.acr.org/lcmsVideos/Tips_for_Writing/story_html5.html
If you want to read more:
RadioGraphics articles:
https://doi.org/10.1148/rg.262055145
https://pubs.rsna.org/doi/10.1148/rg.337125749
Vanderbilt University Center for Teaching: https://cft.vanderbilt.edu/guides-sub-pages/writing-good-multiple-choice-test-questions/
Smart Spending: Know Thy Purchasing Personality & Why Money Mindfulness Matters
I’d like to preface this entry by saying: this post is really fun; I’m so excited for you to get past this introduction and read on; just wait for the surprises I have in store for you! But first read the introduction, of course. Please. Money Mindfulness. Or perhaps, “Mindful Spending”, if you’d like. Guess what it is! No, it’s not the latest #trending New Year’s resolution (#moneygoals, #holla4dolla). It’s not the topic of a dope, inspirational TedTalk, gone viral, either. Nope, sorry, it’s also not the title of my new financial wellness self-help book for radiologists.
To be honest, it’s not even a new term or concept; back where I’m from, they kinda just call it, “paying attention to your spending and what you buy.“ You might also call it: “self-explanatory common sense of the commonly ignored variety (as it’s all too easy to fall into spending-related patterns of thinking and behavior that lead to financial troubles)” and/or “life-experience preferable not to learn the hard way.” But, as we are not here to play games (entirely), I’ll get on with it.
Yes, it even applies to you, my high-earning radiologist friends! Did I just catch a whiff of an eyeroll? Well, if so, this post is definitely for you! Below you’ll find some valuable insights, tips, and, yes, a little bit of weirdness to help you brush up on your spending-smarts and to understand what that actually means.
If you’re a radiology trainee, someday you’ll be making an above average physician salary. If you’re a practicing radiologist, you’re already making an average salary of $427K. With that kind of income, you shouldn’t have any money worries—right? Wait—are you telling me you find it hard to meet your expenses each month? This sounds more like a spending problem than an earning problem.
You can’t outearn dumb spending
-Gregory Karp (The 1-2-3 Money Plan)
That quote is a bit misleading so let me explain. I don’t judge you by how you spend your money. Money is a resource that gives us choices, and how we opt to spend money is a reflection of our values. So what is dumb spending? It’s when our dumb-spending self ignores those values to buy something that our smart-spending self wouldn’t.
Are you the person who spent $50 in Beanie Babies thinking they would increase in value? Or $100 on clothes for your avatar when you could have bought clothes for yourself? Have you bought a rare exotic cucumber from a guy who said it would bring you good luck? Or bought a 5-lb bag of peach rings when you were high? These stories were all submitted by people who admitted to “the dumbest things they’d spent money on.”
Now back to the quote. I share it to emphasize that for everyone, no matter how much they earn, there is a limit to how much that income can compensate for overspending.
Keep reading to find out what kind of spender you are and take a voyeuristic look into what people spend money on. Maybe it will trigger some memories of your own dumb spending. And spoiler alert: you don’t want to miss my list of “12 ways you can spend less for more.”
Self-reflection: What kind of a spender are you?
Some people are natural savers who may be viewed as cheapskates and risk-averse (ahem), some are big spenders and like to make a statement, and others take pleasure in shopping and buying. Others rack up debt—often mindlessly—while some are natural investors who delay satisfaction for future self-sufficiency. Many of us may display more than one of these characteristics at given times, but will usually revert to one main type. Note: Radiologists have been well-trained in delayed gratification.
What is your money personality?
Saver
Do you close the refrigerator door quickly to keep in the cold? Do you enjoy looking at your bank and brokerage statements?
Shopper
Do you get great emotional satisfaction from spending money? Do you find it hard to resist buying things you don’t need?
Debtor
Do you make impulse buys that aren’t even satisfying at the time of purchase? Are you deeply in debt? Note: student loans may not count here.
Investor
Are you striving to amass enough wealth to be financially independent?
Why is spending important?
The financial media focuses mainly on increasing income. Get rich in real estate! Let us manage your money and double your earnings! This credit card will give you 6% back!
Indeed, many of you could change jobs and potentially double (or more) your income as a radiologist. In reality, if you want to increase your wealth, it’s often much more effective to increase income than it is to decrease spending.
But there are exceptions. For example, if you’re spending more than you can reasonably earn or you’re living on a fixed income. In these situations, a spending adjustment may be the best strategy.
How does your spending compare with others?
If you want to make a big impact on your wealth through decreased spending, I suggest you focus on the big-ticket items. What do you spend most of your money on? In the U.S., most of a family’s income goes towards taxes, followed by housing (up to a third of overall spending), “other” goods and services (entertainment, clothes, services), transportation, food, insurance and pensions, savings, and healthcare.
If you’re interested, the Consumer Expenditure Survey by the Bureau of Labor Statistics breaks down how people spend their money, including everything from, literally, dollars (contributed to savings accounts) to donuts (bakery).
An average family, with an income before taxes of $78,635, spends their money on the following:
| Shelter | $11,747 |
| Pensions & Social Security | $6,831 |
| Food at home | $4,464 |
| Utilities | $4,049 |
| Vehicle purchases | $3,975 |
| Food away from home | $3,459 |
| Health insurance | $3,405 |
| Entertainment | $3,226 |
| Other vehicle expenses | $2,859 |
| Other housing expenses | $2,270 |
If you’re like most early-career (and even some mid- to later-career radiologists), you will have most or all of the above expenses plus student loan debt. But you also earn, on average, three to five times or more what the average family is bringing in. Most radiologists that I know spend more than $14,017 on shelter and other housing expenses.
So if you’re looking to significantly reduce spending, the first place to start is often housing. The reason housing costs so much is because of the purchase price and mortgage costs, property taxes and insurance (which rise with the assessed value of the house), maintenance costs (which rise with the size of the house), utilities (also more costly in larger homes), and furnishings.
The larger the house and the more expensive your tastes run, the more you will spend on furniture, window coverings, appliances, oriental rugs, artwork, etc. Some experts recommend budgeting 10% to 50% of a home’s purchase price for furniture. That means a $250,000 home would give you a furniture budget of $25,000 to $125,000. Whoa!
Data during a pandemic proves that people’s spending habits can change
If you think you can’t save more or spend less, just look at how U.S. families have changed their spending during the coronavirus pandemic. Roughly two-thirds of Americans, 64%, say their spending habits have changed when comparing August 2019 with August 2020.
Many employees, including radiologists, have been working from home during the pandemic, which typically affects their commuting and dining expenses. But spending in other categories, such as gym memberships, travel, online shopping and even pet expenses, have also changed substantially.
| Category | 2019 Monthly Spend | 2020 Monthly Spend | YOY Change |
| Investments | $940 | $1,334 | 41.91% |
| Pets | $160 | $197 | 23.13.% |
| Education | $699 | $818 | 17.02% |
| Home | $1,831 | $1,997 | 9.07% |
| Food & Dining | $1,862 | $920 | 6.73% |
| Health & Fitness | $270 | $286 | 5.93% |
| Shopping | $766 | $810 | 5.74% |
| Gifts & Donations | $275 | $287 | 4.36% |
| Loans | $583 | $608 | 4.29% |
| Kids | $443 | $431 | -2.71% |
| Personal Care | $133 | $127 | -4.51% |
| Fees & Charges | $139 | $129 | -7.19% |
| Business Services | $355 | $326 | -8.17% |
| Auto & Transport | $670 | $609 | -9.10% |
| Travel | $584 | $458 | -21.58% |
| Entertainment | $120 | $93 | -22.50% |
| Bills & Utilities | $623 | $474 | -23.92% |
| Financial | $871 | $612 | -29.74% |
Source: Mint. The financial spending category includes expenses for services such as financial advisors and life insurance, while the investment category includes actual investments transactions. YOY = year over year
Easy spending changes
As I’ve already said, I don’t judge people by how they spend their money (as I hope they don’t judge me). But if you’re incredibly busy (like most radiologists), with work often spilling into your evenings, weekends, and holidays, you might not be as aware of how your money is spent as you’d like to be.
You might be overspending on things and not realize it, or there may be relatively simple ways you can put a dent in your spending without sacrificing quality of life. In some cases, you might be able to get MORE gratification by spending less.
12 Ways you might be able to spend less for more:
- Say NO to extended warranties and other junk insurance
- Comparison-shop before renewing home and auto insurance (and consider increasing deductibles)
- Refinance your mortgage (at the time I’m writing this, rates remain at or near all-time lows)
- Cancel landline phone service (are you using it?)
- Rightsize and comparison-shop your wireless phone plan (Are you 55 or older? T-mobile offers unlimited talk, text, and smartphone data for $27.50/line)
- Review TV, cable and internet service and beware automatic subscription renewal. Are you using what you’re paying for? Is it time to cut the cord? (Check out this article by yours truly about FREE video services)
- If you’re an impulsive online shopper, let the items sit in your cart for 24 hours (I’ve tried it - it works!)
- Don’t walk into an auto dealer and pay full price for a car (try emailing a few dealers with the details of the car and add-ons you want and ask for bids)
- Don’t pay more than you need for financial advice (especially if it isn’t good advice)
- Don’t carry a balance on a credit card
- Take advantage of rewards cards (I like the Citi Double Cash Card that gives 2% back on all purchases and has no annual fee)
- Use online savings and checking accounts (I like Ally - I don’t pay any fees and the interest rate is generally one of the highest you can get - unfortunately, that’s only 0.5% right now)
I’m aware that this list only scratches the surface. I could go on and on with ways you might be able to pay less for more. Every person’s financial situation is unique and not every tip will apply to you. Use what works and ignore the rest.
Remember:
The only dumb spending is that which buys things of no value (you define) or that limits your ability to buy other things of greater value. Money buys options and the more money you have, the greater number of choices you have. But at some point, you can spend more than your income allows. Note: banks and other lenders will not be concerned if you overborrow to the point that your financial plan derails. They will not care if you have a satisfying retirement or have to work until you’re 80. They only care that you have a radiologist’s salary and can use that to pay them back.
Thoughtful spending, which might mean a “time-out” from hitting 
could mean the difference between one of the best purchases you ever made and a lifetime of regret.
Bonus tip: Along with free movies, most local libraries also offer a plethora of free downloadable TV shows, eAudiobooks, eBooks, music, e-magazines and digital newspapers. I get 99% of my reading material online from the library. I can’t remember the last time I paid for a book that wasn’t related to my work (and I’ve gotten a lot of those from the library too). I read my eBooks on the Kindle app, which syncs my iPhone to my iPad, so that I always have the book I’m reading with me everywhere I go. I gladly pay my property taxes, a portion of which goes to supporting my library. Readers are leaders!
What in the Heck is a “Bull Market” and a “Bear” Market”?
Imagine yourself skipping down a yellow brick road. That road has a street sign that says, “Wall Street.” You’re on a journey to the Emerald City, which you presume is so-named for all its flourishing investments and wealth; a place where money is so abundant it practically grows on everything and little green triangles always point skyward. Along the way, the sky begins to darken. Suddenly, you feel spooked and uneasy. Despite your fear, however, you know you must be brave and carry on, so you begin to sing a little ditty. This makes you feel better, and eventually, you arrive at the destination of your dreams.
The ditty that gave you courage to get through the scary parts of the journey? Well, it goes a little something like this: “Bulls and luftsichel signs and bears, oh my!”
If I may preempt you, no, I have not been frolicking through a poppy field. The tale I’ve told you will all make sense in time, and in a circuitous way, encapsulates the lesson of this post. And also...the nature of the beast…
Alright, enough goofing; let’s get down to business!
Even if you don’t consider yourself to be a financial expert, you’ve probably come across the terms “bull market” and “bear market.” They’re hard to avoid. The terms are ubiquitous in newspapers, magazines, blogs, and TV news and financial shows.
Consider the following headlines:
“With the stock market officially in a bear market, here’s a look back at each decline of at least 20% since the 1930s to see how long, and how severe, such downturns typically are.” (CNBC 3-14-20)
“Is this a new bull market? Or the same old bear? The rally has been historic, but it still needs to prove itself.” (Kiplinger 7-1-20)
Chart of the S&P 500’s returns in bull and bear markets
“Stock investors got the big bull market they wished for - and now they should be careful.” (Marketwatch 12-19-20)
If you don’t have a good handle on what these terms mean, don’t feel bad. You aren’t alone. I confess that I used to struggle with this.
Before I did a little research and became financially literate, this is the way I kept the terms straight: I pictured a bull as an animal raging forward (a stock market on the way up) and a bear as a lumbering, hibernating mass of inactivity (a stock market on the way down). I’ll leave it up to you to decide whether this makes any more sense than the real origin of the terms, which is coming up.
But first, a couple definitions
- an uncastrated male bovine animal (male cow)
- relating to, or resembling a bull, as in strength
- having to do with or marked by a continuous trend of rising prices, as of stocks (a bull market)
- a person who buys shares hoping to sell them at a higher price later
A bull is an optimistic investor who thinks the market, a specific security or an industry is poised to rise. Bulls attempt to profit from the upward movement of stocks by buying now under the assumption that they can sell later at a higher price.
A bull market is a period of time in financial markets when the price of an asset or security rises continuously. There is no specific or universal metric used to identify a bull market. A common definition is when stock prices rise by 20%, usually after a drop of 20% and before a second 20% decline. Other common measures are when at least 80% of all stock prices rise over an extended period or market indices rise at least 15%.
The most prolific bull market in modern American history started at the end of the stagflation era in 1982 and concluded during the dotcom bust in 2000. During this time the Dow Jones Industrial Average (DJIA) averaged 16.8% annual returns. The NASDAQ, a tech-heavy exchange, increased its value five-fold between 1995 and 2000, rising from 1,000 to over 5,000.
A protracted bear market followed the 1982-2000 bull market. From 2000 to 2009, the market struggled and delivered average annual returns of -6.2%. Then, in March of 2009, the market began it’s start of a ten-year bull market run.
- any of a family of large heavy mammals of America and Eurasia that have long shaggy hair, rudimentary tails, and plantigrade feet and feed largely on fruit, plant matter, and insects as well as on flesh
- a surly, uncouth, burly, or shambling person
- a tall, friendly bear of a man
- something difficult to do or deal with
- having to do with or marked by a continuous trend of declining prices, as of stocks (a bear market)
- one that sells securities or commodities in expectation of a price decline
A bear market is characterized by a prolonged decline in the price of securities, typically by 20% or more from recent highs. But 20% is an arbitrary number, just as a 10% decline is an arbitrary benchmark for a correction.
Bear markets may accompany general economic downturns such as a recession. They can be cyclical or longer-term. The former lasts for several weeks or a couple of months and the latter can last for several years or even decades.
Another definition of a bear market is when investors are more risk-averse than risk-seeking.
Investors can take a bullish or bearish stance, depending upon their outlook. To be bullish is to believe that an investment's price will rise. To be bearish is to believe that the price will fall.
Between 1900 and 2018, there were 33 bear markets, averaging one every 3.5 years. A prolonged bear market occurred between 2007 and 2009 during the Financial Crisis and lasted for roughly 17 months. The S&P 500 lost 50% of its value during that time.
In February 2020, stocks entered a sudden bear market in the wake of the global coronavirus pandemic, sending the DJIA down 38% from an all-time high on February 12 to a low on March 23 in just over one month. During this “Coronabear” period, the Dow Jones fell sharply from highs close to 30,000 to below 19,000 in a matter of weeks. Note: as I write this on December 29, 2020, the DJIA is back up to 30,390.
Other bear market examples include the 1929 Great Depression and the bursting of the dot com bubble in March 2000, which wiped out approximately 49% of the S&P 500's value and lasted until October 2002.
“Bear” and “Bull” explained by a bit of history
The bear came first. Etymologists point to a proverb warning that it is not wise "to sell the bear's skin before one has caught the bear." By the eighteenth century, the term bearskin was being used in the phrase "to sell (or buy) the bearskin" and in the name "bearskin jobber," referring to one selling the "bearskin." Bearskin was quickly shortened to bear, which was applied to buying and selling stock in a speculative manner.
The “bear” borrows stock, sells it, buys it back at a lower price (hopefully), and returns it to the lender in a specified time period. This technique, called “short selling” is done with the expectation that stock prices will go down and bought back at the lower price, with the difference from the selling price kept as profit. It’s a risky trade and can cause heavy losses if it does not work out.
For example, an investor “shorts” (borrows and sells) 100 shares of a stock at $94/share. The price falls and the shares are “covered” (bought back) at $84. The investor pockets a profit of $10 x 100 = $1,000. If the stock trades higher unexpectedly, the investor is forced to buy the shares at a premium, causing heavy losses.
As an alter-ego to the bear, a “bull” makes a speculative purchase in the expectation that stock prices will rise.
Another explanation for for the terms bear and bull markets - one that is probably more widely understood and represented by the illustration below, is the following:
The “bear market” phenomenon is related to the way in which a bear attacks its prey—swiping its paws downward. This is why markets with falling stock prices are called bear markets. The term “bull market” comes from the way in which the bull attacks by thrusting its horns up into the air (rising stock prices).
What does this mean for you?
So many people can say it better than I can:
There will always be bull markets followed by bear markets followed by bull markets. (John Templeton)
There are two kinds of investors, be they large or small: those who don't know where the market is headed and those who don't know what they don't know. Then again, there is a third type of investor: the investment professional, who indeed knows he doesn't know, but whose livelihood depends upon appearing to know. (William J. Bernstein)
Bull markets go to people's heads. If you're a duck on a pond, and it's rising due to a downpour, you start going up in the world. But you think it's you, not the pond. (Charlie Munger)
The last leg of a bull market always ends in hysteria; the last leg of a bear market always ends in panic. (Jim Rogers)
Bull-markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. (John Templeton)
In a nutshell
When it comes right down to it, you don’t need to know what a bull market or a bear market is in order to make sound investment decisions. You don’t need to listen to the media and sell during a bear market and buy during a bull market (although, sadly, this is what many people do).
Upright CXR showing arcuate lucency surrounding the aortic “knob”
Then why did I write this post? For the same reason you should be familiar with the “luftsichel sign” of left upper lobe atelectasis on a CXR. You may know this as an arcuate lucency surrounding the aortic knob, representing the hyperexpanded superior segment of the left lower lobe interposed between the atelectatic left upper lobe and the aortic arch.
Do you need to recognize the luftsichel sign in order to diagnose left upper lobe collapse? Absolutely not. There are many other, more consistently seen signs of volume loss that allow you to make the diagnosis. But when your non-radiologist colleague or resident asks you if the lucency represents a pneumothorax or a pneumomediastinum, you need to be able to answer “no” and explain what the lucency represents. Or when they use the term luftsichel sign in a conversation, you need to know what they’re talking about.
Similarly, understanding “bull markets” and “bear markets” is not required in order to be a good investor. But if you do understand the terms, and someone mentions them in a conversation, you won’t feel like an idiot. And if they try to convince you that you should sell your mutual funds because we’re in a “bear” market, and the “market is only going to tank further”, you will know that that is a bunch of “bull”.
Top Ten Tips for Academic Radiologists
The first few years in academic radiology, especially year one, can be overwhelming. If you’re lucky, you will get excellent advice from colleagues from within and outside your department. If not, you may feel like you’re sailing in a boat without a rudder. Going into it without a solid plan and supportive guidance can mean the difference between early success and early failure.
As a radiologist, you have enough clinical work to keep you busy. Somehow you need to find time to tend to your academic passions. If you have a family, you need to make time for that too (and for scuba diving, playing the cello, traveling the world, or whatever you find to be personally fulfilling).
This post is about using time to your advantage. It will be most relevant to junior radiologists who are building their academic careers and looking to get promoted, but if you’re beyond this stage, or if you’re a resident or fellow planning on an academic career, you may also benefit from reading my “top ten tips.” The items are not listed in order of importance and I could keep going past ten. But people seem to like top ten lists, so here goes.
- Always have something in the mail. One of my mentors said this early in my career and it stuck with me. There’s something exciting about waiting on a decision as to whether your paper or abstract has been accepted. Or whether you will get the award or grant. It serves as motivation. Always having something in the mail is tangible evidence that you are actively pursuing your goals.
- Keep a to-do list. Having a list not only helps you meet deadlines but also means you never have to waste time wondering what to do next. And checking items off as they are completed will give you a sense of accomplishment.
- Leverage your work. This means getting the most out of your efforts. Don’t turn a project into just an abstract that you present at a meeting. With advanced planning, your research project can earn you a grant, presentation of an abstract, and publication of a paper. With enough forethought, you can make sure you meet the deadline to submit your work for an award. Once you’ve presented and published your work, people will invite you to give a talk as a visiting professor because you will be seen as an “expert” on the subject. That’s 5 items for your CV from one project.
- Put yourself out there. Let people know you are interested in serving on committees and collaborating on research. Be active and don’t always wait for someone to approach you. The more things you do, the more people you will meet, which will lead to more opportunities. Attend events at society meetings where more senior members mingle with junior members. Look outside your department and institution for mentors and collaborators. When the time is right, be a mentor to someone else.
- Develop a niche. Build on your strengths and consider pursuing areas of deficiency in your subspecialty area. I had an advanced degree in education and 6 years of teaching experience before going to medical school. I’d always been passionate about education and saw a need for someone to promote educational scholarship. I joined and later chaired numerous education committees locally and nationally. I teamed up with PhDs in medical education departments at my and other medical schools to do medical education research. I was a radiology program director and dean for graduate medical education. I built my career and brand around education. What’s your passion?
- Learn as much as you can. Take advantage of faculty development opportunities. Apply for a fellowship in radiology journalism (ARRS Figley Fellowship, ACR Bruce J. Hillman, MD Fellowship in Scholarly Publishing, RSNA William R. Eyler Editorial Fellowship). Apply for the AUR Faculty Development Course. Take advantage of local faculty development courses, especially if you’re female or a member of another underrepresented minority. The Hedwig van Ameringen Executive Leadership in Academic Medicine® (ELAM) program offers an intensive one-year fellowship of leadership training with extensive coaching, networking and mentoring opportunities aimed at expanding the national pool of qualified women candidates for leadership in academic medicine. One or more women at your institution have probably attended - talk to them. Find out if your institution is one that offers a medical education fellowship (here, here, and here are a few that do). Consider getting another degree (MBA, MEd, etc.). Note: the networking opportunities are as valuable as what you learn from a fellowship.
- Document your teaching activities. Keep a record of courses taught, learner evaluations, curriculum development, and assessments and outcomes of these educational interventions. Document links to online presentations. Log all teaching awards. All of this can be chronicled in an educational/teaching portfolio (also here and here).
- Always have something to work on wherever you go. I don’t mean you should be working all the time. But if you’re sitting on an airplane, bus, or train you might as well be doing something constructive. Uninterrupted time to read background literature for a research project comes at a premium. Got a paper to review for Radiology, AJR, Academic Radiology, or JACR? You might be able to knock that off while you’re on the Peloton or sitting in the dentist/doctor’s waiting area. Note: In addition to adding something to your CV, being a reviewer is one of the best ways to become a better writer.
- Consider being active on #SoMe (social media). It can be a great way to network, which can open the door for speaking invitations and research collaboration. It takes time and you’ll have to judge whether it’s a good use of yours. If it becomes a burden you can dial down your efforts. Caution: be mindful of what you post. If you wouldn’t feel comfortable seeing it on the news, think twice about posting it. It’s easy to feel anonymous when you post online, but you are never truly anonymous. Follow all patient privacy (HIPAA) rules.
- Update your curriculum vitae (CV) regularly. Don’t wait until the end of the year or until someone asks for a copy. Your CV should be an active document. Keep a shortcut on your desktop so it’s easy to get to when you want to add something. When you’ve spoken at a meeting, given a resident lecture, published a paper, received an award - whatever the accomplishment - put it on your CV. If you’re especially productive, you might keep a list of activities and update your CV every time you’ve accumulated a few. I know people who update their CV every couple weeks. Don’t put it off. It’s easy to forget lecture titles, dates, and even the activities themselves down the road. Plus, it will make you feel good to see how much you’ve accomplished every time your CV gets a little bit longer.
Financial Capacity: Here Today, Gone Tomorrow (Wise-up on Health, Wealth, & Aging)
You may lose your marbles, but you can still preserve your financial well-being. Unlike other finance posts on The Reading Room aimed at helping you become financially literate, this one is all about what happens when you develop age-related financial vulnerability and are no longer able to make sound financial decisions.
And this post is not just relevant to older or retired radiologists, but also to those of you who are nearing that time of life or are/will be acting as an agent to manage finances for a friend or family member.
There’s a good chance that you will at some point be asked to manage someone else’s finances or will need someone to manage yours. If you are a working radiologist, you are probably already busy enough. Managing a loved one’s assets will be an added burden. Of course, the more informed you are, the better—and being as prepared as possible can help make that burden less overwhelming.
It’s an important and—okay, yes, somewhat depressing—subject. Growing older comes with it’s perks (wisdom, financial security, naps, etc.). It also brings greater susceptibility to a host of potential afflictions and new challenges to navigate—for both yourself and for your loved ones.
Hopefully, we will all undergo the aging process like a fine wine; stay sharp as a tack and still run marathons at 104, but we all know life is unpredictable. That’s why it’s vital to protect your financial health and security as a senior, and to know the risks and responsibilities involved when taking care of others.
In this post, I’ll talk about the scope of the problem, how aging and other factors can effect our financial abilities, the signs of financial vulnerability, tips for managing loss of financial capacity, how to recognize elder fraud and exploitation, and what you need to know before you agree to be a power of attorney.
How many people are at risk for age-associated financial vulnerability? Let’s look at the facts.
Source: U.S. Census Bureau
According to the U.S. Census Bureau, there were more than 54 million U.S. residents 65 years and older in 2019, up from 40.3 million in 2010. The number of Baby Boomers (born between 1946 and 1964) has hit 73 million, which has increased by 34.2% since 2010. Note: U.S. population in 2019 was 328,239,523.
Baby boomers have changed the face of the U.S. population for more than 70 years and continue to do so as more enter their senior years, a demographic shift often referred to as a “gray tsunami.” In 2019, one in five people in Maine, Florida, West Virginia and Vermont were age 65 or older.
What is the relationship between age and financial behavior?
When considering age-related changes in financial capacity, it’s important to understand the distinctions between normal aging, age-associated financial vulnerability, mild cognitive impairment, and dementia.
Although there are differences in abilities and rates at which individuals decline, everyone is expected to show some losses in fluid cognitive abilities. This includes memory, computations, and speeded decisions. These changes are typical of aging (i.e., “normal aging”) and not hallmarks of dementia or other disorders.
Age-associated financial vulnerability (AAVF) is defined as “a pattern of financial behavior that places an older adult at substantial risk for a considerable loss of resources such that dramatic changes in quality of life would result.” Note: To be considered AAFV, this behavior also must be a marked change from the kind of financial decisions a person made in younger years. For example, if you’ve been in the habit of leaving $1,000 tips throughout your career, this wouldn’t be considered an abnormal behavior just because you turned 65 years old.
Cognitively intact older adults may become financially vulnerable.
An important distinction should be made between AAVF and dementia or other cognitive impairments. Cognitive impairment is not necessary for AAVF. In other words, cognitively intact older adults may become financially vulnerable.
Mild cognitive impairment (MCI) is a disorder included in the Diagnostic and Statistical Manual of Mental Disorders. It is NOT considered to be a precursor to dementia. The essence of MCI is that the individual's cognitive functioning is worse than expected but not bad enough to be classified as dementia. MCI is more challenging to diagnose than dementia because it must be distinguished not only from dementia, at the upper end of severity, but also from normal cognition, at the lower end of severity.
To further confound things, people are not accurate at assessing their own memory or cognitive function, and subjective complaints often do not correlate with objective deficits. Many of those experiencing true cognitive decline often feel they are not, while many who are not experiencing decline often feel they are.
The ability to perform simple math problems, as when handling financial matters, is typically one of the first skills to decline in diseases of the mind, like Alzheimer’s and other forms of dementia. But you may be surprised to learn that even cognitively normal people may reach a point where financial decision-making becomes more challenging.
Why is it that some older people seem to be “as sharp as ever?”
Are they really, or are cognitive problems just not easy to detect? You may know elderly radiologists who still drive, make investment and healthcare decisions, and read CT scans - only to receive a diagnosis of dementia. How can this be? The answer lies in the ability of the brain to compensate for mild cognitive loss, and a person’s ability to adapt to their environment.
A person’s financial decision-making ability peaks in their 50’s, when they have substantial amounts of experience and only modest declines in ability to solve new problems.
The brain's compensation is related to two kinds of intelligence:
- Fluid intelligence is the ability to solve new problems. It slowly declines over time, starting as early as age 20.
- This is partly offset by our growing experiences and wisdom, known as crystallized intelligence. This type of intelligence tends to plateau in a person’s 70’s, the time at which people become most vulnerable, particularly as they reach their 80’s and 90’s.
Note: A person’s financial decision-making ability peaks in their 50’s, when they have substantial amounts of experience and only modest declines in ability to solve new problems.
Older people adapt to their environment by developing habits and following familiar routines. Such tactics require fewer cognitive demands. Alarms can be used as reminders to take pills or attend appointments. Rooms, such as offices and kitchens, can be organized so that items are always in the same place. Driving can be limited to familiar routes.
The signs of decline can be subtle:
- Focusing on investment benefits and downplaying the risks
- Taking longer to pay bills (especially writing checks that need to be mailed)
- Difficulty with math calculations that become prone to error (e.g., calculating a 15% tip)
- Difficulty understanding concepts like deductibles, minimum balances, inflation, and interest rates
It isn’t all about memory loss
Although you might be or become a “super ager” (individual in their 80’s or beyond who functions at a much younger intellectual level), the vast majority of adults will experience at least some isolated cognitive decline associated with typical brain aging as they progress through their 60’s, 70’s, 80’s and beyond.
Aging has become more or less synonymous with memory loss. Although memory does decline with age, many older people experience far more dramatic declines in non-memory-related cognitive abilities, such as difficulties with concentration, problem solving, and decision-making. Whereas memory loss is a temporal lobe phenomenon, these other abilities are closely linked to deterioration of the prefrontal cortex.
Complex decision-making, such as purchasing financial products and making related decisions, if often the first cognitive function to decline in older adults.
Abnormalities in the brain areas involved in emotion and decision-making, rather than memory, may make some older adults especially susceptible to poor decision-making. Other areas that often change with age include diminished processing speed or quickness of thought; a reduction in the volume of information a person can think about simultaneously (also known as working memory capacity); and slower rate of new learning ability. Complex decision-making, such as purchasing financial products and making related decisions, if often the first cognitive function to decline in older adults.
Factors that influence the aging brain
Cognitive change in older adults is uneven and dependent on many factors, some that may not be intuitive. They include:
- Educational background
- Overall intellectual capacity
- Uncontrolled physical health conditions (high blood pressure, high cholesterol, diabetes, cardiac disease, endocrine dysfunction, autoimmune disorders, pulmonary dysfunction)
- Lifestyle habits (smoking, excessive alcohol consumption, lack of exercise, social isolation, limited intellectual stimulation)
- Mental health conditions (depression, anxiety)
- Mild cognitive impairment (impairment beyond normal cognitive change associated with healthy aging, but not as severe as dementia)
While people with mild cognitive impairment (MCI) may appear relatively intact and function reasonably well in most areas of life, their subtle cognitive deficits put them at even higher risk for poor decision making and financial exploitation.
Elder fraud and financial exploitation - the “Crime of the 21st Century”
Fraud (typically perpetrated by strangers) and financial exploitation (committed by people who occupy positions of trust, such as friends and relatives) are crimes that target older adults. One in five Americans aged 65 or older have been victimized by financial fraud. $3B is taken from seniors per year and only 1 in 44 cases is reported to authorities. Radiologists and other physicians are not immune.
Having adult children who manage an elder’s money decreases the risk of fraud because they prevent strangers from accessing their loved one’s accounts. However, the presence of adult children may increase opportunities for financial exploitation. Despite the common image of stranger scams and paid caregiver thefts, the perpetrators of exploitation are more often family members or trusted friends. Radiologists are not immune.
Where there is a history of family conflict, where an adult child feels he or she is “entitled” to their parent’s money, or where the adult family member is reliant upon the vulnerable adult for basic needs, the potential for financial exploitation increases exponentially.
Social isolation is not only a potential risk factor for financial victimization, it is also a tactic perpetrators use to manipulate their victims and hide acts of exploitation. Fraudsters and financial exploiters use undue influence to limit and control an older person’s social interactions, creating a sense of powerlessness and dependency. This makes elders easier to manipulate, even if they are mentally competent.
Why are the elderly targeted by scammers?
Answers:
- The elderly have a diminished capacity to recognize fraud
- Our nation’s wealth is disproportionately held by older adults
Note: Adults over the age of 65 hold about a third of the nation’s wealth.
Even the most financially literate person can become financially vulnerable, owing to loneliness due to loss of a spouse, physical dependency, or cognitive decline. I repeat: Financial decision-making is often one of the first functions to decline with age. The most preyed-upon age range is 80 to 89.
Financial exploitation victims experience mental health consequences such as shame, depression, and anxiety. In some cases, even suicide.
Common abuses
One of the ways we can protect ourselves and others from fraud and abuse is to be aware of the common crimes being committed. They include:
- Affinity fraud (claiming to be from the same ethnic, religious, career, or community-based group)
- Suddenly-appearing needy “grandkids” of no relation
- Tech support scams (promising to “fix” computers)
- Home improvement scams (scammers take money and don’t do the work)
- Free lunch seminars aimed at recruiting investors
- Free trips
- Lottery scams (false claims of “you’ve won!”)
- Internal Revenue Service (IRS) “agents” offering to settle “back taxes” by pre-paid debit cards
- Fake charities
- Deed theft and foreclosure rescue
- Identity theft
- Credit card fraud
- Fake “official” snail or email (appearing to be from a legitimate bank or business)
- Health care fraud (scammers pretending to be from Medicare)
- Funeral and cemetery scams
Tips to combat loss of financial capacity
- Assemble a “protective tribe” of trusted people who are willing to assist when needed
- Select more than one person to make financial decisions on your behalf, preventing one person from having unbridled access and control over financial assets
- Simplify your financial life (e.g., limit assets to a few mutual funds at one institution, carry no debt)
- Organize important documents in a safe, easily accessible place (bank and brokerage account information, mortgage and credit information, insurance policies, pension/other retirement benefit summaries, social security payment information, contact information for financial and medical professionals)
- Consider a “letter of diminishing capacity”, which authorizes a financial professional to contact a named individual when there is a concern for declining cognitive skills
- Consider creating a durable financial power of attorney
- Keep things up to date (new accounts, trusted contacts)
- Speak up if you think you or someone you know is being taken advantage of
- Have an open conversation with loved ones about investments and other financial matters sooner rather than later
One factor that appears to be linked to better financial decision making in old age is financial literacy. In fact, neuroimaging shows that financial literacy is associated with greater structural and functional connectivity between important brain regions, even after considering the effects of cognitive ability. This is encouraging because financial literacy (defined as “the ability to understand, access, and utilize information in ways that contribute to optimal financial outcomes”) is an ability that could be improved at any age and is therefore a potentially modifiable protective factor against financial exploitation in old age.
Your role as a durable power of attorney
With the rapid expansion of the 65-and-older population comes an increase in the need for legal safeguards for that population. You might be asked to play a role as a durable power of attorney, meaning you agree to manage money or property for someone else (called a principal). In this role, you are a fiduciary, which involves 4 basic duties.
Duties of a fiduciary:
- Act in the principal’s best interest
- Manage the principal’s money and property carefully
- Keep the principal’s money and property separate from yours
- Keep good records
Accepting the role as a fiduciary is a serious decision, with ramifications for both you and the person for whose money and property you agree to manage. What can go wrong? A lot.
Family members might not all agree on important financial decisions. The conflict that results can lead to deep and permanent rifts among family members. This is best addressed with advanced planning. Let’s say you agree to be a fiduciary for your elderly mother. You can have a conversation with her about what she wants before she needs you to make decisions for her. If this isn’t possible, the next best course of action is to look at her past decisions, actions, and statements to determine what she would have wanted.
As a fiduciary, you must avoid all conflicts of interest or even the appearance of a conflict of interest. You can’t make decisions about money or property that benefit you or someone else at the expense of your mother. Generally, this means not borrowing, loaning, or giving her money to someone else unless you know it is in line with what she wants.
Having your son repair your mother’s roof, even if he does that work for a living, may be considered a conflict of interest if you pay him for it with your mother’s money. If you pay yourself, the fee must be reasonable and you should only do so if the power of attorney document or state allows it.
As a fiduciary, you need to be aware of the common signs of financial exploitation. Why? Because your mother may still control some of her funds and can be exploited (and even if she doesn’t control her funds, she can still be exploited). Your mother may have been exploited already and you may be able to intervene. People may try to take advantage of you as the fiduciary. Knowing what to look for will help you avoid doing things you shouldn’t do, protecting you from claims that you yourself have exploited your mother.
Common signs of financial exploitation
- You think money or property is missing
- Your mother tells you money or property is missing
- You notice a change in your mother’s behavior (withdraws large sums of money, tries to wire large amounts of money, uses the ATM a lot, is not able to pay bills that are usually paid, buys things or services that don’t seem necessary, puts names on bank or other accounts that you don’t recognize or that she won’t explain, makes gifts to “new best friends”, changes beneficiaries of a will/life insurance/retirement funds, has a caregiver or other person who suddenly begins handling her money)
- Your mother says she is afraid or seems afraid of a relative, caregiver, or friend
- A relative, caregiver, friend, or someone else keeps your mother from having visitors or phone calls, doesn’t let her speak for herself, or seems to be controlling her decisions
What to do if someone has been exploited
- Call local adult protective services (www.eldercare.acl.gov)
- Alert the bank or credit card company
- Call the local prosecutor or state attorney general
- Call the long-term care ombudsman program or the state Medicaid fraud control unit (if your mother is in a nursing home or assisted living)
- Consider talking to a lawyer
That was a lot to absorb so let me sum it up for you.
- The number of people in the U.S. age 65 and older is increasing faster than any other age group.
- They own ⅓ of the nation’s wealth.
- “Normal aging” involves a loss of fluid cognitive abilities.
- Even cognitively normal people may reach a point where financial decision-making becomes more challenging.
- In other words, cognitively intact older adults may become financially vulnerable.
- Financial decision-making is often one of the first functions to decline with age.
- People are not accurate at assessing their own memory or cognitive function.
- The signs of cognitive decline are often subtle.
- One in five Americans aged 65 or older have been victimized by financial fraud.
- The elderly have a diminished capacity to recognize fraud.
- Radiologists are not immune to any of the above.
If that’s not a sobering stew of facts I don’t know what is!
Our brain partially compensates for certain cognitive losses and we can combat the effects of those losses further by adapting to our environment so that items are easy to locate and common tasks are repetitive and familiar. We can limit the risk of fraud and abuse by being aware of the common crimes being committed and recognizing the signs of exploitation.
We can simplify our financial affairs, organize our financial documents, and make plans for people to manage our finances for us when we’re not able to do it ourselves. (If you agree to be that person, you will be required to be a fiduciary and abide by the legal requirements that are entailed.)
Final note
A person’s protection from financial fraud or exploitation is only as strong as their own financial capacity or that of the person/s who have been granted legal control over their financial decision-making. It doesn’t matter how well you’ve managed your finances over your lifetime if, when you become unable to continue doing so, the person you direct to do it for you is not capable or trustworthy. It’s a sad fact that senior abuse is often committed by a close relative or trusted professional.
Why Smart Radiologists Can’t Manage Their Money
Once you’ve finished the 26th grade (average stage of a radiologist at the end of training), you should be well-equipped to practice radiology. You've survived all the entry requirements, standardized tests, rigorous educational demands, and long and arduous nights on call.
After years of dedication and sacrifice, you have become a valuable member of the healthcare community. Medical school, residency, and fellowship have prepared you well.
If you’ve landed your dream job - congratulations! You managed to impress your employer with your sterling record, professional demeanor, and glowing references. You’re ready to start practicing radiology independently.
There’s no question that by objective standards you are a very smart person. Does this equate to being good at managing money? If you read my prior post, the one where I espouse the need for required financial literacy education, you probably know how I would answer this question. That would be a resounding NO.
If you were lucky enough to receive personal finance education along the way, or you became aware of its importance and started teaching yourself by reading finance books and blogs and listening to finance podcasts, this post might not apply to you. (I say might because not all finance advice is good advice.) To the rest of you, who might not be smart at managing money, I suggest a few reasons why that’s so.
7 Reasons why you’re a smart radiologist but might not be smart at managing money:
- Being smart at one thing doesn’t make you smart at everything. Would you represent yourself in court? No, you’d probably hire a lawyer who has spent years training to be good at lawyering. Unless you’ve been appropriately trained, you wouldn’t fly a plane, install electrical wiring in your home, or repair your car. If you haven’t had any financial education, what makes you think you’d be good at managing money?
- You don’t know what you don’t know. In radiology parlance we say “you only see what you look for.” Case in point: if you don’t know what a pneumothorax looks like on a supine chest radiograph, you won’t see it. The White Coat Investor published a list of doctor’s financial mistakes and there were so many of them that it required four posts. I’ve read several such lists. The same stories of how radiologists and other physicians learned financial lessons from the School of Hard Knocks have been told over and over again. Radiologists don’t intend to make bad financial decisions. They just don’t realize they’re doing so.
- You don’t have time. Radiologists are busy. In the words of Theodore Roosevelt, “nothing in the world is worth having or worth doing unless it means effort, pain, difficulty… I have never in my life envied a human being who led an easy life”. What I’m getting at here is that if you want to be smart about money, you have to invest some time to become educated about managing money (or learn how to get good advice at a fair price).
- You don’t care. By this, I don’t mean you don’t care about making smart financial decisions, but that you don’t have any interest in learning about finance. I wouldn’t expect everyone to be as passionate about it as I am. Maybe you spend your time outside of practicing radiology honing your cello skills, climbing Mount Everest, brewing the perfect beer, performing stand-up comedy, running for political office, playing chess at a master level, or any one of a number of impressive hobbies. My aim is not to judge financial education to be more or less important than any other pursuit, but rather to point out that we’re good at what we care about and value most.
- You’re too trusting. Radiologists are trained to provide service based on the best interests of the patient. It’s natural to think other professionals would practice with a similar ethical conduct. Unfortunately, this isn’t always the case. A radiologist’s lack of financial knowledge creates a void that can be easily filled by unscrupulous investment professionals, realtors, lawyers, and bankers who see radiologists and other high-income professionals as “targets”. Note: I by no means consider all of these professionals to be unscrupulous, but sometimes it’s hard to tell who is and who isn’t. But that’s only part of the problem. Your trusted colleague may have your best interest in mind when, for example, she raves about her financial advisor. As far as she knows, her financial advisor is a nice person who has all the qualifications needed to do a good job managing her money. But what if your colleague, who is an excellent radiologist, doesn’t realize that she’s paying her advisor $20,000/year to do not much more than buy and sell funds that underperform cheaper, more broadly diversified funds? If you don’t have a basic level of financial literacy, you won’t be able to recognize when someone, even when acting in good faith, is not providing good advice. Ironically, by the time you know enough to choose a good financial advisor, you know a lot of what you need to know to manage your finances yourself. One of my favorite mantras: no one will care about your finances as much as you do.
- You think you know more than you do. This refers to those of you who like playing the stock market because it gives you a sense of control. So much of the practice of radiology is outside of a radiologist’s control. Many physicians think they’re absolute geniuses when it comes to playing the market. Because they have a lot of superficial knowledge in investing, they overestimate their ability. In reality, even the smartest, most well-informed investment professionals can’t accurately and consistently time the market. Note: if you’re tempted to try to “pick the winners”, read this.
- Your parents didn’t help you. Parents are powerful role models. If you’re lucky, your parents made smart financial decisions and talked to you about the importance of being financially literate. Sadly, there’s a good chance this wasn’t the case, as only a little over ⅓ of the world’s population is financially literate. This rate varies by country, with Yemen coming in at 13%, Norway, Denmark, and Sweden tied at 71%, and the U.S. an unimpressive 57%. And being financially literate isn’t an all or nothing phenomenon. A person can be a smart saver but a poor investor. Maybe your parents smartly eschewed the practice of “keeping up with the Joneses”, but naively relied on a financial advisor to invest half of their retirement money in individual stocks. Note: if you aren’t aware of why this might be a problem, read this. It’s very likely that you picked up some bad financial habits from your parents or didn’t learn much finance from them at all because in many families the subject is taboo.
From Forbes, November 18, 2015
A silver lining
As radiologists, we’re fortunate to earn an above average salary ($427,000 according to the 2020 Medscape survey) so we can make a lot of financial mistakes and still come out okay. We have the ability to get out of debt more quickly compared to physicians in lower-paying specialties. Once we’ve whittled down or eliminated our debt, we have a substantial amount of discretionary income. We can withstand losing a month’s salary from day-trading without having to sacrifice fully funding our retirement accounts.
There are exceptions. At a certain point, you can fritter away so much money on things that don’t bring value to your life that even a radiologist’s salary won’t be enough compensation. Additionally, if your radiology income is on the lower side of the spectrum and you don’t work full-time, or if you are forced to retire from radiology early, you’ll have a smaller cushion of cash to protect you from financial blunders. None of us knows what the future will bring.
You can avoid many of the common financial mistakes that radiologists make by taking steps to becoming financially literate. You can get started by reading one book, and I’ll even suggest a few of my favorites. If you’re already financially literate, pass along the list to a friend who isn’t.
A few good basic financial literacy books:
The White Coat Investor: A Doctor’s Guide to Personal Finance and Investing by James Dahle
Investing for Dummies by Eric Tyson
The Bogelhead’s Guide to Investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf
John Clements Money Guide 2016 by John Clements
The Elements of Investing by Burton G. Malkiel and Charles D. Ellis
A couple of my favorite more advanced finance books:
A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel
Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies by Jeremy Siegel
Blogs
I also recommend you subscribe to one or a few physician finance blogs and try to read one post a day. Zen Productivity has already done the work of making a complete list with rankings and social media links.
Oh, and you might consider subscribing to The Reading Room so you don't miss a single post by yours truly.
What I Wish I Knew About Finance As a Medical Student and Resident
Let’s talk about the “f-word.” That word being failure, of course (what did you think I meant?). Hindsight is 20/20. To err is human. We can’t escape failure, as much as we might want to, especially when we receive that stinging feedback. It’s true that the path to success is paved with failure—but, as it turns out—everything you thought you knew about failure is probably wrong (🤯!!!). Well, maybe not everything, but I have an interesting tidbit for you. Contrary to common beliefs about learning from failure, you actually learn more from success. This is true of personal success and personal failure. But did you know that people learn equally and just as much from others’ failures as from others’ successes? In other words, when failure is removed from the “self’,” when you take the personal out of the equation and psychological distance is achieved, people tune in and learn from failure.
So, now that I’ve gone all psychological on you, the stage is set and you have some context for what comes next.
This post is about learning from others’ failures or regrets, because...
“The only real mistake is the one from which we learn nothing.” - Henry Ford
I’ve come across a lot of blog and social media posts over the years about the things medical students and residents wished they’d known earlier. None of it surprises me, except maybe for the fact that most of the time what they regret is unrelated to finance. Maybe trainees don’t consider financial matters to be as important as choosing the right school, prioritizing personal time, starting early to prepare for licensing exams, or doing research. It’s also possible that they just “don’t know what they don’t know”, which is the oxymoron of financial illiteracy in a highly educated population. Financial regrets and advice seem to emerge a few or more years into physicianhood.
In light of this, I’ve collated some of the most common financial wisdoms that I’ve heard from junior radiologists who, after looking back at their earlier selves, realized “what they wish they’d known” about finance during their training. Give it a read—your future self might thank you. And, yes, read it because you can learn better from others’ failures and successes without the “ouch” factor (you’re welcome).
It’s not true that as a doctor you’ll never have to worry about money again.
Sometimes this way of thinking is part of the message students receive. Case in point from a Canadian Medical Director:
“It can be daunting to think about tuition and how you’ll pay for medical school, but try not to ruminate on it too much. You stand to earn a substantial salary once you’re practicing medicine and will eventually have no trouble paying off your debts.”
Because they believe it IS true, many students figure they’ll worry about finances later. Medical student loan debt starts accruing interest while in medical school. While making minimum payments in residency, it’s still accruing interest. This means that by the time a resident finishes training, $200,000 of loans could have grown to nearly $400,000 – sometimes even more. Without some degree of financial literacy, many students make financial mistakes that cost them a small fortune. Note: I’m a strong advocate of financial literacy being a required part of the residency curriculum.
I don’t have to live up to someone else’s standards.
You may have heard this before: “She’s a doctor, she can afford that,” or, “A doctor has to have a nice (insert material item).” This pressure to “live like a doctor” may even come from family members and close friends. Even during residency, the outside world thinks that doctors have the world handed to them. It’s this kind of thinking that prompts medical students to drive new BMWs, use student loan disbursements to make car payments, and justify it with their future doctor salary. If a physician lets someone else dictate their spending, lifestyle, or self-image, that person will likely never have control of their finances and never be satisfied.
Buying a house as a resident isn’t always a smart move.
I don’t know what the statistics show, but I’ve heard from a lot of residents who regretted buying a house. I’ve also read accounts of residents who claimed they “made money” when they sold their house and were happy with their decision to own instead of rent. And of course, if you’re married to a high-earner and have no debt, none of this may apply to you. The thing with real estate is that the cost is dependent on a multitude of factors: location, housing market, sale price, mortgage rates, renovation and maintenance costs (and the owner’s DIY skills), and property taxes. Aside from the $$$ costs, there is also a time-cost in owning a home that there isn’t with renting a home or apartment. And I don’t have to tell you that time is a limited commodity during training (keep reading for more on this).
There are a lot of reasons why owning a home during residency may not be a good financial move: you don’t have a down payment; you already have a lot of debt; radiology residency is only 5 years and it can be hard to break even, let alone make a profit in that length of time; and new homeowners tend to underestimate the costs of maintenance, property tax, insurance, and furnishings. Buyer beware.
It pays to understand student loans.
It’s easy to put off any thought of managing student loans when you’re busy trying to become a doctor or a radiologist. Managing student loans involves borrowing as little as possible and entering the right loan repayment program for you on day one as a resident. For the latter, you need a plan. The most comprehensive guide is available here for free. Note: This is an area where it can be very important to consider your personal situation, especially if you’re married to another earner.
Start by consolidating your federal loans so that you’re eligible for Public Service Loan Forgiveness (PSLF) (even if you may not ultimately go this route) and enter into an income driven repayment program. The best choice for most residents is REPAYE (Revised Pay As You Earn). (Note: The goal here is to pay the minimum required qualifying payment each year and to have as much debt forgiven at the end of ten years.) The monthly payments are usually an affordable $0-$300/month so you can avoid deferment or going into forbearance. Next you want to refinance any private loans you have (which are not eligible for PSLF). Private student loans can be refinanced for free and you should consider refinancing whenever you can get a lower rate. Typically, when you finish residency you can get a better rate because of your enhanced income status.
Anything you pay for now (using borrowed money) will cost you 50% more in the long run.
It actually may cost more than this and it’s due to the compounding effect of interest on loans. That means that a Caramel Cocoa Cluster Frappuccino® Blended Coffee (one of the top ten drinks at Starbucks) with a price tag of $4.95 might actually cost about $7.50 in the long term. The $2,000 tab to travel to your cousin’s wedding could wind up costing $3,000. Think of it as paying a premium for everything you buy using money from loans.
I don’t advocate total frugality as a trainee and a reasonable amount of discretionary spending will not be nearly as consequential as how a newly graduated radiologist spends her salary. But beyond a reasonable amount, you could be setting yourself up for regret. It’s a good idea to think about how much something is “actually” costing when using borrowed money. You don’t know how your future self will feel about how your present self is spending. If for some reason you decide you don’t want to be a radiologist, you will still have to pay back the money you borrowed.
Not all medical schools cost the same.
If you get accepted to only one medical school then the choice is simple. It would also be hard to pass up a full-ride scholarship. Otherwise, it pays to consider each school’s cost. (Note: I don’t mean what the school advertises, but what you will have to pay, which is often very different.) Going to a public school in the state where you are a resident will usually decrease your overall loan burden, and the difference between public/resident and private/nonresident costs can be substantial. Think twice about taking on $300,000 of debt if you have the option to spend half that much by choosing a less expensive school.
Tuition, Fees, and Health Insurance, AAMC, 2020-2021 (Note: minimum cost is $0)
| Ownership | Residence Status | Median | Maximum | Average |
| Public | Resident | $39,150 | $347,612 | $41,438 |
| Private | Resident | $64,053 | $73,659 | $61,490 |
| Public | Nonresident | $63,546 | $91,557 | 58,246 |
| Private | Nonresident | $64,494 | $73,659 | $57,619 |
Note: I don’t know if the $347,612 number is an error, but it caught my eye.
You can’t make up for missed opportunities to contribute to retirement accounts.
About half of hospitals offer residents a retirement plan (401k, 403b) and some will match your contribution up to a limit. By not taking advantage of this match you are leaving money on the table, essentially taking a self-imposed pay cut. You also miss out on the tax break because the money you contribute to a 401k is tax deductible, which lowers your taxable income. This is advantageous if you are pursuing Public Service Loan Forgiveness and are on an income-driven repayment plan because the lower your income, the lower your loan payments, and thus, the less debt you will eventually pay back.
The other retirement contribution that residents should consider is the Roth IRA. You pay the taxes on the front end (at the time of contribution), but there are no taxes on the back end (at the time of withdrawal) and money grows tax free while it’s in the account. As a resident, you may be in the lowest tax bracket you'll ever be in for the rest of your life so it’s a good time to contribute to a Roth IRA because the front end taxes will be low. You can also contribute to a Roth IRA for a non-working spouse from your income. Note: You can’t put off contributing to a Roth IRA during residency thinking you will just make bigger contributions after you graduate. This is because you’re only allowed to contribute a certain amount per year ($6,000 in 2021).
Residents should have disability insurance.
A professional has a greater statistical probability of suffering a severe disability that impedes their ability to work than of dying prematurely. More than one in four 20-year-olds will experience a disability for 90 days or more before they reach age 67. If you become too ill or injured to work before you reach peak earning potential, you’ll still have to pay back the lender that bankrolled your medical school education. The lender will not care that you are disabled.
When should you get DI? If you have a pre-existing medical condition (which might mean you get denied insurance) you might want to wait until you are a resident. About 70% of residents are offered fully paid group disability insurance through their employer that does not require a medical exam or medical history taking (but the insurer may deny anyone who had previously been denied DI). An individual policy is best, but it will cost more than a group policy (ranging from 1% to 3% of your annual income per year).
Medical students and residents with spouses or other dependents should have life insurance.
If someone depends on you financially, life insurance provides for them if you die. Some residents with children choose to purchase life insurance during residency (or before) and others wait until they finish training, when they can more easily afford the premiums. Those who wait are gambling with their spouse’s and children’s financial future. Other good reasons to purchase life insurance early are that you will pay lower premiums (as you will be younger at the time of insurance purchase), and you will lock in the insurance rates while you are still healthy. If you wait, and become ill or disabled as a resident, your premiums could rise significantly, and you may even become uninsurable.
Permanent life insurance is almost always a costly mistake.
There are two basic types of life insurance. Term life insurance provides a predetermined death benefit and covers you for a predetermined number of years, usually five to 30. The annual premiums are fixed and are based on your health and life expectancy at the time you apply for the policy. Permanent life insurance combines a death benefit with a savings or investment account. There are several varieties, including whole life, variable life, and numerous variations of universal life insurance. The policy covers you for as long as you’re alive. The premiums can be fixed or not, depending on the policy you purchase. Like term life insurance, the premiums are based on your health and medical history.
Permanent life insurance is NOT the best choice for most people. It’s several times as expensive as term life insurance for the same amount of coverage. While your policy does accumulate some cash value through its savings or investment component, which a term policy doesn’t have, you pay a hefty premium for this feature and for having a policy that will definitely pay out one day. Nearly every radiologist will receive a pitch at some point in their career to buy permanent life insurance. Often, the medical school or radiology department will bring someone in to “advise” residents on buying life insurance, and that person’s goal is often to sell as much expensive insurance as she can. Residents, and often well-intended departments, may not recognize that the “advisor” is a sales person that does not have the best interests of her clients in mind. Naive radiology residents and practicing radiologists being “sold” permanent life insurance is one of my top financial pet peeves. Note: Residents should get disability and life insurance from an independent insurance agent. Even if the hospital offers a group plan, the coverage is often inadequate. Individual plans for trainees are relatively cheap.
I could have started a 529 for my kids during residency, even before they were born.
A 529 plan (from Section 529 of the federal tax code) is a tax-advantaged savings plan, typically established by parents or grandparents to help pay for a child’s or grandchild’s education. You can open a 529 plan before your kid is born and list yourself as the beneficiary, and then change the beneficiary after birth since 529 plans allow the beneficiary to be changed to a member of the family of the old beneficiary. The two major types of 529 plans are savings plans and prepaid tuition plans. Savings plans, the most common type, allow for investing in mutual funds that grow tax-deferred. Withdrawals are tax-free if they're used for qualified education expenses.
Prepaid tuition plans allow the account owner to pay in advance for tuition at designated colleges and universities. Prepaid tuition plans are offered by a limited number of states and some higher education institutions. They vary in their specifics, but the general principle is that they allow you to lock in tuition at current rates for a student who may not be attending college for years to come. They grow in value over time, and the money that eventually comes out of the account to pay tuition is not taxable. Prepaid tuition plans may have restrictions on which particular colleges they may be used for. The money in a savings plan, by contrast, can be used at just about any eligible institution.
You aren't restricted to investing in your own state's 529 plan, but doing so may get you a tax break. Bottom line: As with other kinds of investing, the earlier you get started, the better. With a 529 savings plan, your money will have more time to grow and compound. With a prepaid tuition plan, you'll most likely be able to lock in a lower tuition rate, since many schools raise their prices every year.
Time is more valuable than money. It’s limited in supply and once it’s gone, you can’t get it back.
You can lose money and make more. And radiologists are fortunate in that they have a higher than average physician income ($427,000) so they can make a lot of financial mistakes (up to a limit) and still do okay. But time is something you never get back. How you spend it is therefore one of the most important decisions you will make. As a student or resident, you will have a limited amount of discretionary time away from studying and taking exams. How you spend it will reflect your personal values. If you have a spouse and children, they will want a piece of your time and I’m guessing you will want to spend time with them.
The Finance Savvy Resident: Your Future-Self Will Thank You For This
Or your future-self might not; I don’t know, because I can’t predict the future. But I can offer some solid, evidence-supported suggestions—apropos to residents—as to potentially prescient, if not generally, sensible financial moves. Whatever your particular path or current circumstances, it is never too early nor too late to consider your financial future; how you can help position yourself for financial stability and mitigate financial disaster. Of course, as you might’ve guessed, such things are not one-size-fits all. Much like ice cream, radiology residents come in as many flavors as exist under the sun. I’m waxing a bit poetic here, because now we are about to get into some serious stats and figures! Ready?
Residents are a heterogeneous group. They may be married with kids, married without kids, single, or part of a blended family. Their student loan debt ranges from nothing, to average ($200,000), to over $300,000. These amounts can be doubled in dual-physician households and some monster debts reach over $1,000,000. Another 19.3% have additional consumer debt (Median amount $12,000).
Medscape Residents Salary & Debt Report 2020
Total Premedical and Medical School Debt (%)
No debt ($0) 26.7
$1 to $49,999 5.6
$50,000 to $99,999 6.1
$100,000 to $149,999 9.1
$150,000 to $199,999 13.1
$200,000 to $299,999 26.2
$300,000 to $399,999 10.5
$400,000 to $499,999 2.0
$500,000 or more 0.8
Median education debt of those reporting education debt $200,000
AAMC Medical School Graduation Questionnaire (July 2019)
Residents may be married to someone without earned income or someone with a high income, or have other financial resources (inheritance, previous work savings, etc.).
Duration of residency ranges from 3 to 7 years (radiology is 5 years followed by fellowship). Not every radiology resident follows a typical pathway to graduation.
One thing that is pretty uniform among residents is salary. Resident salary averages $62,400 ($64,600 in radiology), and ranges from $57,200 in year 1 to $68,500 in years 6-8.
The point of all this is that although general advice works for most residents, you will have to make decisions based on your individual circumstances. Having said that, here are some of the most important financial considerations that residents should be aware of:
Disability insurance (DI)
A professional has a greater statistical probability of suffering a severe disability that impedes their ability to work than of dying prematurely. More than one in four 20-year-olds will experience a disability for 90 days or more before they reach age 67. If you become too ill or injured to work before you reach peak earning potential, you’ll still have to pay back the lender that bankrolled your medical school education. The lender will not care that you are disabled. When should you get DI? If you have a pre-existing medical condition you might want to wait until you are a resident. About 70% of residents are offered fully paid group disability insurance through their employer that does not require a medical exam or medical history taking (but they may deny anyone who had previously been denied DI). An individual policy is best, but it will cost more (ranging from 1% to 3% of your annual income per year) compared with the cost of a group policy .
Life insurance
If someone depends on you financially, life insurance provides for them if you die. Some residents with children choose to purchase life insurance during residency (or before) and others wait until they finish training, when they can more easily afford the premiums. Those who wait are gambling with their spouse’s and children’s financial future. Other good reasons to purchase life insurance early are that you will pay lower premiums (as you will be younger at the time of insurance purchase), and you will lock in the insurance rates while you are still healthy. If you wait, and become ill or disabled as a resident, your premiums could rise significantly, and you may even become uninsurable.
Will
If you have kids, you need a will that designates guardians for your children should you and any other custodial parents die. If this occurs and such a designation is not in place, a court will decide who will be the legal guardian. This will most often be a relative who is willing to take on the responsibility, but in extreme cases, the court could mandate that your children become wards of the state. You may not want one or more of your relatives to raise your children, particularly if they don’t share your views, aren’t financially sound, and aren’t genuinely willing to raise children.
Emergency fund
Sh#%! happens. Your kid breaks her arm and you get a big medical bill. The car needs repair (Note: In 2017, the average auto repair bill was between $500 and $600.) Your washing machine dies. An emergency fund provides you with ready cash to cover these expenses so that you don’t have to pay for it with credit (or sell investments in a down market). How much $$$ should be in your emergency fund? Three to six months of essential living expenses is the general recommendation. For many residents, this may mean $15,000 to $30,000. Where should you keep it? This is money that you will need NOW, so it needs to be readily available. Typically, this means keeping it in a savings or money market account. Note: Online accounts pay higher interest rates (~0.5% at the time of this writing) than do brick-and-mortar banks (which pay an average rate of 0.08%). Also note: An emergency fund is for emergencies (duh) and not for a new HDTV.
Loan management
You need a plan for your student loans. The most comprehensive guide is available here for free. (Note: This is an area where it can be very important to consider your personal situation, especially if you’re married to another earner.) Start by consolidating your federal loans so that you’re eligible for Public Service Loan Forgiveness (PSLF) (even if you may not ultimately go this route) and enter into an income driven repayment program. The best choice for most residents is REPAYE (Revised Pay As You Earn). (Note: The goal here is to pay the minimum required qualifying payment each year and to have as much debt forgiven at the end of ten years.) The monthly payments are usually an affordable $0-$300/month so you can avoid deferment or going into forbearance. Next you want to refinance any private loans you have (which are not eligible for PSLF). Private student loans can be refinanced for free and you should consider refinancing whenever you can get a lower rate. Typically, when you finish residency you can get a better rate because of your enhanced income status.
Retirement plan contributions
About half of hospitals offer residents a retirement plan (401k, 403b) and some will match your contribution up to a limit. By not taking advantage of this match you are leaving money on the table, essentially taking a self-imposed pay cut. The other retirement contribution that residents should consider is the Roth IRA (named after Senator William Roth). You pay the taxes on the front end (at the time of contribution), but there are no taxes on the back end (at the time of withdrawal) and money grows tax free while it’s in the account. As a resident, you may be in the lowest tax bracket you'll ever be in for the rest of your life so it’s a good time to contribute to a Roth IRA because the front end taxes will be low. You can also contribute to a Roth IRA for a non-working spouse from your income. (Note: Anything that has tax ramifications should be considered in terms of your personal circumstances.) If you are pursuing PSLF (and thus want to minimize the amount you pay back along the way), you want to minimize your taxable income in order to minimize your loan payments (which are based on income) by maximizing contributions to a pre-tax retirement plan, like a 401k. Also, if your spouse is a high earner, you may have to contribute to a Roth IRA through the “back door.” Note: You can’t put off contributing to a Roth IRA during residency thinking you will just make bigger contributions after you graduate. This is because you’re only allowed to contribute a certain amount per year ($6,000 in 2021). Also note: Married residents with earned income of $65,000 or less may qualify for a Retirement Savings Contributions Credit (free money from the federal government!) - another reason to contribute to a retirement account.
Pay off high interest debt
What is high-interest debt? I’m not talking about student loans or mortgages. I mean high interest credit card debt. (Note: In December 2020, the median interest rate on credit cards that were assessed interest reached an astronomical 19.4%.) I mean that 6% car loan. I mean that 8% personal loan that paid for that trip to Maui for your cousin’s wedding. Pay those off. Doing so will be the best investment you can make. In these examples, you’re getting a 6%-19.4% guaranteed return on your investment. That’s hard to beat.
Even Uncle Sam advises you to pay off high-interest debt:
“No investment strategy pays off as well as, or with less risk than, eliminating high interest debt. Most credit cards charge high interest rates -- as much as 18% or more - if you don’t pay off your balance in full each month. If you owe money on your credit cards, the wisest thing you can do is pay off the balance in full as quickly as possible. Virtually no investment will give you returns to match an 18% interest rate on your credit card. That’s why you’re better off eliminating all credit card debt before investing. Once you’ve paid off your credit cards, you can budget your money and begin to save and invest.”
Final piece of advice: When it comes to finances and life, hope for the best but prepare for the worst.
And remember: Knowledge is power! The Reading Room is always open.
Play By the Rules and You Could Love Retirement
Are you thinking about retiring? Unless you’re already retired, I suggest you DO start thinking about it. Whether it’s 5 years down the road or 50 years into the future, it’s wise to start planning early.
Why is that? I could fill beaucoup tomes on that answer, but let’s keep it simple: because getting to the $ number you need in order to retire with the lifestyle you’ve imagined for yourself will only happen if you take action. Starting early will give you more options and increase the likelihood of a happy retirement.
Next question. What do you need to know to prepare for retirement? That, my friends, is the subject of the day. Read on!
Note: I’ll only be discussing the financial aspects of retirement, but it’s also important to think about what you will DO in retirement (e.g., fishing, taking up Muay Thai boxing, learning a new language, starting a new career, riding your bike across the country, joining a dead poet’s society or pie baking club, writing a book...well, I don’t know what your cup of tea is— you fill in the blank). Point is, just remember that the financial part isn’t the only aspect of retirement planning that you would do well to prepare for.
Oh, and as the title suggests, I’ll be talking about rules—specifically, the 4% Rule and the Rule of 72.
In prior posts I talked about retirement plans and investing accounts, which you may want to read now if you haven’t already.
But saving and investing is only one aspect of financially planning for retirement. You also need to think about spending! This post will address both.
Perhaps right now you’re thinking, spending?! As in, should I buy that fancy boat to go with the beach house? Well, that’s not the type of question I can answer for you.
However, I will suggest four helpful questions, and then offer some practical information in response that can help you build a retirement financial plan that’s right for you.
When making a financial retirement plan, you might ask the following:
- How much will I need in annual retirement income?
- What will be my sources of income?
- How big of a nest egg will I need?
- What savings rate and length of time will it take to build that nest egg?
Let’s consider each of these questions in turn.
Question #1: How much will I need in annual retirement income?
Let’s say you are earning an average radiologist salary of $427,000 (according to the 2020 Medscape survey). Congratulations! You are among the top physician earners!
Of course, it’s quite likely that you earn much more or less than this amount. A radiologist just starting out earns around $250,000 to $350,000 and high-earning private practice radiologists can earn three to four times that amount. With so much variation in salary during your career, what number should you use in order to plan your annual retirement income?
Do your investments/pension/social security/other income sources need to replace all of your earned income in order to retire with the same standard of living as you had during your working years? The answer is no. Financial planners assume you'll spend about 80% of the income you make before you retire during your retirement—that's known as your retirement income replacement ratio. Although this may be true for the general population, it probably doesn’t make sense for radiologists and other high-income earners. Why not?
Some expenses will decrease (yay!)
Many of your expenses will decrease. In retirement (assuming you no longer have earned income or that it has decreased considerably), you will no longer be contributing to retirement accounts. Let’s say you’ve been earning $400,000/year and contributing 20% to retirement accounts ($80,000). You won’t be making that contribution when you’re retired.
What else changes in retirement? If your income goes down, your taxes go down. If you have $400,000 of earned income and your effective tax rate is 30% (you can refresh your knowledge of income tax here and here), you will pay $120,000 in income taxes. If your retirement income is $200,000, from investment income and social security, your effective tax rate might be as low as 15-20%, for a tax bill of $35,000 to $40,000. It could even be less than that, depending on the type of investment income and the state in which you live.
Other expenses that may go down in retirement include debt (mortgage, car payment), work-related expenses (clothes, travel), insurance (life, disability), childcare, and college costs. If you downsize to a smaller home, you will save on property taxes, property insurance, and maintenance costs.
Some expenses will go up (uh-oh!)
What costs go up in retirement? If you retire before age 65 and your employer doesn’t extend health insurance during retirement, you will likely pay much more in health insurance premiums and other health care costs until you are eligible for Medicare. Once you sign up for Medicare, your premiums will go down, but they may be higher than what you paid when you were employed.
Medicare premiums go up as your income increases. The standard Part B premium amount in 2020 is $144.60. But if your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you'll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium. For example, if your yearly income in 2018 was above $174,000 up to $218,000 (married filing jointly), your premium amount would be $202.40 in 2020. If your yearly income in 2018 was $750,000 and above (married filing jointly), your premium amount would be $491.60 in 2020. Some retired radiologists on Medicare may experience this extreme situation if their spouse is still working and generating a large income.
The $285,000 question
A BIG unknown is long-term care costs. Most radiologists will not buy long-term care insurance, but rather self-insure (i.e., save enough money to pay for the costs). A 65-year-old couple retiring in 2019 can expect to spend $285,000 in healthcare and medical expenses throughout retirement. This doesn’t include the additional annual cost of long-term care, which, in 2019, averaged from $19,500 for adult day care services to $102,204 for a private room in a nursing home.
You may choose to travel more in retirement, so those costs can go up considerably. Or you may buy a second home. Or start paying someone else to clean your home, shovel your snow, do your yard work, and prepare your taxes. Or you may decide to stop paying someone and do all those things yourself once you are no longer working.
So, how do you figure out what income YOU will need in retirement? To reach the most accurate number, don’t base it on a percentage of your income. Rather, look at your current expenses (yes, that might take some effort if you don’t have a handle on this already), and make adjustments based on how you think you will live in retirement. If you’re 30 years away from retirement, it will be harder to guestimate what you will need. In that case, start out with a reasonable number, say 20-50% of current income, and make adjustments over the years. You need SOME goal to shoot for in order to plan how to get there.
Question #2: What will be my sources of income?
Let’s say your magic number (the amount you need each year in retirement) is $150,000. Where will it come from?
Some possibilities:
- Social security
- Pension
- Investment income
- Annuities
- Inheritance
- Lottery
Most radiologists can count on social security and investment income. Fewer will also draw from other types of investments or pensions. Annuities allow you to basically buy a pension, and although it may make a lot of sense to purchase single premium immediate annuities, not many people do. It probably isn’t wise to count on an inheritance, and foolish to rely on winning the lottery.
Social security
A discussion of social security is way beyond the scope of this post, but basically, if you’ve paid into the Social Security system for at least 10 years you become eligible for early retirement benefits at age 62. However, you will receive a higher monthly benefit if you wait until your “full retirement age”—66 for people born in 1954, then add two months for each year until reaching 1960, at which point 67 becomes the new full retirement age for all—and an even higher one if you wait as late as age 70, at which point the benefit maxes out. Spouses can also claim benefits, based on either their own earnings record or their spouse’s.
The maximum social security benefit for someone who retires in 2021 is $3,895/month ($46,740/year). The average retired worker receives $1,512.63/month ($18,151/year), as of May 2020. The amount you can expect to receive will depend on the number of years you contributed, the amount you contributed, the age at which you start to collect social security, and whether you’re collecting based on your history or that of your spouse.
Pension
49% of the workforce in private industry has no private pension coverage. If you’re lucky enough to work at an academic center (okay, I’m biased because I’ve spent my whole career in academic radiology), you will probably receive a pension from the university. The amount will depend on your years of service and salary level near retirement. Note: this refers to the salary from the university and does not include practice plan income, which is usually the majority of a radiologist’s income. Radiologists who work for the VA and meet service requirements receive a generous pension. The majority of radiologists, however, are in private practice and do not receive a traditional pension.
Investment income
This refers to retirement accounts, taxable brokerage accounts, certificates of deposit, and savings accounts. It may also include real estate or other sources of investment income. All together, you can consider this your investment portfolio. During retirement, those investments can grow (from dividends and interest) and they can decrease (from market losses and spending).
Question #3: How big of a nest egg will I need?
Let’s say you’ve estimated needing $150,000/year in retirement income. How much investment income will you need? Since you can estimate what your social security income will be (or ignore that income if you don’t trust the government), and any pension income, your investment income must be enough to make up the shortfall.
There are different ways to determine how much money you need to save to get the retirement income you want. The 4% rule can be used to determine how much you need to save as well as how much you can spend.
To determine how much you can spend: add up all of your investments, and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation.
Using the 4% rule to determine how much money you need to save, you divide your desired annual retirement income by 4%. To generate $150,000, for example, you would need a nest egg at retirement of about $3,750,000 ($150,000 ÷ 0.04). This strategy assumes a 5% return on investments (after taxes and inflation), no additional retirement income (e.g., Social Security), and a lifestyle similar to the one you would be living at the time you retire.
Note: hot off the press - the 4% rule is now the 5% rule! Even so, I’m still using 4% in my calculations to stay on the conservative side. Also, many people feel that a 4% withdrawal rate is too high and recommend a 2-3% withdrawal rate, depending on individual circumstances. A discussion of a safe withdrawal rate (SWR) is beyond the scope of this post, but the bottom line is this - If you want an SWR of 4%, you need to save more than if you want an SWR of 3%. The 4% rule also assumes 30 years of retirement - an early retirement will require a bigger nest egg or a smaller SWR.
Is it reasonable to expect a 5% real return? The historical average annual return (1926 to 2018) for stocks is 10.1%. Note: that’s 100% stocks, and you probably have bonds and other types of investments in your portfolio, not just stocks. That 10.1% also doesn’t account for taxes or inflation. Over the last 100 years, inflation has averaged 3%. However, during the past 10 years, inflation has been well under 3% each year except one. The current inflation rate is only 1.4%. In 1980 it was 13.5%.
Let’s assume an inflation rate of 3% going forward. That brings the return on 100% stocks down to 7.1%. Are you paying 1% to your financial advisor? If so, your return is now 6.1%.
Let’s say you’re invested in 50% stocks and 50% bonds (not unreasonable for people close to or in retirement). The historical average annual return (1926 to 2019) for this portfolio is 8.2%. Knock off 3% for inflation and assume you pay negligible investment expenses or taxes, and you’re close to a 5% return.
Question #4: What savings rate and length of time will it take to build that nest egg?
Assuming you need a nest egg of $3,750,000 as calculated above, what amount do you need to save per year, and for how many years do you need to save to build that nest egg? This is actually more complicated than it may seem since you probably won’t save the same amount every year for 30 years.
You can reasonably expect your income to increase over your working years (although it may not increase every year, and in some years it may decrease). Historically, average radiologist salaries have increased most years.
Your salary will be lowest early in your career, when you might also have many competing expenses. The amount you can save for retirement will increase as your salary increases and your expenses decrease. So, why not wait several years to start saving?
The answer is that the earlier you start to save, the longer your money has a chance to grow.
Rule of 72: Divide the interest rate into 72, and the result is the number of years it takes your money to double.
This brings me to the Rule of 72, which is a way to determine how fast your money will grow at a given interest rate:
Divide the interest rate into 72, and the result is the number of years it takes your money to double.
So, if your investment earned 7.2%, your money would double every 10 years (72 divided by 7.2 equals 10). If you assume a return of 5%, your money would double every 14.4 years. Note: the percentage return you assume is AFTER inflation, expenses, and taxes.
Think about that. $25,000 at 5% would double to $50,000, then double to $100,000, then double to $200,000 in 43.2 years. If you invest that money at age 32, you’d have $200K at age 75. If you invest that amount at age 46, you’d only have $100,000 at age 75 (two doublings).
Of course, a radiologist doesn’t invest for one year and call it quits. Ideally, she invests every year of her working career. You can use a future value calculator or the future value function of a spreadsheet to determine how much money a yearly investment will compound over a given length of time, assuming a certain percentage of return.
Let’s go back to the $3,750,000 nest egg. If you invest 15% of a $400,000 annual income ($60,000/year) for 30 years, and assume a 5% real return, you would generate $4,077,425. That’s pretty close to your nest egg goal! But most radiologists should easily be able to save more than 15% of their income. Let’s say you invest 25% ($100,00/year) and assume a return of 5%. You would generate $3,938,354 in just 22 years. If you start investing at age 32, you’d reach that goal at age 54 - early retirement!
You can play with the numbers (it’s kind of fun), changing the amount you invest, to see what it would take to shorten or lengthen the time to retirement. One note of caution: increasing the return rate will add a greater element of uncertainty and the higher you make it, the more likely your calculation will be an exercise in optimism/fantasy and not reality.
Recap (not a question)
You can play with an infinite number of variables to determine how much money you will need in retirement. If you want to keep it simple, especially when you are young and don’t have a clear vision of your retirement lifestyle, you can guestimate an annual retirement income to be 20% - 50% of current income, and using the rule of 4%, divide that annual income by 4% to determine the size of your nest egg.
To estimate how long you need to save in order to retire at a desired age, use the rule of 72 (with the aid of a future value calculator or the future value function of a spreadsheet). When you do retire (congratulations!), you can use the 4% rule again to estimate a safe withdrawal rate (SWR). I would suggest, however, that you use the 4% spending rule only as a guide, and incorporate plenty of flexibility in your withdrawal strategy. When your portfolio is doing well, spend a little more. When it’s not doing well, spend a little less. The more flexible you are with spending (and I’m a big fan of low fixed expenses for this reason), the more likely you will enjoy a long and financially successful retirement. And bring your retirement vision to fruition, whatever that may look like to you (fancy boat and beach house sold separately).