Negotiation: Everything You Wish You Knew But Nobody Taught You
Q: What do a doormat and a bull-in-a-china-shop have in common?
A: Neither are good approaches to negotiation.
In a previous post I briefly discussed contract negotiations. Because this is something that can greatly influence one’s career, I feel it’s worth taking a closer look at what it takes to be a successful negotiator. If you’re already a pro at this, you might want to read on anyway so as not to miss my personal story (Ebert and Roeper give it two thumbs up!).
But first, what does “negotiate” mean?
Negotiate: to confer with another so as to arrive at the settlement of some matter.
In practical terms, the reason to negotiate is to produce something better than the results you can obtain without negotiating, or in other words, to “change the outcome for the better.”
Notice I didn’t say “changing the outcome for myself.” There are always at least two sides in a negotiation and a “good” outcome is one that is good for all parties. Also, the “outcome” can be a lot more complicated than you might think.
The reason for this? Every action has consequences; changing one variable in a transaction influences other variables. If you successfully negotiate a salary raise, the outcome isn’t just a change in your salary. It also changes the group’s expense line and it may create inequity among employees. Note: Be careful what you negotiate.
We all negotiate
Like it or not, you are a negotiator. As a toddler, you negotiated with friends about sharing toys (you were a sharer, weren’t you?).
As an adult, you might negotiate with: neighbors (when a tree falls down on both properties); siblings (taking care of your parents); children (minutes of TV time or 3 more bites of broccoli and then dessert); spouses (picking out new furniture—wait, can we buy a sports car, instead?); roommates (it’s your turn to take out the trash); colleagues (who will pick up the extra weekend of call?); potential employers (getting the job); and bosses (you’ve earned a raise).
When was the last time you negotiated something? Was it when you made an offer on a house, followed by a few counter offers? Or haggled over a find at a flea market?
Have you ever passed on an opportunity to negotiate? Did you pay the sticker price for a car instead of offering less?
Did you sign the first job contract offered without questioning any of the terms (uh-oh)?
Have you paid a financial advisor an assets under management fee for 10 years without ever negotiating for a better rate (guilty, as charged)?
When was the last time you spoke with your insurance agent to negotiate the terms of home or auto insurance (or do you always pay the amount on the invoice that arrives in the mailbox every year)?
Negotiation is an opportunity to optimize a situation to be more in your favor. But…
When to negotiate (and when not)
It isn’t necessary or practical to negotiate every transaction in life. Case in point: you don’t need to worry about paying 29 cents for a banana (which, by the way, must be the cheapest food on the planet).
Negotiating becomes more important as the stakes increase. Your starting salary will serve as a baseline on which future raises are based. That’s pretty high stakes. If everyone in a group receives a pay raise of 5%, your salary of $250,000 will increase to $262,500. A salary of $300,00 would increase to $315,000. The difference between the two salaries, after the first increase, grew from $50,000 to $52,500. Your initial salary level should be fair and reflective of what you’re worth and what the market can bear.
It’s also not necessary, or even wise, to negotiate every element of a transaction. Why? Because “over-negotiating” sends a negative message to the other party that you’re not dealing in good faith for an outcome that is reasonable and fair. In the case of contract negotiation, it is an indication to the employer of what kind of an employee you will be. Who wants to hire someone who will constantly be asking for more?
The most significant outcome from negotiation is often the relationship that develops between the parties involved. Negotiation is seldom a one-time deal. There will likely be opportunities for future negotiation. In fact, you should hope for that. How you negotiate today will open or close doors for the future. Don’t make the mistake of trading a big win today for a large loss in the future. That’s why a “win-lose” outcome is seldom the best outcome.
You were never taught how to negotiate? You can learn!
Undergraduate and medical students don’t negotiate their medical school tuition. Residents and fellows don’t negotiate their salary or benefits. As a trainee, I bet you were never taught the art of negotiation. At this point, you might be asking, “how do I learn how to be an effective negotiator?” There are lots of books on the subject, mostly iterations of the same general principles.
Here’s a book I recommend: “Getting to Yes: Negotiating Agreement Without Giving In” by Fisher, Ury and Patton (Roger Fisher is the Samuel Williston Professor of Law Emeritus and Director Emeritus of the Harvard Negotiation Project.) It’s short enough and interesting enough that you can read it cover to cover and it includes actionable strategies that you can apply in your professional as well as your day-to-day life.
Principled negotiation (from “Getting to Yes”) involves four points:
- Separating the people from the problem (attack the problem, not each other)
- Focusing on interests, not positions (avoid having a bottom line)
- Inventing multiple options looking for mutual gain
- Insisting that the result be based on an objective standard (e.g., market value, expert opinion, custom, law)
The first point seems self-explanatory - keep emotions in check. Focus on the tangibles. One sure way to derail a negotiation is to let your emotions speak for you. Decisions based on anger, fear, hostility, or trying to preserve your ego are likely to end in disaster. It takes practice and skill to overcome the urge to fight, especially if something personal is at stake.
The second and third points are related. Consider salary, for example. Salary isn’t always the element of most interest in contract negotiation but it is one of the most common. It should be. If radiologists weren’t paid for their work, most would not do it. Money pays for the things we need to exist and unless we already have a life’s-worth, we need to acquire it by some means. Unless you have a steady stream of income from real estate investing, a trust fund, an annuity, or some other source, you will need to earn it.
For example, setting a position of a certain salary level (your $ bottom line) will lock you into a number that will give you less room to negotiate. Using principled negotiation, you don’t want to narrow the gap (between your salary position and that of the employer), but rather to widen the options. You’re not looking for one right solution. Being open to a number of different solutions will give you more room to negotiate.
A radiology group or department often has a fixed pot of money budgeted for radiologist salaries. In that case, you might be wondering, how can there be multiple options? The most common solution is to sweeten the salary pot with a sign-on bonus, loan-repayment benefit, greater academic time, or other perks. There are yet other ways to widen the options. Consider that the department may not be the only source of revenue. Depending on the type of radiology job under consideration, there may also be a hospital, university, or corporation that will want a stake in your hire.
Radiology groups have shared goals with the institutions with which they associate. For example, they may share a common plan to increase diversity among their workforce. Perhaps there are funds associated with this initiative that can be used to hire an underrepresented minority radiologist.
Hospitals have a stake in bringing on radiologists who can develop a new service line (and it’s associated $$$).
As another example, money might be available from a funded quality improvement initiative. The hospital might pay a portion of the salary of a radiologist who is willing to be a leader in that initiative. Hospitals have a stake in bringing on radiologists who can develop a new service line (and it’s associated $$$). Do you have the skills needed to start a uterine artery embolization service, or a prostate MRI program? Such examples are win-win situations for all the parties that can jointly contribute to your salary.
Universities are another source of salary income. They contribute money to departments to pay for the teaching time of radiologists and radiology medical student course directors. Some of this can be passed on to you as part of your guaranteed salary.
Fourth point - arm yourself with objective standards
It doesn’t get more objective than a dollar number. Salary ranges are easy to get.
Note: A better interest to consider is compensation, which includes benefits and salary. Considering this broader term opens the door to more options, which is the third point of principled negotiation. But total compensation numbers are harder to get.
Let’s say you’ve researched all the latest salary surveys and talked to other radiologists in a similar position (based on skill, experience, location, and type of practice) so you have an idea of what is fair and reasonable. It’s good to go into a negotiation with an acceptable range and not one number. And it’s good to know your BATNA (Best Alternative to a Negotiated Agreement) before negotiation starts. BATNA refers to the lowest value of a deal that you’re willing to accept, and at anything less, you will walk away from the table.
Note of caution: a rigid BATNA inhibits imagination. It reduces the incentive to invent a tailor-made solution that can reconcile differences in a more advantageous way for both parties. It limits your ability to benefit from what you learn during the negotiation process.
You’ll be in a much better position to negotiate if you’re considering your total interests and not one position and you can create multiple options to get to your desired BATNA.
Let’s assume you’ve concluded, based on the research you’ve conducted, that an acceptable salary range for a first radiology job, for someone in your position, is $250,000 - $350,000. Does that mean your BATNA should be $250,000? Not necessarily, if you weigh the benefits such as retirement contributions, insurance, and paid time off. Consider the following two one-year probationary job offers:
Job A offers you $300,000 in guaranteed salary, a compensation package worth $40,000, and 30 days of paid time off.
Job B offers you $240,000 in guaranteed salary, a compensation package worth $90,000, and 35 days of paid time off.
You might think the two offers are fairly similar in worth, and that a salary of $240,000, although lower than market value, might be okay. But you don’t have all the information you need to make that conclusion. Will salary be guaranteed every year or just the first year? If only for the first year, how is it determined going forward? Is it based on work relative value units (wRVUs) or some other measure of productivity? Does the group typically distribute a bonus at the end of the year? If so, what portion would you be entitled to? When should you expect a salary increase? What are the criteria for an increase? Who determines salary increases? What type of retirement package are you being offered? Are you able to invest in diversified, low-cost index funds? Or will you have to choose from a limited number of funds with high fees?
There’s another reason to think beyond the first year. Job A may come with regular increases in salary and Job B’s history of salary increases might be spotty. There’s nothing wrong with asking your potential employer how much you could be expecting to earn in 2 years and in 5 years. You might even be able to negotiate future salary increases as part of the initial contract.
If the first year’s salary offer is below $250,000, and the benefits don’t compensate for it, but otherwise the job is more appealing than other offers, you can ask for a sign-on bonus or negotiate a raise the following year. You’ll be in a much better position to negotiate if you’re considering your total interests and not one position and you can create multiple options to get to your desired BATNA.
My personal story
I’ve had lots of experience on both sides of the negotiating table, both as a hirer and a hiree. Most recently, I negotiated the current position I have as Director of Medical Content at MRI Online. It’s a non-clinical role that allows me the opportunity to use my leadership and educational skills to help build the best educational platform for radiologists. Since it’s a unique position, there aren’t published salary ranges. But I knew the value of my worth as a clinical radiologist and an administrator so that was a place to start.
My interest was total compensation, not salary. I considered the total value of salary and benefits as an employee and an independent contractor. As an employee, I would be eligible for the usual benefits such as office space, retirement, insurance, and vacation. But as I was already retired from clinical work and financially independent, I didn’t need disability, malpractice, or life insurance. And I had a good health insurance plan through the Wisconsin Retirement System.
So, what did I decide to do? I opted to work as an independent contractor, waiving all benefits (except for paid time off). Since they would save money on benefits, the company could afford to pay me a higher salary as an independent contractor than they could as an employee.
Note: The Internal Revenue Service (IRS) considers a self-employed individual (i.e. independent contractor) to be both an employer and an employee. As such, I am required to pay the full 12.4% Social Security tax up to the wage limit and Medicare tax of 2.9%, for a total self-employment tax of 15.3%. If you choose self-employment over being an employee, the salary should be increased accordingly (in some cases up to 50% more).
Also note: As an independent contractor (i.e., sole proprietor), I am able to deduct 20% of my qualified business income (QBI) as a 199A deduction on my income taxes. The QBI deduction is not considered an “above the line” deduction because it is subtracted after adjusted gross income is calculated. But it is also not an itemized deduction, so I’m able to claim it as well as the standard deduction. As a sole proprietor, I can also deduct health insurance costs as an “above the line deduction”, decreasing my taxable income dollar for dollar. And since I work from home, I am able to deduct home business expenses.
And finally: Federal anti-discrimination laws only apply to “employees” and not independent contractors. Your job as an independent contractor may not be as stable as it would be as an employee.
Never yield to pressure, only to principle
What do I mean by that? If an employer tells you that they can only offer you a starting salary of $225,000, and you know that number to be well below average, you don’t have to give in. What can you do? You can share your salary data with the employer and ask her to explain why her offer is fair market value. This creates a situation where you are asking for a fair salary based on objective criteria. Note: be prepared for the employer to come back with her own objective criteria, different from yours.
Get in touch with your assets
Factors that will influence bargaining power include who needs who more, external market forces, and what types of contracts other people are signing. Knowing your assets gives you more negotiating power. What assets might a newly-graduated radiologist bring to the table?
- Manpower (especially valuable during times of manpower shortage)
- Unique skills (CT colonography, prostate MR, etc. if you concentrated on these areas in training)
- Extra degree/certification (PhD, MBA, IT, MEd)
- Underrepresented minority (a more diverse group is a better group)
- Ties to the community
- Research experience and interest
- Fellowship training in a high demand area
- Flexibility in work hours
- Flexibility in scope of practice (i.e., willing to practice general radiology)
- Ability to start the day after finishing training (if you’re willing to do so)
Something else that will give you power is knowing in advance what the BATNA for the other side is. Since this is difficult, if not impossible to obtain, you should strive to at least understand what the other side’s alternatives are. Learn what the other party needs in a new hire by reading the job description and perusing the group’s website.
Entering negotiations with information about the other side’s interests will allow you to better determine your own value by knowing what you can bring to the table.
Talk to former and current employees. Ask targeted questions about the direction the department is taking, what is needed to get there, and how you might fill a needed role. Ask whether there are deficiencies in the group (and view these as opportunities).
For example, unless you ask, you may not find out that none of the current faculty members have an interest in leading the medical student radiology course. This results in a missed opportunity to emphasize your educational leadership interests. If you don’t check out the group’s website you might not discover how lacking it is in content and design and blow an opportunity to promote your experience in web development. Entering negotiations with information about the other side’s interests will allow you to better determine your own value by knowing what you can bring to the table.
Don’t ignore the soft skills
How you negotiate reveals a lot about what kind of a person you would be to work with. You’d be smart to keep this in mind. This works both ways - you will get to see what kind of person the employer would be to work with by the way she negotiates. Negotiating is an opportunity to demonstrate your principles: fairness, continuous self-improvement, service-orientation, and a desire to see the group thrive. If the employer values those qualities, she will want to add you to her team. If you convince all the people you interview with and otherwise meet that you share the team’s values, those people will root for you.
Negotiating presents an opportunity to build trust and sow the seeds of a long-lasting positive relationship. It’s hard to put a dollar value on that. How much is it worth to have a world-renowned radiology chair write a personal recommendation on your behalf? Her initial impressions of you will be influenced by your style of negotiation.
Go into negotiations with a clear idea of what is most important to you. Then focus your asks on those interests. Presenting a long list of demands will make you appear unreasonable and not the kind of person a group wants to bring onto their team. Most employers are not going to fight a limited number of changes that would make a candidate happy. After all, they spent a great deal of time and money to recruit you, and they won’t want to start the process all over again.
Don’t sell yourself short
Even “standard” contracts that “every physician has signed” can be changed. Underestimating your value can substantially reduce your compensation—and that reduction can last a lifetime if future raises are based on initial salary. A person doesn’t get paid what they’re worth, they get paid what they negotiate. It’s very likely that the first offer you receive won’t be the best offer. You may recognize those words from previous posts because it’s a mantra worth repeating. View receiving a contract as an invitation to bargain. As a general rule, initial contracts are worded in the best interest of the employer and should never be signed outright.
I also recommend against accepting an offer on the spot. The right amount of time (days, not weeks) provides an opportunity for both parties to think about what they bring to the table. If you’ve made a good impression and “sold yourself”, a day or two will make you even more valuable in the eyes of the employer.
My advice: when presented with an offer, thank the employer, express your interest in the job, ask for a day or two to think it over (and to discuss it with your legal consultant), and come back with a sound and reasonable counteroffer.
When the other side doesn’t play smart
Since negotiation is a skill that is honed with education and experience, you shouldn’t be surprised if you find that the person you’re negotiating with isn’t very good at it. This actually works to your disadvantage. You would rather be negotiating with someone who understands the importance of creating multiple options and building relationships. When this isn’t the case, you’re going to have to work harder to make up for the other side’s deficiencies.
When the other side doesn’t play fair
So too is it difficult when you’re stuck negotiating with someone who doesn’t play by the rules. Here are some of the ways interviewers don’t play fair:
- They try to deceive you by representing themselves as someone with authority they don’t have (promising you something they can’t deliver) or by offering phony facts
- They deliberately make you feel uneasy (the room is too hot or cold, they don’t offer food/water or a bathroom break)
- They criticize your appearance or fail to listen to you or make eye contact
- They ask illegal questions (do you plan to have children?)
- They threaten or overly pressure you (I need to have an answer right now)
One way to handle the above is to stick to your principles of negotiation, which includes separating the people from the problem and focusing on your interests, multiple options and objective criteria.
Another solution, which might be the best, is to walk away. Do you really want to work with someone who demonstrates that kind of negative behavior? Unless you only plan to stay with the group for a short period of time as a temporary position until your dream job opens up or until your family is free to move around, you should think twice about forging a long-term relationship with someone who creates a toxic work environment.
Closing remarks
Negotiation is much like politics (the definition of which is “the art of influencing others”). Becoming a skillful negotiator requires a bit of finesse as well as education and practice. In high stakes situations, like your dream job, you might want to practice with a colleague, faculty member, or an experienced and trustworthy person in a hiring position.
The way you negotiate can mean the difference between making a deal or not, whether the pie is expanded or merely divided, and whether you have a good relationship with the other side or a strained one. If you do come to an agreement, be happy about it, even if you didn’t get everything you wanted. Both sides should be happy to be working together. It won’t benefit you any to feel remorse. If that’s the case, it probably wasn’t a deal worth making.
Remember:
- Know what you want and what you can accept
- Know what the other party wants and needs
- Negotiate in good faith and build a lasting relationship
Enhanced Education Through the Application of Adult Learning Principles
What are adult learning principles? What does it mean to apply “adult learning principles” to one’s teaching? Are you already doing it? If you don’t know the answers to these questions I invite you to keep reading.
Research that looks into how pre-adults (pedagogy) and adults (andragogy) learn shows that if you apply adult learning principles, you can be a more effective teacher.
Adult education literature supports the idea that teaching adults should be approached in a different way than teaching children and adolescents (pre-adults). Many aspects of effective teaching apply to all age groups, and current theory sees the two processes as a continuum with pedagogy on one end and andragogy on the other. However, adults have had more life experiences and in many ways are differently motivated than children.
Malcolm Knowles, who is considered the father of adult learning theory, coined the term andragogy to describe the study of adult learning. Adults are more self-directed in their learning and have a greater need to know why they should learn something. They have set habits and strong tastes. They may have prejudices, which are detrimental to the learning environment. They want a choice in what they learn. These characteristics of adult learners can be addressed in the learning environment. Understanding the principles of adult learning can help you become a better facilitator of learning.
Everyone seems to be drawn to “top ten” lists, so here are ten principles of adult learning:
- Adults have accumulated a foundation of life experiences and knowledge. Acknowledging adults’ understanding and experiences validates them as competent and capable learners. It is important that the facilitator of adult learning help adult students see the connections between earlier learning experiences and new information. Thus, teachers of adults should begin educational sessions by finding out what the adults already know about the topic. For example, knowing whether or not a group of students has an understanding of interstitial lung diseases would be helpful to the radiology teacher who plans to show the students radiologic examples of the diseases. A student with no fundamental knowledge of such diseases, who may be unfamiliar with the disease names, would have no current knowledge to tie the radiologic images to. Although this information is ideally obtained prior to the educational event, when this is not practical, the audience can be quizzed at the beginning of the session.
- Adults are autonomous and self-directed. Knowles promoted the concept of self-directed learning. He felt that adults should create personal learning objectives that would allow them to set individual goals and to apply the new learning in practical ways. Self-initiated learning is lasting and pervasive. It is most effective when adults can proceed at their own pace, so independent study should be encouraged. Independent study can be facilitated by providing learners with references and supplementary educational resources, such as educational videos and handouts.
- Adults are goal-oriented. They like to know how the educational activity will help them reach their goals. This is why you should explicitly state your objectives at the beginning of every presentation. For example, a learner may attend a lecture on high-resolution computed tomography (HRCT) of the chest, with a goal to understand the different patterns of disease seen on CT scans. At the beginning of the presentation, you would outline several patterns that will be discussed and contrasted with each other, making it clear to the learner how the lecture will help him or her understand patterns of disease on CT scans in a way that will be applicable to his or her practice.
- Adults are relevancy-oriented and practical. Learning should be applicable to the learner’s work or other responsibilities valued by the learner. In other words, adults want to know “what’s in it for me” (WIFM). They want content that can be applied to real-life situations. Adults tend to be problem-centered and learn best through practical applications of what they have learned. Techniques that can be used to facilitate making content relevant and based on learner needs are problem-solving activities, anticipating problems in the application of the new ideas to the learner’s setting and offering suggestions, and showing real-life cases to link theory to practice.
- Adults (all learners) need to be respected. Learning takes place in an environment that is considered “safe” by the learner- one in which the learner feels he or she can be successful. Respectful learning environments are those in which all opinions are valued. Adults should participate voluntarily. In a true learning community, all participants, including the instructor, share ideas and learn from each other. As the instructor, you are a facilitator or guide rather than the only one with knowledge. Learners respond to personal interaction, such as when you call them by name and listen to their questions and viewpoints. They respond positively to constructive feedback and your respect for their time and educational priorities.
- Adults are motivated to learn by both intrinsic and extrinsic motivation. What motivates radiologists to learn? They want to build social relationships, fulfill licensing or certification requirements, improve their ability to serve mankind, advance professionally (e.g., by getting a raise or promotion), escape from the routines of home or work, and learn for the sake of learning. You can leverage learner motivation to make your teaching relevant. An obvious example of this is how you might use case-based teaching to prepare trainees or practicing radiologists for certification exams.
- Adults learn best when they are active participants in the learning process. Teaching is not something that should be done to the learner. The learner should be actively involved in the learning process as this enhances retention of new concepts. Active learning is student-centered (e.g., not a “talking head” lecture), encourages sharing of experiences and questions, and weaves discussion sections with exercises that require learners to practice a skill or apply knowledge. Such experiential learning (as described by Carl Rogers) that is personal, self initiated, and evaluated by the learner leads to long-lasting retention of knowledge.
- Not all adults learn the same way. Individual learning styles are influenced by personality, intelligence, education, experiences, culture, and sensory and cognitive preferences. Methods to accommodate different learning styles can include small- and large-group discussion, role-playing, lecturing, case studies, games, questioning, and optimal use of technology. For decades, educators have quoted literature touting that learners retain 10% of what is read, 20% of what is heard, 30% of what is seen (demonstration), 50% of what is seen and heard (discussion), 70% of what is said (practice), and 90% of what is said while doing (teach others, immediate use). These numbers have been debunked but the general principle still holds true that learning is most effective when different learning styles are used and learners are actively engaged.
- Adults learn more effectively when given timely and appropriate feedback and reinforcement of learning. Providing timely feedback optimizes learning and mastery of content and skills. Constructive feedback helps learners correct errors and reinforces good behaviors. As the name implies, positive reinforcement is “good” and reinforces “good” (or positive) behavior. Negative reinforcement is useful in trying to change modes of behavior. The result of negative reinforcement is extinction—that is, the instructor uses negative reinforcement until the “bad” behavior disappears or becomes extinct. Feedback is most effective when it is constructive, frequent, and regular and comes from self, peers, and instructors.
- Adults learn better in an environment that is informal and personal. It has been suggested that people do not learn from experience, but rather they learn from reflecting on experience. Reflective learning is a way of allowing learners to step back from their learning experience, helping them to develop critical thinking skills and connect previous learning experiences. Writing in reflective journals is one way to track changes in behavior or actions as a result of new learning and to keep track of how those changes affect one’s practice over time.
In summary, adults learn best when:
- New knowledge is built on current knowledge
- Learning is self-initiated
- Learning helps meet personal goals
- Learning solves problems
- They feel comfortable in the learning environment
- They are motivated to learn
- They are active participants
- They can use their preferred learning styles
- They reflect on their learning
- Constructive, regular, and frequent feedback is provided
The best way to learn is to teach.
Teach/Learn Image from Dvir Yitzchaki (@divirtzwastaken) tweeted 8-18-19
Every good post deserves a Collinsism, so here it is: The best way to learn is to teach. Put another way -teaching is learning twice. All of the adult learning principles described can be wrapped up in one activity: teaching. Nothing in my career has been more rewarding than the positive changes I’ve made in the lives of the students I’ve taught both formally and informally. Most rewarding of all is to hear that someone is a better teacher because of something I taught them.
One last note: thank you to all the teachers who made a difference in my life.
Financisms: A Top Ten List
Radiologists can relate to the phrase “a picture is worth a thousand words.” “The only constant is change” is another adage perfectly describing the specialty. And this dictum was hammered home by faculty throughout my radiology training: “If it isn’t documented, it didn’t happen.”
You know I have a passion for finance. But I have a confession to make.
I also love words. I love learning new words. Which is why when my parents asked me what I wanted for my birthday many many years ago, my answer was a copy of the Deluxe Encyclopedic Edition of New Webster’s Dictionary of the English Language. It still has a place on my bookshelf (next to a well-worn medical dictionary and one of the best books I’ve read about Bob Dylan).
I also love to make up words, which is how I came up with the title for this post.* Did you know there’s a word for that, too? Protologism. It’s a word for a new word that hopes to one day become ‘official’ and widely accepted.
Another quick fun fact for you: before the Internet, there was Shakespeare—the master of coinage. Seriously, it’s insane, you should Google it.
Anyway, speaking of, ahem, coinage…
Financisms: Financial truisms
For those of you who don’t know the definition of a truism: A truism is a statement that is so widely accepted, or so evident and factual, that questioning its validity is considered foolish.
Examples: You’ve got to crack a few eggs to make an omelette. A fool and his money are soon parted.
If you’ve read hundreds of finance books over the years, followed finance blogs, listened to finance podcasts, and attended finance conferences, you’ve probably come across many of the financisms on my list. I like them because they concisely sum up important financial concepts. And because, well, in addition to loving words, I also love truisms and their cousins: idioms, proverbs, sayings, adages, maxims...you get the idea.
I thought it would be fun and educational to list some of the financisms that I’ve found particularly enlightening. Most of them have been repeated over and over without giving credit to their origin, but I’ve credited a source (which may or may not be the original source) when it’s known to me.
My top ten financisms and what they mean:
1. It’s not timing the market that matters, but time in the market.
Market timing refers to the act of moving in and out of a financial market or switching between asset classes based on predictive methods. It is the opposite of a buy-and-hold strategy. It is nearly impossible to time the market successfully compared to staying fully invested over the same period. This is due primarily to costs of opportunity, transaction fees, and taxes. A report of investor behavior showed that, if an investor remained fully invested in the Standards & Poor’s 500 Index between 1995 and 2014, they would have earned a 9.85% annualized return. However, if they missed only 10 of the best days in the market, the return would have been 5.1%. Some of the biggest upswings in the market occurred during a volatile period when many investors fled the market.
A recent White Coat Investor post does a nice job of explaining how timing the market is a fool’s game because it requires 1) predicting the future, 2) knowing when to get out of the market, and 3) knowing when to get back in the market.
2. It’s not how much you earn that counts but how much you keep
(also: It’s not how much you make but what you make of it).
This could be construed in a couple ways. First, that you can earn a lot of money but spend it, especially on things that you don’t value. Second, that you earn money from investments but in an inefficient manner (again, those pesky fees and taxes) such that an unnecessary amount of the profit is eaten up by fees and taxes.
3. The greatest wealth is health.
This phrase was reportedly coined over 2,000 years ago by the Roman poet Virgil. Translation: No amount of money can compensate for deterioration of health and the limitations it places on the ability to enjoy life. Some people remain active for a long time and don’t seem to have to work at it. They’re lucky. For most of us, we have to work at it every day by eating well, exercising, getting adequate sleep, avoiding stress and getting recommended vaccinations and screening exams. I’d happily trade financial wealth for the ability to walk 10 miles a day when I’m in my 90’s. Fortunately for many of us, we have the potential to be wealthy and healthy. Note: I’ll let you set your own criteria for financial wealth.
4. Don’t compare your insides with other people’s outsides.
In other words, stop trying to keep up with the Joneses’. The bestselling book, The Millionaire Next Door, identifies seven common traits that show up again and again among those who have accumulated wealth. Most of the truly wealthy in this country don’t live in Beverly Hills or on Park Avenue-they live next door. The sad truth is that a lot of people who live in big homes, drive fancy cars, and take expensive vacations aren’t wealthy. They’ve accumulated a lot of material possessions but with them a load of debt.
5. Only in investing is it NOT true that you get what you pay for; you get what you don’t pay for.
A version of this financism was often repeated by John Bogle, founder and chief executive of The Vanguard Group, who is credited with creating the first index fund. He preached on why it is so difficult to capture the market’s returns due to the costs of investing—fund management fees, operating costs, brokerage commissions, sales loads, transaction costs, fees to advisers, out-of-pocket charges, market timing, and so on. These fees are minimized if you invest in broadly diversified index funds and avoid market timing.
6. You can’t manage expenses if you don’t know what they are.
I’m not going to tell you to make a budget, but if you’ve never looked at how you spend your money, I suggest you have a go at it. I think it’s fun! Track all of your major expenses for 6 months (mortgage/rent, utilities, phone/internet/cable/streaming services, food, insurance, gas/auto maintenance/other transportation, travel, health care, clothes, child care, lawn care, student loan payment, credit card debt, retirement contributions, etc.). Also, find out what you pay in income and property taxes. You might be surprised at where your money goes. For most of us, money is a limited commodity and we make choices as to how we want to spend it because we don’t have a never-ending supply. Like the Hawthorne effect (or “observer effect”), simply observing what you spend will influence the way you think about spending and may change the way you spend going forward. The point is not to stop spending money (it really can’t be avoided) but rather to spend and invest it on things you value.
7. Net worth is not self-worth.
Net-worth: Your assets minus your debts.
Self-worth: The quality of being worthy of esteem or respect.
It’s human nature to compare ourselves to others. And many people determine who is living a more valuable life by comparing their clothes, cars, homes, and paychecks (tying self-worth to net-worth). I hope you don’t do that, because life is far more valuable than the things that you own. Your self worth is also not determined by how many things you cross off your to-do list, your job, your social media following, your age, what other people think of you, how far you can run, your grades, the number of friends you have, or your relationship status. You are the only one who determines your self-worth. What truly matters when determining people’s worth are their kindness, compassion, empathy, respect for others, and how well they treat those around them.
8. In the end, how your investments behave is much less important than how you behave
(source: Benjamin Graham).
Behavioral finance theorists argue that, rather than being rational, people often make investment decisions based on emotions and biases. Investors often hold losing positions (i.e., investments) rather than feel the pain associated with taking a loss. The instinct to move with the herd explains why investors buy in bull markets and sell in bear markets. When the market takes a big downward swing, investors see the value of their portfolio plummet and hear TV/social media/blog chatter about “getting out of the market before it goes down even further.” But doing this results in a behavior of buying high and selling low, leading to lower long-term gains than if the investor had ignored the hoopla and stayed the course.
9. The market giveth and the market taketh away.
A stock market correction is usually defined as a drop in stock prices of 10% or greater from their most recent peak. If prices drop by 20% or more, it's called a bear market. Since 1920, the S&P 500 Index has—on average—recorded a 5% pullback three times a year, a 10% correction once every 16 months, and a 20% plunge every seven years. Corrections have lasted an average of 43 days. In 2020, the coronavirus pandemic rocked the stock market, sending it into another bear market. But within five months, the S&P 500 had made a full recovery and was setting new record highs. Key point: market swings are to be expected and should not influence your long-term investment strategy.
10. Past performance is no guarantee of future results.
This year's top-performing mutual funds aren't necessarily going to be next year's best performers. It’s not uncommon for a fund to have better-than-average performance one year and mediocre or below-average performance the following year. That's why the U.S. Securities and Exchange Commission (SEC) requires funds to tell investors that a fund's past performance does not necessarily predict future results and recommends considering other factors before investing in a mutual fund.
But, wait, there’s more! Financisms, of course. Enough for a couple more top ten lists, so let me know if you’d like a follow-up post. Send me your financisms and I can throw those in, as well.
And because I couldn’t NOT include these two:
Bonus financisms
The future ain’t what it used to be
(Source: Yogi Berra - okay, maybe this isn’t strictly a financism, but it sure applies to investing).
See #10.
The best guide to our future behavior is our past behavior
(Source: everyone from psychologists, such as Albert Ellis, Walter Michel, and B.F. Skinner, to writers such as Mark Twain. I first came across the phrase when reading one of my favorite finance books by Jonathan Clements. I don’t remember which one it was, but I recommend both of the following: How to Think About Money and Money Guide 2016. You can also access Money Guide for free on his website Humble Dollar).
If you found yourself unable to sleep during the last market downturn and wound up selling stock funds when they were down, you learned something important about how you react to market fluctuations. You may need to titer your portfolio to include fewer stock funds to the point where you can sleep.
*Disclaimer: a Google search of financisms reveals nothing, but removing the “s” creates a term that, as far as I can tell, has been described as an extreme stage of capitalism. My use of the terms financism and financisms is unrelated to this definition.
Get Involved (In Societies!): A Guide for Radiologists-To-Be
If you are a radiology resident or fellow or you are a medical student interested in pursuing radiology, you should know that there are a gazillion opportunities for you to become actively involved in radiology societies and benefit from a plethora of educational resources that they offer for FREE. The highlights were outlined in a paper published in the American Journal of Roentgenology in 2017. This post is an updated online version with lots of handy links.
This post is not just for trainees - it’s also for medical student clerkship directors, radiology residency program directors, radiology fellowship directors, vice chairs of education, clinician educators, and anyone else who is in a position to advise and mentor trainees.
If you are still in school or in a training program, I know you are busy 
just trying to keep up with studying, exams, clinical duties, and preparing/interviewing for the next career step (it’s a never-ending cycle). So, why should you spend your precious free time getting involved in societies? There are lots of reasons!
You will be able to:
- Meet people who can help you with your career (this is first on the list for a reason)
- Participate in activities that can be logged on your CV
- Serve on radiology committees and subcommittees (see above)
- Travel to meetings
- Access radiology blogs, journal articles, e-books, and more for FREE
- Be a deputy editor or associate editor of a radiology journal
- Learn how to review radiology journal articles from expert radiology editors
- Apply for grants and scholarships (created for YOU)
- Access hundreds of radiology job postings
- Access a virtual 2-week radiology curriculum for medical students
- Apply for fellowships in journalism, quality & safety, health policy, government relations, physics, and informatics
- Enroll in a leadership course
- Participate in online forums
- Participate in radiology journal clubs
- Access radiology fellowship directories
- Access radiology membership directories
- Learn how to be a better teacher
- Learn how to apply to radiology residency and fellowship programs
There are literally dozens of radiology societies (and I’m just talking about those in the U.S.). I’ve attempted to outline the opportunities these societies provide for medical students, residents, and fellows. Most of the information is available on each society’s website and I’ve provided links when they were available. If I missed a society, it wasn’t intentional and I would be happy to add it to the list if you want to send me the information.
The BIG 5
The following societies are included in the BIG 5 because they are the largest radiology societies in the U.S. and/or because they do not cater to one clinical subspecialty. I’ve listed them in random order, not according to any type of hierarchy. I’ve been an active participant in all of them (including serving as past president of the AUR and the APDR) and view each with high regard.
RSNA (Radiological Society of North America) 
- World’s largest radiologic organization with over 50,000 members (including over 19,000 members-in-training)
- Free membership for medical students and members-in-training (including international)
- Access to RSNA-affiliated journals including RadioGraphics, Radiology, Radiology: Artificial Intelligence, Radiology: Cardiothoracic Imaging, and Radiology: Imaging Cancer
- Free registration to annual meeting (includes trainee-specific events)
- Third- and 4th-year radiology residents (within 3 years of completion of residency or fellowship) are eligible to enroll in the RadioGraphics mentored reviewer program
- Members-in-training may be appointed to numerous select committees
- Residents and fellows can serve as Deputy Editors and Associate Editors for Radiology in Training
- One-year Resident/fellow research grant ($30,000 for resident, $50,000 for fellow)
- The William W. Olmsted Editorial Fellowship for Trainees is for residents and fellows in training interested in scholarly publication and editorial processes
- Medical Student research grant recipients receive $3,000, which is matched by the sponsoring department, equaling $6,000 total
- Career Connect posts radiology jobs and offers articles on career coaching and resume writing
- Educational content for trainees, such as the Entrustable Professional Activity - Breast Radiology (EPA-BR) (comprehensive outline of breast imaging skills, and links to educational resources such as articles, videos, and interactive PowerPoints) and the National Imaging Informatics Curriculum and Course - Radiology (NIIC-RAD) (week-long, online course open to any individual professional, resident, student, practice or institution, intended to introduce the fundamentals of imaging informatics), and the RSNA Public Information Committee Patient-Centered Care Trainee Modular Interactive Learning Set
- A complete guide to RSNA opportunities for trainees was published in RadioGraphics: A Radiology Trainee’s Guide to Unique Opportunities Offered by the Radiological Society of North America
ACR (American College of Radiology) 
- Nearly 40,000 radiologists, radiation oncologists, interventional radiologists, nuclear medicine physicians, medical physicists and allied health professionals
- Free membership for U.S. and Canadian Medical Students and U.S. and Canadian Members-in-Training (Transitional Residents, Residents, Radiology-related Fellows not yet in practice)
- Resident and Fellow programming at the annual ACR meeting
- Residents and fellows can volunteer to serve on ACR committees and subcommittees
- Complimentary publications for members: Journal of the American College of Radiology, ACR Bulletin, and the online Resident and Fellow news section written specifically for members-in-training
- Free educational activities: Daily Case in Point, monthly CME article in the Journal of the American College of Radiology (JACR), e-learning activities, Lung Cancer Screening education, and leadership training through the Radiology Leadership Institute (additional courses are offered at a discount to members)
- Free Radiology Well-Being Program assessment and associated tools
- ACR Career Center posts radiology jobs
- Access to Engage — a members-only online discussion forum
- Free subscriptions to e-newsletters and information on radiology, health care, research and advocacy
- Free access to RadiologyInfo.org and associated toolkits and materials
- Free access to the Online Fellowship Directory
- Free access to the Membership Directory
- Discounted student loan refinancing
- Lecture Series for LCME (Liaison Committee on Medical Education) ED-24 Requirement to enhance the teaching and assessment skills of residents: Teaching Skills for Residents, Anatomy Instruction, Assessing Medical Students, Case Based Teaching, Conducting a Small Group Interactive Teaching Session, Engaging Medical Students, How To Enhance Lecturing: Eight Questions, Instructing Medical Students On the Selection of Appropriate Imaging Procedures, Medical Student Mentoring, Optimizing Your Slides, Preparing Patients For Imaging Procedures, Problem Based Learning, Tips for Writing
- The ACR RFS (Resident and Fellow Section) provides numerous opportunities for trainees to participate in the ACR and access trainee educational resources; trainees can subscribe to the ACR RFS blog and access free Chest Radiology CPI (Continuous Performance Improvement) e-books
- The ACR RFS facilitates 2 journal clubs, on the topics of Artificial Intelligence and Economics, allowing trainees the opportunity to interact directly with ACR leaders
- Seven trainees fellowships include the Bruce J. Hillman, MD, Fellowship in Scholarly Publishing, E. Stephen Amis, Jr., MD, Fellowship in Quality and Safety, James M. Moorefield, MD, Fellowship in Economics & Health Policy, Rutherford-Lavanty Fellowship in Government Relations, Valerie P. Jackson, MD, Education Fellowship, Richard L. Morin, PhD, Fellowship in Medical Physics, and the Fellowship in Informatics in addition to the RLI Leadership Summit Scholarship, Data Science Institute Travel Grant, and Goldberg-Reeder Resident Travel Grant
- A Medical Student Hub lists numerous opportunities and resources including a two-week virtual radiology curriculum for medical students, an extensive guide for applying to radiology residency, and medical student scholarships and internships
ARRS (American Roentgen Ray Society) 
- Founded in 1900, the first and oldest radiology society in the United States
- Free Membership for U.S. and international in-training members, including residents or fellows in a radiology, interventional radiology/diagnostic radiology, radiation oncology or nuclear medicine program, or a student in a medical school program or radiology-related science or allied science program (benefits listed on this page)
- Online subscription to the American Journal of Roentgenology (AJR), InPractice news magazine, and ARRS InPractice Insight e-newsletter
- Free registration to the Annual Meeting
- Free in-training lectures on topics such as leadership skills for residents, job interview skills, work-life balance and more
- Complimentary Web Lectures available on-demand
- Discount on case-based review courses
- Discount on case-based imaging review books ($155 for bundle of 4)
- Professional committees & volunteer opportunities (specific in-training member opportunities aren’t listed but questions can be directed to: volunteer@arrs.org)
- Quick Bytes (20-minute videos on emerging topics in radiology)
- ITAR (Introduction to Academic Radiology) course introduces residents to academic radiology early in their residencies ($1,000 award made to the departments of accepted applicants who attend the program at the ARRS meeting)
- ARRS Resident/Fellow in Radiology Awards available to residents and fellows to present their work at the ARRS Annual Meeting
- ARRS Career Center posts radiology jobs and offers advanced job searching options and optional email alerts of new jobs
AUR (Association of University Radiologists) 
- Over 1,600 academic radiologists, residents, and fellows
- Free membership for all trainees in ACGME (Accreditation Council For Graduate Medical Education)-approved radiology residency programs or fellowships (junior member) as well as all medical students in LCME (Liaison Committee on Medical Education)-approved medical schools (student member)
- Junior membership includes discounted annual meeting registration and a print and online subscription of Academic Radiology
- Student membership includes discounted annual meeting registration
- A3CR2 Research Award: Eligible to residents who are both the primary author and the presenter of an accepted abstract
- AMSER Henry Goldberg Medical Student Award: presented annually to a medical student who submits an outstanding abstract for a paper, poster, or electronic exhibit for presentation at the AUR Annual Meeting
- AUR Trainee Prizes: Eligible to any student, resident or fellow who is both the primary author and the presenter of an accepted abstract
- Whitley Award: A certificate along with a $1,000 honorarium in honor of Joseph E. Whitley, MD, and his wife, Nancy, is awarded annually to the person who presents and submits the best radiologic educational paper
- Memorial Award: presented annually to the medical student, radiology resident, or first year radiology fellow who submits an outstanding original paper on any aspect of radiology
- Radiology Alliance for Health Services Research (RAHSR) - Harvey L. Neiman Award: presented annually to any student, resident, fellow, or AUR member who submits an outstanding abstract on radiology socioeconomics or health services research for presentation at the AUR Annual Meeting
- Free access to Diagnostic Radiology Resident Core Curriculum Lecture Series: a series of 20-30 minute lectures created specifically for radiology trainees
- Free access to Educational Scholarship Webinar Series designed to enhance skills in educational research and scholarship
- Free access to Professionalism and Ethics Competencies for Radiology Residents (series of short videos that address the different Professionalism and Ethics Competencies as described by the ACGME)
- Free online access to annual meeting presentations and posters
- AUR Radiology Resident Academic Leadership Development (ARRALD) Program: focused mentorship, leadership, and academic development activities to a group of high-potential second-year (PGY-3) radiology residents; participation is determined by a nomination process
- Research Scholar Program: full day program offers health policy research curriculum, scholar presentations and focused mentoring sessions for residents and fellows who have a background and interest in scientific, health services and health policy research; twenty travel stipends of $1,000 are awarded to the participant institutions; participation is determined by a nomination process
- Participation in AUR Affinity Groups (complimentary with AUR membership) (includes The American Alliance of Academic Chief Residents in Radiology (A3CR2) whose mission is to develop leadership skills in chief residents, to foster the collaboration of chief residents with each other and with the leaders of academic radiology, and to advance the interests of radiology residents in the affairs of organized medicine)
- A3CR2 annual survey results (covers moonlighting, call structure, core exam, stipends and other resident benefits, and many other topics of interest to residents)
APDR (Association of Program Directors in Radiology) 
- Organization of radiology residency and fellowship program directors and coordinators with the common goal of optimizing the trainee educational experience
- Free membership for physicians who are in approved radiology residencies and fellowships (Note: although there is a medical student information page, it does not state that medical students are eligible for membership)
- In-training members can serve on committees
- Free access to meeting presentations (such as updates from the Accreditation Council for Graduate Medical Education and the American Board of Radiology)
- Residents seeking positions page (e.g., “I’m currently a US Grad PGY2 ENT resident in good standing seeking to switch into a PGY2/R1 radiology position”)
- Residency positions available page
- Fellowship positions available page
- Extensive list of online trainee education resources, including YouTube videos of APDR virtual resident noon conferences
By actively engaging in society committees, you will have access to the leaders in radiology (in your specialty area of interest) who can write letters of recommendation and enhance your career development.
That covers the big general U.S. radiology societies. If you have a particular interest in a radiology subspecialty area, I urge you to check out that specialty society’s website. Many offer free membership for trainees (including medical students and international students/residents), which confers benefits such as e-subscriptions to their society journal and online newsletters, online access to course lectures from annual meetings and discussion forums, society directory access, free or discounted meeting registration fees, eligibility for travel grants to their annual meeting, eligibility for trainee scholarships and awards, and access to fellowship listings, job postings, and volunteer opportunities. By actively engaging in society committees, you will have access to the leaders in radiology (in your specialty area of interest) who can write letters of recommendation and enhance your career development.
Radiology specialty societies:
Note: If you’re interested in a particular specialty, I suggest that you browse through their society’s website and become familiar with the opportunities available to you.
American Association for Women in Radiology (AAWR)
American Society of Emergency Radiology (ASER)
American Society of Neuroradiology (ASNR)
American Society of Head and Neck Radiology (ASHNR)
International Society for Magnetic Resonance in Medicine (ISMRM)
Society for Imaging Informatics in Medicine (SIIM)
Society for Pediatric Radiology (SPR)
Society for Advanced Body Imaging (SABI) (formerly the Society of Computed Body Tomography & Magnetic Resonance (SCBT-MR))
Society of Abdominal Radiology (SAR)
Society of Breast Imaging (SBI)
Society of Interventional Radiology (SIR)
Society of Nuclear Medicine and Molecular Imaging (SNMMI)
American College of Nuclear Medicine (ACNM)
Society of Radiologists in Ultrasound (SRU)
American Institute of Ultrasound in Medicine (AIUM)
Society of Skeletal Radiology (SSR)
Society of Thoracic Radiology (STR)
North American Society for Cardiovascular Imaging (NASCI)
Society of Cardiovascular Computed Tomography (SCCT)
Elements of an Effective Presentation: a Cheat Sheet
I’m guessing that most of you have been inundated with presenting or watching webinars during this time when many face-to-face conferences have been canceled or made virtual. You probably have a few pet peeves about some of the webinars you’ve seen (watching someone’s chin for an hour?).
For many people, giving a live-streamed (or in-person) presentation can be a scary proposition. As opposed to recording a talk that will only be made available on-demand, a live event does not allow you to correct mistakes on the fly. The same guidelines apply for both, but the stakes are higher with a live presentation.
An effective presentation results from 1) preparation and 2) rehearsal. Preparation means being aware of and applying guidelines for giving effective presentations. Rehearsal is important because it reveals pitfalls in your presentation and builds confidence. The more times you give a talk, the more familiar you will become with the content and the more you will be able to focus on the learners.
In this post I won’t be discussing web-conferencing software or troubleshooting tips, although these are important elements of an effective webinar that have been outlined by others. Rather, I will go over what I feel are the “high yield” teaching points in preparing and delivering an effective presentation. Giving and watching hundreds of live talks over the last three decades has revealed to me a number of things that can enhance or derail a presentation.
Disclaimer: I am not perfect. I watch the videos of my own presentations and learn something I can do better from every cringe-worthy moment. I urge you to do the same. It’s like looking at yourself in the mirror, and a mirror can be the best teacher.
One caveat - guidelines are just that. You don’t have to follow them 100%, but the more you do, the better your presentation will be. You shouldn’t have to deviate from the guidelines very often. Be able to justify not following a guideline (e.g., sometimes it just makes sense to have more than 6 words in a line or 6 lines on ONE slide).
In abbreviated format, here are my top ten presentation tips (a more in-depth discussion was recently published):
Pretend that PowerPoint limits the number of characters per slide as Twitter does per tweet.
1. Keep slides simple. Avoid complete sentences and limit the number of words and lines. Force yourself to trim the text. Pretend that PowerPoint limits the number of characters per slide as Twitter does per tweet.
2. Increase the size of the text font. For example, I like a heading font of 54 and the rest of the text to have a font minimum of 40.
3. Keep tables and graphs simple. Think about the learner’s experience. Put yourself in their shoes. You’ve looked at that complicated graph many times and you understand every figure on it. In one minute or less, don’t expect your audience to accomplish the same, no matter how much you try to explain what you’re showing.
4. Use high quality images. Make them big - don’t waste real estate. Blow up small areas that you are trying to highlight. Look at the images on your smartphone and if you can’t see them well, make them bigger. Crop any unnecessary information and DO NOT include any patient information. Adjust the contrast to enhance the features of interest (but not to “create” pathology that isn’t there).
5. Speak clearly and loud enough to be easily heard. Do not mumble. Slow down (yes, it’s possible to speak too slowly, but in my experience, this is very uncommon). Do not cut off the volume of your voice at the ends of sentences (sometimes that’s when the “answer” or teaching point is announced so you want the learner to hear it). Pretend your next salary raise depends on the learner being able to repeat back to you what you said.
6. Vary the pitch of your voice. Speak with enthusiasm. Speaking in a monotone voice is a real communication killer. If you really care about how much your audience is learning, you will focus on how you speak to them. How would you talk to someone while teaching one-on-one at the computer monitor? You would be having a conversation. When you are giving a webinar, think like you’re having a conversation.
7. When showing images, clearly and concisely describe the anatomy and relevant imaging features. When showing more than one image on a slide, orient the audience by making it clear which image you’re referring to before you start describing the image (e.g., “The image at the top left shows…”). Remember, you’ve seen these images many times and you know where the abnormalities are. Allow time for the learner to assimilate the information on each image. Don’t expect the learner to see everything that you do in 30 seconds or less without some help. Be as descriptive as you can (e.g., “This is a coronal reconstructed image of the chest showing numerous 2-mm ground glass nodules in a predominantly upper lung distribution.”). Use an enhanced mouse or other technique to point out relevant findings, but not in lieu of a verbal description. Pretend the learner can’t see the image and describe it with enough detail so that she can picture it in her mind.
8. Avoid reading slides word for word, line by line. Avoid reading slides word for word, line by line.
We learn best when we learn from each other.
9. Engage the audience by incorporating interaction. Possibilities include asking rhetorical questions, showing case-based examples, pausing for directed audience thinking, and use of chat, Q&A, and polling. These are all great mechanisms for getting the audience actively involved. Some of the best teaching moments of a presentation occur when answering a question from the audience. If one person had that question, chances are at least one other person did. One of the basic principles of adult learning is that we (adults) each come to a presentation with a history of different experiences and a unique knowledge bank that we want to share. We learn best when we learn from each other.
10. When possible, share your face with the audience. Yes, I know that means you have to comb your hair and put on a shirt. It’s easier to just avoid having to care about how you look. But allowing the audience to see you will enhance engagement. People prefer watching a real person talking to them rather than a disembodied voice. Keep in mind that you will have to not only pay attention to how you look but also how you act. Many speakers have annoying mannerisms (e.g., tics, facial expressions, overly repetitive hand gestures) that they aren’t aware of. The best way to uncover these distracting behaviors is to watch yourself on video. Adjust your webcam so that you are showing more than just your chin or your eyes. Maintain eye contact with the camera so that you appear to be looking at viewers in the eye. Clean up the remains of last night’s party if they are included in the background. That’s me being facetious. Here’s me being serious: choose a background that will enhance your professional reputation.
There are many more tips for making a great webinar presentation, but 90% of what you need to know is in my top ten. Feel free to send me your recommendations.
It’s worth emphasizing again that the above are guidelines. There is no one recipe for a perfect presentation. That’s where your passion and creativity come into play. Experience and feedback from trusted individuals will make you a better speaker. You will not always hit a home run. If you feel bad when this happens, it means you care about your teaching skills and your audience. If you teach residents and fellows, you serve as a role model, and it’s important that they know that the road to a more perfect presentation is paved by disciplined self-evaluation and making corrections along the way. Finally, optimizing one’s speaking abilities is a life-long process.
Radiologist $alary Update 2020: Show Me The Money!
One of the most popular posts on The Reading Room is about radiologist compensation (FYI: it’s worth clicking on the link for the title of said blog post alone). Alas, as money still doesn’t grow on trees, it seemed like a good idea to give the post a facelift and update the numbers. Note: the prior post also included a review of partnership terms and buy-in, buy-out arrangements that you may want to revisit.
Now, SHOW ME THE MONEY!
Okay, yes, that’s a reference to the film Jerry Maguire. And don’t worry, I’ll dig into the good stuff—the green, the dough, the moolah—shortly, but first a few words of sense and context.
Have average salary figures gone up or down? Does your paycheck stack up to other radiologists in a similar practice? What is “average” anyway?
In this post, we’ll get down with the data, sort through the most recent figures, and cover some other important salary considerations, so you’ll be armed with all the info you need to ensure you get a fair shake in 2020 and beyond.
Remember: you don’t get paid what you’re worth, you get paid what you negotiate.
I know that you want to be paid fairly for your hard work and that you want your compensation to reflect what you’re worth. One of the best tools at your disposal for negotiating fair compensation is salary data. It’s easier to make your case for a higher salary if you can show a potential employer what other radiologists with similar qualifications, in a like position, in the same geographic area, are being paid. But please remember: you don’t get paid what you’re worth, you get paid what you negotiate.
Compensation is not all about salary
Before you diplomatically ask your boss or potential employer for more money, make sure you understand the total compensation package. It should be clear whether you are/will be an employee, an employee on a partnership track, a partner, or an independent contractor. Independent contractors are self-employed and generally do not receive the same (or any of) the benefits offered to employed individuals. The value of employer-paid benefits is a big-ticket item that is likely to be the equivalent of between 10% and 20% of total cash compensation. The most valuable benefits are typically insurance (health, life, disability, malpractice), retirement plans, and paid time off.
Compensation can consist of salary alone or also include bonus, profit-sharing, or other forms of remuneration. In any type of practice, salary might be determined in part by work relative value units (RVUs). Other ways practices may measure work productivity include patients seen (especially for interventional radiologists with a clinic schedule), hours worked, fees billed, fees collected, or profit for the entire practice. Academic RVUs, metrics for scholarly activity, are more commonly a component of a compensation plan in an academic setting.
What’s an average radiologist salary? It depends who you ask...
Salary data is available from several sources, although some may charge a fee and have various access restrictions. The data used by most groups and institutions are from the American Medical Group Association (AMGA), Medical Group Management Association (MGMA), and the Association of American Medical Colleges (AAMC) surveys. Salary information is generally reported separately for interventional radiology, neurointerventional radiology, non-interventional radiology, and nuclear medicine/radiology.
Colleagues and mentors can also be useful sources of information and fellow trainees are usually happy to share salary and other benefit information that they’ve acquired from their job search.
And now, what you’ve been waiting for - lots of different $alary figures!
The AMGA Medical Group Compensation and Productivity Survey (in its 33rd year in 2020) is considered the gold standard for benchmarking compensation and productivity in large, multispecialty medical groups and other organized health systems. It focuses on the individual compensation and productivity of physicians and other clinical staff, starting salaries of new residents and experienced new hires, as well as salaries for physician leadership, nurse practitioners, and physician assistants. Survey results are segmented by medical specialty and are broken down by size of group and geographic region.
The 2020 survey included data from 317 medical groups representing more than 127,000 practicing clinicians and showed that diagnostic radiologists in the U.S. had a median compensation of $509,447, compared with $482,599 in 2019. Data collection started in January 2020. Salary and work RVUs varied by size of group:
| Radiologist salaries by number of employees | ||
| Practice type | Median annual salary | Work RVUs |
| All practices | $509,447 | 10,020 |
| 50 to 150 employees | $589,730 | 9,920 |
| 151 to 300 employees | $578,826 | 11,236 |
| More than 300 employees | $504,183 | 9,918 |
How to get it: Provider and non-provider organizations can purchase the survey for $3,200. AMGA members and corporate partners receive a 50% discount. You can get a free summary of the radiology data on Aunt Minnie.com. Note for residents and fellows: Your radiology department business administrator may have access to salary survey information and be willing to share a few relevant numbers with you.
The 2020 MGMA Compensation and Production Report represents comparative data from more than 168,000 providers in 6,300 organizations. The report is based on a voluntary response by MGMA member and nonmember practices. Data collection opened January 2020, reflective of 2019. Participants included private practices, hospitals, integrated delivery systems, universities and academic departments. The MGMA provides annual compensation (total pay, bonus/incentives, retirement), productivity (work RVUs, total RVUs, professional collections and charges), and benefit metrics (hours worked per week/year and weeks vacation) for physician-owned, hospital-owned and academic practices for a variety of regions, practice sizes and provider experience levels.
According to an April 7, 2020 MGMA Stat poll, 97% of medical practice leaders reported a drop in patient volume amid the COVID-19 pandemic. A separate COVID-19 financial impact report by MGMA found that, on average, practices reported a 55% decrease in revenue and 60% decrease in patient volume since the beginning of the COVID-19 crisis. These significant impacts to medical practices of all sizes and specialties forced many to lay off and/or furlough staff.
How to get it: This information is available free of charge to contributors/members and for a fee to non-contributors.
Below are Fiscal Year (FY) 2021 compiled salary/wRVU data from MGMA, AMGA and McGladrey Pullen surveys, broken down by subspecialty:
| Non-Interventional Radiology | Interventional Radiology | Neurointerventional Radiology | Nuclear Medicine | |
| Weighted | $503,917/9,691 | $560,030/7,093 | $545,635/10,252 | $392,560/5,863 |
| MGMA | $532,695/9,719 | $526,107/6,868 | $518,265/10,257 | $393,027/5,352 |
| McGladrey | $498,691/9,500 | $598,988/6,642 | $495,275/8,497 | $395,361/5,588 |
| AMGA | $482,599/9,809 | $551,676/7,457 | $572,749/10,605 | $391,166/6,148 |
Note: In FY2020, the weighted median salary for non-interventional radiology, using combined data from MGMA, AMGA, and McGladrey Pullen surveys was $489,126. The weighted median salaries for interventional radiology, neurointerventional radiology, and nuclear medicine were $566,115, $573,499, and $461,715, respectively.
The AAMC Faculty Salary Report provides updated compensation data from the FY 2019 survey of 151 accredited U.S. medical schools.
How to get it: Faculty and staff at member institutions may purchase the paper publication (one year of data) for $155 and one-year access to the online version (three years of data) for $43. For non-members, the costs are $590 and $1,150, respectively.
The Association of Administrators in Academic Radiology Departments (AAARAD) conducts annual Physician Salary & Productivity surveys.
How to get it: Access to AAARAD Surveys is available exclusively to AAARAD members in the Members Only section of their website. If you are at an academic institution, the radiology business administrator may be able to share select information with you.
Other sources of salary information are freely available online:
Doximity’s study is drawn from self-reported compensation surveys completed in 2019 and 2020 by approximately 44,000 full-time, licensed U.S. physicians who practice at least 40 hours per week. Radiology ranked as having the 10th highest average salary ($485,460, compared with $429,000 in 2018-2019) and nuclear medicine was ranked 20th.
The Aunt Minnie SalaryScan is based on data acquired from AuntMinnie.com members in the U.S. from January to February 2020. AuntMinnie.com members can conduct searches on comparable salaries in their professions, regions, and states by going to the SalaryScan data query tool in AuntMinnie.com's Radiology Jobs section. In 2020, the average radiologist salary was $408,023 (compared with $394,000 in 2019).
The 2020 Medscape Radiologist Compensation Report showed the average radiologist salary to be $427,000 (compared with $419,000 in 2019). The data was collected prior to February 2020 and reflected physician salary prior to the onset of the COVID-10 pandemic. For employed physicians, compensation included salary, bonus, and profit-sharing contributions. For self-employed physicians, it included earnings after taxes and deductible business expenses, before income tax. 56% of radiologists received an incentive bonus, averaging $77,000. Male radiologists earned 14% more than female peers (compared with 15% more in 2019). The average salary for men was $438,00 and for women was $386,000.
Medscape 2020 Radiologist Compensation Report
Data published by Salary.com showed the median radiologist salary in the United States to be $418,000 on November 2, 2020 (compared with $406,690 on June 27, 2019), with a range between $314,089 (10th %tile) and $544,106 (90th %tile). With bonus, the median salary was $432,090.
Each year for the last 27 years, Merritt Hawkins has released its Review of Physician and Advanced Practitioner Recruiting Incentives, which tracks the starting salaries and other incentives offered to recruit physicians. In addition to salary, signing bonus, relocation allowance and other data, the Incentive Review features an analysis of the physician recruiting market -- the types of facilities that are recruiting physicians, the kinds of physicians they are recruiting, and why they are recruiting them. The 2020 report (based mostly on data gathered prior to the emergence of COVID-19) tracks a sample of 3,251 physician and advanced practitioner recruiting engagements conducted by Merritt Hawkins from April 1, 2019, to March 31, 2020. It shows an average radiologist starting salary to be $423,000. The analysis of findings suggests that the previously robust job market for physicians has softened since the emergence of COVID-19.
KISS (Keep It Simple Stupid) table of most recent $alary data:
| Salary ($1,000) | |
| AMGA | 509 |
| MGMA (non-IR) | 533 |
| McGladrey (non-IR) | 499 |
| Doximity | 485 |
| AuntMinnie | 408 |
| Medscape | 427 |
| Salary.com | 418 |
| Merritt Hawkins | 423 |
Closing words
There you have it. Last year I was able to report numbers from a survey of private practice radiologists who attended the 2018 Economics of Diagnostic Imaging conference (Larry Muroff, MD, FACR, personal communication). That information isn’t available this year, but it’s worth noting that the salaries reported from that survey were higher than those from other surveys. This isn’t surprising, as it’s well known that private practice radiologists, on average, earn more than radiologists working in other job types.
Last year, the starting salaries (without benefits) being offered to radiologists right out of fellowship training were between $300K-$349K (59% of respondents). Average income, excluding benefits, for private practice groups that did not collect technical component was most commonly between $400K-$499K (33%) or $500K-$599K (33%), although the range was between $300K and $899K. In groups that did collect technical component, the average annual income was most commonly between $500K-$599K (40%), $400K-$499K (20%), $600K-$699 (20%), or $700K-$799 (20%). Benefits added about $100K to a shareholder’s compensation, and about $45K to the compensation for a new hire.
Remember that the first offer is usually not the best offer.
If you’re looking to join a private practice group I strongly urge you to talk to past alumni from your residency/fellowship program and any other connections you have who are willing to share salary information with you. The best data will be from people working in a group that is similar in size, function, and location to the group you are considering. No matter the type of job you’re considering, remember that the first offer is usually not the best offer. If you can’t negotiate a higher salary, but surveys show that the salary offered isn’t in line with what other groups offer, you can try to negotiate a sign-on bonus or other benefits to make up for it. Remember that the salary you start with will influence the salary you have down the road, as increases are often based on starting salary.
Unless, of course, you can figure out how to finally make money grow on trees. You should probably go ahead and re-read the preceding sentence.
Economics 101: Why Your Investment Activities Don’t Influence the Price of Stocks
They tumble, slide, jump, soar. They get the jitters and often seem moodier than a hormone-addled teenager. They are the stuff of which dreams are made—the rise and fall of fortunes in mythological proportions. I’m thinking of how fortune smiled on that lucky mortal who bought Apple shares for a song back in the ‘80s and became a bajillionaire.
Yes, I’m talking about financial markets. Yes, it’s a vast, complicated subject. In this post, I’ll give you a crash course in economics 101 and explain how this information relates to you, as an investor—so you can separate fact from fantasy.
A successful investor likely has an understanding of basic economic mechanisms and the way the markets work. A wise investor may also have questions...
Have you ever wondered what makes stock prices go up and down? When you and all the other individual investors in the country buy and sell stocks or mutual funds, how much does that influence the price of those funds? If you and a lot of people like you want to buy, rather than sell a stock, does that make the price go up?
Do you also wonder why the price of toilet paper goes up in a pandemic? Okay, that’s a little off track, and the increase in the price of TP at the onset of the COVID-19 pandemic was due to hoarding and price gouging. Price gouging is illegal in about 35 states, by the way, where price increases are prohibited when there is a declared emergency (e.g., hurricanes, earthquakes, flooding, or pandemics).
Unlike toilet paper, however, there is no cap on the price of a stock, so it can vary tremendously based on supply and demand.
You’re probably familiar with the economic theory of “supply and demand”, which defines the effect that the availability of a product and the desire for that product has on its price. Generally, low supply and high demand are associated with increased price and vice versa.
For example, when the radiology market is booming, there are lots of good jobs and employers have a hard time filling open positions. The high demand for radiologists coupled with a low supply of radiologists usually results in an increased “price,” either in the form of higher salary offers, a sign-on bonus, or other incentives.
How does the law of supply and demand apply to the stock market? Before answering this, I should define the terms “stock market” and “broker.”
Stock market
The stock market refers to the collection of markets and exchanges where buying, selling, and issuance of shares of publicly-held companies takes place. While both terms - stock market and stock exchange - are used interchangeably, the latter term is generally a subset of the former. One of the leading stock exchanges in the U.S. is the New York Stock Exchange (NYSE). All of the exchanges operating in the country form the stock market of the U.S.
Though it is called a stock market, other financial securities (like corporate bonds) are also traded in the stock market. The stock market brings together hundreds of thousands of people and institutions to buy and sell securities (e.g., stocks, bonds, etc.).
Broker
A broker is an individual or firm (e.g., Fidelity or Schwab) that acts as an intermediary between an investor (you) and a securities exchange. Because securities exchanges only accept orders from individuals or firms who are members of that exchange, individual traders and investors need the services of exchange members. Brokers provide that service and are compensated in various ways, either through commissions, fees or through being paid by the exchange itself.
Back to supply and demand…
Stock exchanges provide liquidity in the market, giving you and others a place to sell your shares. The exchange tracks the supply and demand for each stock, which sets the stock price. For example, an investor may tell the exchange that they are willing to buy a stock for $40 (the “bid” price). At the same time, somebody else is willing to sell the stock for $41 (the “ask” price). The difference between the two is referred to as the bid-ask spread.
The New York Stock Exchange (NYSE) is the world’s largest equities exchange. (Note: In stock market parlance, the terms “equity” and “stocks” are often used interchangeably.) Although some of its functions have been transferred to electronic trading platforms, the NYSE remains one of the world's leading auction markets, meaning that there are people physically present on its trading floor (wearing masks these days), each specializing in a particular stock, and buying and selling the stock through auction.
These professionals are under competitive threat by electronic-only exchanges that claim to be more efficient by executing faster trades and decreasing bid-ask spreads through the elimination of human intermediaries.
Many exchanges now allow trading electronically, meaning there are no traders and no physical trading activity. Instead, trading takes place on an electronic platform and doesn't require a centralized location where buyers and sellers can meet. The Nasdaq is one of the world's leading electronic exchanges.
How much do you, an investing radiologist, influence the price of stocks?
When you buy or sell shares of an individual stock or a mutual fund, say within your 401k or taxable brokerage account, how much does that change the share price? Here’s where it gets interesting, because as it turns out, you as an individual do not influence share prices much at all.
There are two types of investors:
- An institutional investor is a person or organization that trades in large quantities, qualifying for lower fees and other preferential treatment; they invest other people’s money.
- A non-institutional investor (aka “retail” investor) is an individual or non-professional investor who buys and sells stocks or other securities through brokerage firms (e.g., Fidelity, Schwab, TD Ameritrade); they invest for themselves. Almost all radiologists fall into this group.
Who are the institutional investors?
They are the heavyweights, the big cheeses, the big guns, the investing behemoths. These are all metaphors for pension funds, mutual funds, insurance companies, money managers, investment banks, endowment funds, etc. Together, they account for three-fourths of the volume of trades on the NYSE. (And remember, the NYSE is only one of many exchanges that makes up the total stock market.) Because they buy and sell in large quantities, they have tremendous influence on the movement of the stock market.
If you have a pension plan or invest in a mutual fund, you are benefiting from the expertise of institutional investors who make investment decisions for you. Because of their size, institutional investors are able to negotiate lower trading fees compared with individual investors and can access investment opportunities that individual investors cannot because of a minimum buy-in requirement that individual investors cannot meet.
Buys and sells by everyday investors represent only a fraction of total market volume.
Who are non-institutional investors? YOU!
Non-institutional investors, by definition, are any investors that are not institutional investors (Duh!). Although an individual investor can also be an institutional investor, this is not the usual case and when people talk about individual investors, they are generally referring to non-institutional investors (and that’s how I will regard them in this post).
What is important to realize is that households directly hold about ¼ to ⅓ of U.S. stocks. Yet, small retail trades represent just 2% -2.5% of total trading volume. Buys and sells by everyday investors represent only a fraction of total market volume and the value of their trading is small relative to what they own. This means that the trading done by you and other individual investors does not greatly influence individual stock or mutual fund share prices.
Can individual investors pick “the winners”?
The retail investment market in the United States is huge. Over 50 million households are retail investors of some kind and over 50% of households have savings accounts or investment plans like 401(k)s. A radiologist who wants to actively manage their portfolio now has access to more financial information, investment education, and trading tools than ever before. Brokerage fees have fallen, and mobile trading means you can actively manage your portfolio from your smartphone or other mobile device. A huge range of retail funds have modest minimum investment amounts or minimum deposits of a few hundred dollars, and some ETFs (exchange-traded funds) and roboadvisors don’t require any.
Armored with all this information and easy access to trading, you might think you can beat the market by picking your own stocks or mutual funds. Alas, there are many people who think they can outperform the indices, such as the S&P 500. They think they know something important when they invest, but almost always what they think they know is either not true or not relevant or not important new information. The amateur’s “scoop” is usually already well known and factored into the market prices by the professionals who are active in the market all the time.
Today’s trading volume is in the billions and 99% of it is done by institutional investors.
Charlie Ellis (investment consultant and author, who taught at the Yale School of Management and the Harvard Business School), calls this “The Loser’s Game” in his seminal paper by the same title that was published in 1975. In a recent podcast, he talked about what it was like back in the ‘60’s, when you could type in a stock exchange symbol on the keyboard of a large electronic device that would then spit out (on heat-sensitive tape) the high, low, and last price of the day as well as the total trading volume for that stock. Those were the days of slide rules (think analogue images for comparison), when daily trading volume on the exchange was ~3 million shares.
In those days, 90% of trading of those 3 million shares was done by individuals (like you) who did a trade every year or two or three. Today’s trading volume is in the billions and 99% of it is done by institutional investors. That means virtually every time you buy, you buy from a professional, and every time you sell, you’re selling to a professional. Note: This is the situation in the U.S. but just the opposite is true in China. In 2019, 99.6% of total investors in China’s stock market were retail investors.
Also back in the ‘60’s, an investor learned about a company through private meetings - it was amazing how much information could be gleaned from such meetings that other investors would not be privy to. With that kind of advantage, it’s easy to see how someone back then might have been able to “pick the winners.”
Today, however, every investor has access to all the information. This is thanks to the Regulation FD (Fair Disclosure) Act that was passed by the SEC (Securities and Exchange Commission) in 2000. Now, when a publicly owned company reveals information that might be useful from an investment point of view to any one person, that company must make a diligent effort to make that same information available to every investor. This lack of “informational advantage” makes it hard for professional investors, let alone individual investors, to pick the “winners.”
And all this leads back to the debate on “passive” versus “active” investing
In a prior post, I discussed “active” and “passive” investing. Basically, an active investor attempts to pick stocks or stock funds that will beat the indices, or in other words to beat the “average return.” The goal of a passive investor is to earn the average return (say, that of the S&P 500, or some other major index). You may be wondering why anyone would want to shoot for “average.” After all, you made it all the way through medical school and radiology residency, and not because you were an average student.
The fact is that over a 10-year period, 85% of actively managed funds fall short of what they choose as their benchmark. And when they fall short, they fall short by a great deal more than those that don’t. And if you think you’re going to choose the 15% that do well, you’ll find that about 85% of that 15% will fall short in the next decade.
Bottom line
That was a bit of a ping-ponging between what controls stock prices, who the people/entities are that buy stocks, and whether you can “beat the average” by picking your own stocks. There are two points I want to make in this post:
- The great majority of market trades (i.e., buying and selling of stocks and funds) are done by institutional investors. The number of trades that you or any other average radiologist makes does not influence the price of stocks to any significant degree.
- Active investing (i.e., trying to pick the “winner” stocks and funds) is a “loser’s game.” You can feel good about this, since the alternative, which is passive investing (i.e., investing in low-cost, broadly diversified index funds), is cheap and easy.
How to Manage Your Green to Stay Golden (with a Sound Retirement Spending Plan)
“I want the last cheque I write to bounce.”
Chuck Feeney
Ah, the golden years—riding into that retirement sunset. For some, it’s an eagerly-anticipated time in life, filled with big dreams; possibly, plans of moving to Florida. For others, shudder-the-thought. Wherever your feelings might fall on the spectrum, one thing may hold true: you probably don’t want to burn through your retirement savings too quickly.
Yet, indeed, the future is shrouded in so much uncertainty. So what can you do to better ensure your ability to stay comfortably solvent until the end? That is the subject of the day.
In two words: retirement spending.
In more words: how and when you should tap that. And by “that,” I mean, your retirement savings, of course. The nest egg. The well. The coffers. Pick your favorite verbiage—the point is I’m going to offer some very sound suggestions.
The topic of this post may seem most relevant to retired, or soon to be retired radiologists. However, I’m a believer in the adage “if you don’t know where you’re going, you won’t know where you are when you get there.” If you have an idea of what’s ahead in retirement, whether that’s 5 or 25 years down the road, you can plan accordingly.
It’s worth saying up front that there is no “one size fits all” when it comes to retirement spending. First of all, not every radiologist will want to retire. I’ve known plenty of radiologists working into their late 80’s (albeit many part-time) who had no desire to ever stop working. On the other end of the spectrum are radiologists who decide at a relatively young age that they want to retire early. Many of them pursue the FIRE lifestyle movement (Financial Independence, Retire Early). Planning for 50 years of retirement will be different than planning for 30.
A common and important question I hear is “How much of my portfolio can I spend each year in retirement without running out of money?” The answer to this is complicated. In order to come up with an exact amount, you’d need some information, some of which is knowable and some not.
Knowable
- Current value of your portfolio
- Amounts of your pension and any other fixed sources of income
Unknowable
- Your date of death (do you really want to know?)
- Your portfolio returns every year leading up to your death
- Your federal, state, and local tax rates each year until you die
- Future inflation rates
- Future health care costs
- Future value of any real estate you may own
Did you notice that the list of unknowables is a lot longer than that of the knowables? Time to dust off that crystal ball!
Since every individual has their own idea of when and how to retire, and there are so many unknowables, there isn’t one simple recipe that will work for everyone. However, there are some basic guidelines that everyone can follow. But first, I want to share my philosophy on managing finances during retirement.
Flexibility is the key to stability
I was retired for about 4 years and then rejoined the work force because I had the opportunity to do what I loved, with flexible hours, from home. But I continue to follow the same principles I did when I was retired.
The most important of those is to position myself to be able to withstand bear markets, sky high inflation, surprise decreases in pension or social security, marked increases in tax rates or health care costs, or anything else that might substantially change my income or expenses. I can’t prepare for an apocalypse, but there are many things I can control for. I do this by keeping my fixed costs low, maintaining a healthy emergency fund, and eliminating debt.
Fixed expenses cost the same amount each month. They are not easily changed but are easier to plan for. Typical household fixed expenses are student loan payments, utilities/water, mortgage or rent, property tax, homeowners association fees, and insurance premiums. While you could theoretically change your monthly mortgage payment by moving to a less expensive home, refinancing your loan, or by appealing your property tax assessment, this takes some effort. The same is true if you pay rent. You could change this expense by moving to a cheaper apartment/house or by getting a roommate, but these are major lifestyle changes. Insurance (e.g., health,disability, car, life, homeowner’s, umbrella, etc.) is another fixed cost, in that it generally does not change during the year unless you actively research alternate plans to do so. Note: If you are financially independent when you retire, you won’t need life or disability insurance.
In spite of its name, “fixed” expenses are not necessarily set in stone. If you had to, with effort they could be decreased. They typically represent the biggest chunk of your budget, thus any money saved by decreasing them can be quite substantial. Think about how property tax varies by home value. If a $500,000 home costs you $12,000/year in property tax, a $3,000,000 home might cost you over $70,000/year. That’s a $70,000+ expense you have to pay whether the economy is soaring or in the dumper.
Variable expenses, on the other hand, may change daily or from month to month. Examples include costs from eating at restaurants, buying clothes, or drinking Starbucks coffee. Some may change monthly or annually, such as cellular phone and internet plans, or subscribing to streaming services like Netflix. Other variable expenses include household maintenance, vacations, and charitable contributions. Not everyone will agree on what is fixed and what is variable when it comes to things like paying someone else to do your taxes, manage your finances, mow your lawn, or shovel your snow. If you’re unable to do it yourself, you’re probably going to have to pay someone to.
Some variable costs, such as groceries and transportation costs, are not discretionary but can be easily adjusted. You have to eat, but you can choose to price shop, clip coupons, and cook at home. If you have to commute to work, you can drive a gas guzzling Hummer, an eco-friendly Prius, ride a bicycle, carpool, or maybe even walk.
If you keep fixed expenses low, you will be in a better position to vary your expenses if you need to.
The greater your net worth, the more flexibility you will have regarding expenses. Some people become so good at saving and investing that they become “underspenders” and deprive themselves and those closest to them of goods, services, and experiences that can make for a better, happier and more fulfilling life. I don’t advocate that. But the bottom line is that if you keep fixed expenses low, you will be in a better position to vary your expenses if you need to. In a year when the market is up, you can buy that fancy new car. When the market is down, maybe you take the grandkids to Disneyland instead of taking a 3-month cruise around the world. And by the way, spending flexibility can be advantageous in all stages of life, not just retirement.
Tapping the well (or insert favorite money-bags metaphor here)
So, how do you determine how much you can withdraw from the well (i.e, your nest egg) each year during retirement without running out of money? Investment scholars and researchers have used life expectancy tables and historical financial data to come up with viable answers.
At one time, the general consensus was that if your portfolio averaged a return of 8-10% a year, you could spend 8-10% a year. Make sense to you? The problem with that is what is called Sequence of Returns (SOR) risk. That is, the risk that even if you average 8% returns over the course of your retirement, the combination of portfolio withdrawals during a time of bad returns early in retirement will cause you to run out of money early. Thus, the amount you can safely take out each year must be low enough to account for SOR risk.
The 4% Rule
The Four % Rule, created using historical data on stock and bond returns over a 50-year period, states that you can withdraw 4% of your portfolio each year in retirement. It also allows for annual increases to match inflation. Even during untenable markets, no historical case exists in which a four percent annual withdrawal exhausted a retirement portfolio in less than 33 years. In fact, some scholars believe the 4% Rule is too conservative and that a 4% withdrawal rate is too low relative to the long-term historical average return of almost 8% on a balanced (60/40) portfolio.
Keep in mind that the 4% Rule assumes a “typical” retirement portfolio that includes 50% in stocks and 50% in bonds. This type of asset allocation allows for a retiree’s portfolio to continue to grow (with stocks) while maintaining a reasonable level of risk (with bonds). A severe or protracted market downturn can erode the value of a higher-risk investment portfolio (i.e., one with a high percentage of stocks) much faster than a typical retirement portfolio. The table below, from the Trinity study, shows the odds of portfolio success by withdrawal rate and portfolio composition. You can see from this table that as you start to withdraw more than 4% per year, or invest too heavily in bonds, the odds of outliving your portfolio go up dramatically.
Further, the 4% Rule does not work unless you remain loyal to it year in and year out. Violating the rule one year to splurge on a major purchase can have severe consequences down the road if it too greatly reduces your portfolio’s principal, which directly impacts the compound interest that you depend on for sustainability.
In addition, the 4% Rule can fail if you have a longer than “typical” duration of retirement, either because you start early (FIRE) or live longer than average. The average life expectancy in the United States is 78.9 years. A 65-year-old man has about one in five odds of living to age 90 and a 65-year-old woman has almost one in three odds of living to age 90. A 65-year-old couple has a 45 percent chance -- almost 50-50 -- that one of them will survive to age 90. You probably wouldn’t be happy if you were following a plan meant to last until age 80 and at age 90 find yourself eating cat food and living in your grandson’s dank basement.
Do you see now why there is no “one size fits all” answer to the question of successful retirement withdrawal? There are literally millions of safe withdrawal rates, depending on the variables you include in the calculation. A simple answer is that if you start out with a big enough portfolio or guaranteed income (based on the number of predicted years of retirement), you can make inflation-adjusted withdrawals, starting at 4% of your portfolio’s beginning value. Alternatively, you can withdraw a fixed 5% a year. Your portfolio will go up in some years and down in others, so if you take a fixed percentage, you will take a pay cut when the portfolio is down and a pay raise when the portfolio is up.
I’ve not talked at all in this post about how much income you need in retirement. That number will depend on your annual expenses (which will be a guestimate and change over time) and the number of retirement years. The 4% Rule only provides a reasonably safe withdrawal rate. Using this rule, if you want to live on $100,000 a year, you need a portfolio of $2,500,000. If you want to live on $200,000 a year, you need a portfolio that is twice that amount. Keep in mind, too, that some of that portfolio may be taxable. Money taken out of a non-Roth IRA, 401k, or 403b, for example, will be taxed at your ordinary income tax rate.
I have multiple retirement and taxable accounts - what do I tap first?
The answer to this question is also not one size fits all. The most important consideration is to make withdrawals in the most tax-efficient way while also making any required minimum distributions. You may want to spend down funds from any investment portfolio that isn’t part of a qualified retirement plan. Tapping these accounts, which are taxed at a capital gains tax rate, will generally reduce your total tax liability, compared with withdrawing funds from a retirement account, which will be taxed at your ordinary income tax rate.
You can start withdrawing funds from a retirement account without penalty after age 59 ½, but you MUST start taking required minimum distributions (RMDs) from tax-deferred retirement accounts at age 72 (or age 70 ½ if you reach 70 ½ before January 1, 2020). Failure to take RMDs on time results in a 50% tax penalty on the amount of money required to be withdrawn. Delaying withdrawals from these accounts allows them to continue to grow tax-free.
A Roth IRA works differently. There are no RMDs, so you can let that money grow tax-free for as long as you like. Because it’s tax-free, you may want to take part of the money you need for living expenses from a Roth account to achieve a low income tax bracket. If you’re in a situation where you can live off social security, pensions, annuities, investment income, and continued earned income (either your own or that of a spouse), you can limit withdrawals to RMDs from non-Roth accounts. Keep in mind that you don’t have to spend those RMDs. They can be reinvested (in taxable accounts, for example, but not in retirement accounts).
All of us have individual goals for retirement, including what we want to leave behind when we’re gone. Whether you want to shower your heirs with assets or let your last check bounce, you can devise a plan to make that happen. The size of portfolio or income you will need will depend on your goals. The key to making your money last in retirement is to be financially flexible, particularly in the early years, by keeping your fixed expenses low. The definition of “low” will depend on the resources available to you that can buoy you up in times of economic instability. It also helps to follow a sound withdrawal plan, making adjustments when your portfolio is substantially up or down to avoid under- or overspending.
Finally, I hope your golden years are just that.
Doc Collins, signing off.
Create and Put Your Estate Plan in Place STAT: Here’s How
If you’re looking for a barrel of laughs, you should probably read something else; if you’re looking for practical advice on how to ensure your “affairs” are “in order” before you “croak,” you’re in the right place! And if you’re looking for an opening line using unnecessary quotation marks for silly dramatic effect, you just passed it. Welcome to Part 2 on estate planning!
If you missed my last post (Part 1 on estate planning, of course), you may want to start there. In last week’s post, I reviewed who needs an estate plan, probate, estate/inheritance taxes, and components of an estate plan.
In this post I discuss the role of an executor (not to be confused with “executioner,” which is what some may refer to as “gallows humor”), when you should develop an estate plan, how much it should cost, and what you can do to limit that cost by preparing yourself before meeting with an estate attorney.
I cannot encourage you enough to take care of this now, and to not put off the task of establishing an estate plan. In light of the COVID-19 pandemic, this post is one that is unfortunately quite relevant and timely, particularly for radiologists and all others working in the medical field.
Below is a practical (and current) guide to navigating the various considerations, steps, and legalities in making an estate plan and putting it in place (both expeditiously and thoroughly), along with some personal advice. Ensuring your loved ones will be taken care of and that your wishes are known can offer a peace of mind that only comes with properly planning ahead. Here’s what you should know:
What is an executor?
Whereas a power of attorney names a person to handle matters for you while you are alive, an executor is the person you name in your will to take care of your affairs and handle your estate after you die. Generally speaking, your power of attorney ceases to be effective at the moment of your death. Of course, you can name your power of attorney to also be your executor.
The executor may be your spouse, a trusted friend, an adult child, or another trusted relative. You can also name joint executors, such as your spouse or partner and your attorney. The probate court usually supervises the executor to ensure that she carries out the wishes specified in the will.
One of the most important things your will can do is make sure the wording of your will empowers your executor to pay your bills and take care of any related issues that aren’t specifically outlined in your will.
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Your state may determine who “your” property belongs to
Location, location, location! The passage of assets after death may be affected by the state in which you live, and is therefore important in structuring your will/trust.
If you’re married and live in a community property state, you and your spouse are considered to equally own all marital property. Together, you are basically considered one economic unit. In common law property states, each spouse is a separate entity. They can own property independent of any interest in the other spouse.
In the event of death, a surviving spouse living in a community property law state is considered to own any property owned jointly or by the deceased spouse. Note: whether a state has a common law or community property system, the division of assets in a divorce may also be determined by a prenuptial/postnuptial agreement.
Common law property is a system that most states use to determine ownership of property acquired during marriage. In contrast to the community property system, the common law property system states that property that one member of a married couple acquires belongs solely to that person unless the property is specifically put in the names of both spouses. This becomes important in estate management following a divorce or death of a spouse.
As an example of how a common law property system works, if one partner purchases a boat, house, second home, valuable piece of art, car, etc., and puts only their name on the title, that item belongs exclusively to that person. However, if this partner lived in a state that recognized community property, the item would automatically become the property of both spouses. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
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When should I do it (make an estate plan, that is)?
The simple answer is “before you die.” Since you don’t know if that will be tomorrow or many years from now, every day you are alive and healthy without estate documents in place is a lucky day. If you have dependent children, you MUST have a will and possibly a trust. This is particularly important if you are a single parent because it only takes your death to leave a child parentless. The rest of estate planning isn’t as urgent. But my advice is not to put it off.
Note: this is another bit of “Collins advice learned from experience.” Although I didn’t suffer any hardship from putting off the estate planning process, I realize that I was lucky. If you’ve read many of my other posts you’ve come to learn that I’ve had a lot of luck when it comes to my financial life. I don’t recommend relying on luck for something as important as estate planning.
As I write this, I’m thinking about the many recent articles, Tweets and blog posts I’ve read about and by people who are rushing to get wills and other estate documents in place during the COVID-19 pandemic. A lot of these people are radiologists and other doctors. They’re seeing first hand how a young, healthy person can suffer an untimely death. Many people experience a similar sense of “urgency” to complete the estate planning process when they are diagnosed with a chronic or terminal illness.
Case in point - here’s a recent headline from the Wall Street Journal by an author who said, “this column was in the works weeks ago, before most people realized the world would be upended. Now the novel coronavirus pandemic has unfortunately made it a more urgent topic.”
Estate Planning Goes Digital as Many Families Explore Options:
Wills, life insurance and trusts don’t have to involve a trip to the lawyer!
The current practice of “social distancing” makes it hard to meet with estate lawyers. Although lawyers can generally work from home, and meetings can occur remotely with Skype, FaceTime, or other telecommunications applications that enable video chats between computers, tablets, and mobile devices, it is not as easy to coordinate a meeting of witnesses and notary public for the signing of documents. Aside from a major pandemic there are all manner of other possible catastrophic events that could occur that might make you wish you hadn’t put off estate planning. The future is uncertain. Having estate documents in place means you have one less thing to worry about should you experience one of these events.
Once you have an estate plan, you will need to revisit it when major changes occur in your life (e.g., death of an heir, death or incapacitation of a named power of attorney or executor, marriage, divorce, death of a spouse, significant purchase, or inheritance). Your kids probably won't need guardians named in a will after they're adults, but you might still need to name guardians for disabled dependents.
You should also consider preparing a new estate plan if you move to another state. Although most states will uphold the directions of a legally prepared estate document from another state, you are taking some risk to rely on this. This can be particularly important if you move from a common property law state to a community property law state.
How much does it cost?
There is no legal requirement that an attorney assist with setting up a will or other estate documents. Many places sell the needed forms, such as LegalZoom and other online vendors, the use of which can be a very inexpensive way of preparing estate documents (often less than $100). One big danger with “DIY” estate planning is neglecting to include all the necessary documents in addition to a will, as discussed in Part 1. Also, if you go the DIY route, make sure you follow the necessary witness and notary requirements.
The DIY option will be too generic for many practicing radiologists, who will opt to hire a professional. Depending on the complexity of your situation, the cost for employing an estate attorney can be as little as $300 or as high as $3,000 or more.
Hiring an estate attorney will be the best option for radiologists with a lot of assets (especially real estate or other business interests), many beneficiaries (especially if complicated by prior marriage/s), and a lot of dependents (especially if one or more has special needs). While the decisions of what happens to your estate after you die are yours, an attorney can guide you through the process and help you word your will properly so there are no mistakes.
A lawyer may charge a flat fee to prepare a specific set of documents, but most will charge by the hour, and the rates range from $100 per hour to $400 per hour or more. Even when there is a flat rate, there is usually a stipulation that should the number of hours exceed a certain threshold, there would be an hourly charge for the overages. And if you decide to make any changes that require another trip to the lawyer (including phone consultation), expect to pay for that too.
Before I embarked on estate planning for the first time, I asked several people I worked with in Ohio if they could recommend a good attorney. I was surprised when many of them couldn’t because they hadn’t prepared estate documents. I wound up taking the advice of one of the senior university lawyers, which led me to someone at a large law firm downtown that was experienced in estate planning. She did a fine job and charged me $2,992. The documents for my husband and I included wills, health care powers of attorney, OH living will directives, donor registry enrollment forms, declarations of disposition of bodily remains, authorization to disclose protected health information, and durable powers of attorney.
Several years later, my husband and I were again looking for a reputable estate attorney in Wisconsin. Many states will abide by the language in a properly administered estate plan from another state, but it’s generally recommended that you have a plan that was prepared in the state in which you live.
The second time around I talked with five recommended estate attorneys and met with two. The range of costs for a complete set of estate planning documents for my husband and I was quoted as between $3,000 and $20,000! The person I chose was a senior partner in a downtown law firm who had done estate planning for over 20 years. He charged $2,971 for preparing all the same documents my husband and I had before, but in addition, we also got a joint revocable trust.
Although I think I got good service at a fair price, I could have saved some bucks if my husband and I had been better prepared before we went to the attorney’s office, which would have shaved an hour or so off of attorney time.
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What should you know before you meet with the attorney?
It takes mental effort and time to create estate documents. The more complicated your life is (e.g., multiple dependents and other heirs), the more time it takes. This is a major reason why a lot of people don’t get it done. But after you’ve been through the process once, each successive revision is easier.
You can plan ahead, gathering information and making a lot of decisions prior to meeting with an attorney, saving her time and you money. In most cases, the less time the attorney is on the clock, the less you get charged. Why pay an attorney while you’re deciding who should be guardians for your children, or who should be your power of attorney? The following are decisions you can make and information you can put on paper to take with you to the meeting with the attorney:
- Make a list of all your assets (IRAs, 401(k)s, 403(b)s, 457s, HSAs, taxable brokerage accounts, checking accounts, savings accounts, CDs, insurance policies, homes/other real estate, valuable personal property (such as jewelry, artwork, automobiles, etc.) and named beneficiaries.
- Decide to whom you wish to distribute your estate (after paying funeral and last illness expenses, any taxes owed, and distribution of tangible personal property as directed by separate letter). This may include relatives and other people as well as charities (e.g., National Public Radio, Bicycle Federation of Wisconsin, your favorite public library, radiology organizations, alma maters). Decide how much you wish to leave to each entity.
- Decide who you want to act as executor to represent your estate after death. This is often a spouse, but you need at least one and preferably two back-ups (which could be a relative, lawyer, or bank). If you don’t have a back-up, the court will make decisions on your estate’s behalf.
- Decide who you wish to be your power of attorney for health care and two back-ups. You should discuss your wishes with your chosen health care power of attorney so that she will be able to carry out her duties according to your wishes and with your best interest in mind.
- Decide who you wish to be your durable power of attorney for financial matters (this may not be the same person as your power of attorney for health care - many people do not have the skill sets needed to do both) and preferably two back-ups. It’s very important that you choose someone who shares your financial philosophy and will act in your best interest as they will have access to your accounts and can make decisions that will effect your life after you recover from a temporary period of incapacitation.
- Decide what kind of treatment you want should you become legally incompetent to give directions regarding the use of life-sustaining medical procedures or feeding tubes. These instructions will apply if you have an incurable injury or illness that is terminal or has left you in a persistent vegetative state. They will also apply if you have an end-stage condition caused by injury, disease or illness that has resulted in severe and permanent deterioration making you incapacitated or completely physically dependent and unlikely to return to a state of mental capacity and relatively independent physical capacity.
- Develop a list of items of personal property, their locations, and who you wish to gift the items to. This “separate writing” allows you to make gifts of your tangible personal property without amending your will as long as your will authorizes the use of a separate writing. Note: real property, property used in a trade or business, money, and intangible property such as stocks and bonds cannot be disposed of by a separate writing.
- Decide what you want done with your remains after death (e.g., cremation or burial), and arrangements you want for a viewing, funeral ceremony, memorial service, graveside service/other last rite, and donation of your body. If you have a family plot or other chosen location you should document the address. You should also identify a representative to carry out these wishes.
- Talk to the people listed above and get their agreement to perform the functions described prior to naming them in estate documents.
If all of that seems like a tedious amount of work, know that it doesn’t become less tedious while you’re sitting in a lawyer’s office, talking to the lawyer on the phone, or emailing the lawyer, while the clock is ticking.
To-do list
Even after you’ve dealt with all the formal legalities and have an estate plan in place (yay you!), you might consider preparing a document of final information/instructions:
- A list of credit cards that need to be cancelled (and businesses that automatically charge each card each month)
- Details of bank accounts and businesses that auto-deduct from each account each month
- Where investments are held, and how they can be accessed (i.e., logons and passwords)
- Beneficiaries on retirement plans, who to contact to make a claim, and a suggestion to consult a tax advisor about minimizing taxes
- Information about pension survivor benefits
- Details of life insurance policies and contact information
- Location of estate documents (if in a safe deposit box, where to find the key)
- Details of any outstanding loans to family members (if this sum should be deducted from their share of the estate)
- List of subscriptions and memberships to cancel
This list is just an example of items. You will probably have additional instructions to leave behind.
Congratulations for getting through all of both parts 1 and 2 on estate planning. If you already have an estate plan, pat yourself on the back, but only after you’ve reviewed it to make sure it doesn’t require additions, deletions, or other changes. Once that’s done, you should definitely give yourself a thumbs-up. If you don’t have an estate plan, I urge you to get one in place sooner rather than later. It’s one of those things that tends to spend a lot of time on one’s “to-do” list. For some, that leads to an unfortunate situation where they find themselves in need of a plan without having one. It’s best to be prepared. You’ll feel so good after you get it done. You can do it!!!
Because You Can’t Take It With You...Estate Planning!
The term “estate” is commonly defined as a vast piece of property owned by a prominent family. As in, William Pumpernickel of the Pensicola Pumpernickels invites you to his country estate for croquet and crumpets.
For purposes of this post, I’ll be referring to an alternate definition of estate: an individual’s total assets (e.g., all land and real estate, possessions, financial securities, cash, insurance, and other entitlements). It also includes any liabilities (e.g., mortgage, car loans, and other debt). In other words, an estate is everything that makes up a person’s net worth.
Estate planning refers to management of those assets and liabilities, typically by creating a will, but it’s more than just making a will. So much more, in fact, that I broke it down into two posts. Perhaps we may all be feeling our mortality a bit keener in these times, but estate planning is about more than just morbid contemplation. In fact, it can be fun. Alright, that’s a lie. It’s really not that fun, but it is definitely a responsible thing to do.
In this post, Part 1, I cover who needs an estate plan, probate, estate/inheritance taxes, and components of an estate plan. For a teaser on the contents of Part 2, you will have to read to the end of this post.
Estate planning refers to more than the management of how assets will be transferred to beneficiaries when an individual dies.
Who needs an estate plan?
You may assume that if you have a negative net worth (as is the case with many newly graduated radiologists who carry, on average, $200,000 in student loan debt), that you don’t have to worry about having a will or other estate planning documents. But estate planning refers to more than the management of how assets will be transferred to beneficiaries when an individual dies. If you have any minor children you need to clarify how they will be provided for if something happens to you. Having an estate plan can also minimize the assets that go through the probate process, potentially reduce estate taxes, and clarify who will make medical and financial decisions on your behalf if you become temporarily or permanently incapacitated.
What is probate?
Before getting to the components of estate planning, it’s necessary to talk about probate, because this is something most of you will want to avoid. Probate is a legal process, controlled by a court, that takes place after someone dies. It includes proving in court that a deceased person's will is valid, identifying and inventorying the deceased person's property, and distributing the property as the will (or state law, if there's no will) directs. Probate also ensures that the debts of the decedent are all paid before any assets are passed on to heirs.
There are many negative aspects of probate:
- It can be a lengthy process, in some cases lasting more than a year.
- It can put pressure on real estate sales, leading to accepting a low sale price out of expediency in order to complete the probate process.
- It can be associated with substantial fees, in some cases exceeding 3-5% of the value of the estate.
- Most people don’t have the time or expertise to properly do all of the probate tasks required - there are forms that must be filled out and filed with the court, information that needs to be sent to all interested parties by mail, and there is a need for some accounting skills.
For some, the biggest disadvantage of probate is the lack of privacy. In a probate case, all assets, debts and gifts of the deceased person are reported to the court and become public records. Anyone can go to the court and ask to see what has been inherited by a beneficiary down to the penny. Predators of recent inheritors take advantage of this.
There are two ways to avoid probate: 1) naming specific beneficiaries, and 2) using a revocable trust. Keep reading to learn more about each.
Two certainties in life - death and taxes
And in some cases, they are combined! It’s important to understand tax consequences as you consider how you want to structure your estate documents and manage your assets while you are alive.
“Death taxes” is an unfortunate term that refers to estate and inheritance taxes imposed by the federal and/or state government on someone's estate upon their death. Estate taxes are paid by the estate and based on the estate's overall value, while inheritance taxes are paid by an individual heir on whatever property they inherit. Most radiologists won’t have to worry about either (at least at the federal level), but you definitely want to confirm this if you are exceptionally wealthy. If your 2020 net worth is less than $11,580,000 ($23,160,000 if married), your estate will not be subject to federal estate tax. These exemption amounts are indexed to inflation.
Note that the exemption hasn’t always been so generous. It was only $1,500,000 in 2005, $5,000,000 in 2011, and jumped to $11,180,000 in 2018. It’s possible that at some time in the future, the exemption will decrease.
Also note that many states assess their own estate and/or inheritance taxes, often with far lower exemption amounts, in some cases less than $1,000,000. Here are the jurisdictions that have estate taxes, with the threshold minimums at which they apply shown in parentheses:
- Connecticut ($3,600,000)
- District of Columbia ($5,600,000)
- Hawaii ($5,500,000)
- Illinois ($4,000,000)
- Maine ($5,600,000)
- Massachusetts ($1,000,000)
- Maryland ($5,000,000)
- New York ($5,000,000)
- Oregon ($1,000,000)
- Minnesota ($2,700,000)
- Rhode Island ($1,561,719)
- Vermont ($2,750,000)
- Washington State ($2,193,000).
The primary strategy used to reduce that tax burden is to give assets away before death. You can donate any amount to charity and you and your spouse can each give up to $15,000 per year to anyone you like without using up any of the estate tax exemption.
Another less commonly used strategy is to place assets into an irrevocable trust, removing any future appreciation from your estate and lowering or even eliminating the amount of estate taxes that would be due if you were to pass on the assets at death. Keep in mind that an irrevocable trust, by definition, cannot be repealed or annulled.
Components of an estate plan
To many people, estate planning means making a will. Although a will is a very important part of an estate plan, it’s only one document among many, and for some, not even the most important.
Wills
A will is a legal document that outlines the distribution of your property and the care of any minor children. If you have children from a prior marriage, even if they are adults, your will can dictate the assets they receive. If you die without a will (aka, “intestate”), those wishes may not be followed and leaves decisions about your estate in the hands of judges or state officials.
Note: Naming beneficiaries, designating accounts as “payable on death” or “transfer on death”, and designating property as “joint tenancy with rights of survivorship” are ways of avoiding probate.
Many of your assets are NOT covered by wills. For example, payouts from life-insurance policies, money remaining in annuities, and retirement plan assets go to designated beneficiaries. The same applies for “payable on death” bank accounts and any investment accounts that are designated as "transfer on death." Lastly, it also includes property that has “joint tenancy with rights of survivorship” (i.e., two or more owners hold title to an asset together, such as a house; if one owner dies, the asset goes directly to the surviving owner).
Note: Naming beneficiaries, designating accounts as “payable on death” or “transfer on death”, and designating property as “joint tenancy with rights of survivorship” are ways of avoiding probate.
Also note: If a will leaves less to a spouse than state law requires, that part of the document may be overridden, and the spouse awarded the mandated amount.
There are several kinds of wills:
Testamentary wills, the most familiar and arguably the best type of will, is prepared by the person whose assets are being dispersed, who then signs the document in the presence of witnesses. This type of will is the best insurance against successful challenges to your wishes by family or business associates after you die.
Holographic wills are written, signed by the testator (person making the will), but not witnessed. Holographic wills (from the word holograph, meaning a document hand-written by its author) are often used when time is short and witnesses are unavailable. They are not recognized in all states, but even where they are, the absence of witnesses often leads to challenges to the will's validity.
Oral wills, as the name implies, are oral only. The testator speaks his or her wishes before witnesses. Oral wills are not widely recognized from a legal perspective.
Pour-over wills are used in conjunction with trusts (see below).
A Living will – also known as an advance directive – is different from other types of wills used for passing on property and other assets. A living will is a legal document that specifies the type of medical care that you do or do not want in the event that you are unable to communicate your wishes.
A living will addresses many of the medical procedures common in life-threatening situations, such as resuscitation via electric shock, ventilation, and dialysis. You can choose to allow some of these procedures or none of them. You can also indicate whether you wish to donate organs and tissues after death. Note that refusing life-sustaining care doesn’t preclude receiving pain medication throughout your final hours. Most states also allow the living will to cover situations where you have no brain activity or where doctors expect you to remain unconscious for the rest of your life, even if you don’t have a terminal illness or life-threatening injury. Because these situations can occur to any person at any age, it’s a good idea for all adults to have a living will.
A probate court usually requires access to your original will before it can process your estate. It's important, then, to keep the document where it is safe and yet accessible. A waterproof and fireproof safe in your house is a good choice. Let your executor know where the original will is stored, along with such information as the password for the safe. Note that if you store your will in a bank safety deposit box, your family may need a court order in order to gain access.
Trusts
In simple terms, a trust is a relationship where property is held by one party for the benefit of another party. A trust is created by the owner, also called a "settlor", "trustor" or "grantor" (typically an individual or married couple) who transfers property to a trustee. The trustee holds that property for the trust's beneficiaries. Often, the trustor is the same person as the trustee.
Trusts are particularly useful tools to provide for a beneficiary who is underage. Once the beneficiary is deemed capable of managing their assets, they receive possession of the trust.
A trust is private while a will is made public after a person dies. A revocable trust, where the trust creator has the power to revoke or amend the trust, is the most commonly used type of trust. Much like a corporation, a revocable trust is a legal entity that can own property. Owning and controlling property is the main purpose of a trust. When all of a person’s assets are owned by a trust, the person technically owns nothing. This is how probate is avoided using trusts.
Trusts are not just for the wealthy, but rather a vehicle to control the person’s assets and to make things easy on the person’s family. Trusts do not require a lot of ongoing effort. The only time a trust requires attention is when buying real estate, a vehicle, or opening a bank or investment account, and even then, the attention it requires is minimal and need not involve an attorney. In a revocable living trust, the person who set it up has complete control to make any trades or any sales or use their property in any way, without oversight. There should not be any ongoing costs with a revocable trust (i.e., there is no cost for someone to administer the trust).
Even if you have a revocable trust, you still need what's known as a pour-over will. In addition to letting you name a guardian for your children, a pour-over will ensures that all the assets you intended to put into the trust are put there, even if you fail to retitle some of them before your death.
Irrevocable trusts are not as commonly used because they are less flexible and difficult to change (i.e., irrevocable). The trustors are not able to use the trust assets for whatever purpose they want. The restrictions are designed to result in protection from lawsuits, bankruptcy recovery, nursing cost spend-down and recovery and splitting in a divorce judgement - all depending on the wording of the trust and the actions and identity of the trustee/s.
Durable Power of Attorney
A durable power of attorney (POA), sometimes referred to a financial power of attorney, is someone that you choose to act on your behalf financially when you are unable to do so yourself. Without a POA, a court will decide what happens to your assets if you are found to be mentally incompetent.
A POA can make real estate and financial transactions, as well as make other legal decisions as if she were you. She can deal with retirement plans, write checks, open and close bank accounts, buy or sell a house, etc., depending on the language of the document. This type of POA is revocable, typically when you become physically able, or mentally competent, or upon death.
In many families, it makes sense for spouses to set up reciprocal powers of attorney. However, in some cases, it might make more sense to have another family member, friend, or a trusted advisor who is more financially savvy act as the agent.
Healthcare Power of Attorney
A healthcare power of attorney (HCPA) is typically a spouse or family member who has agreed to step in and make important healthcare decisions on your behalf in the event of incapacity. You should pick someone you trust, who is aware of and comfortable acting on your wishes, and will recommend a course of action you would agree with. This person may be asked to deal with such things as admission into nursing homes or other residential facilities, when to make decisions about withholding treatments, and how to deal with pain medications, feeding tubes or even autopsies. Given the importance of POAs and HCPAs, backups should be identified.
Beneficiary Designations
As noted above, many possessions (e.g., retirement accounts and insurance plans) can pass to your heirs without being dictated in the will. This is why it is important to maintain a beneficiary (and a contingent beneficiary) on all such accounts. When no beneficiary is named, the court can decide how the funds are distributed. Depending upon your state’s laws, you may also be able to use a “pay on death” or a “transfer on death” designation for bank accounts, investment accounts, vehicles, or real estate. Note: Named beneficiaries should be over the age of 21 and mentally competent.
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.
Guardianship Designations
While many wills or trusts incorporate this clause, some don't. If you have minor children or are considering having kids, picking a guardian is incredibly important. If such a designation is not in place and the custodial parents both die, 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. In addition to choosing a guardian, you need to designate someone to manage the assets you leave behind to care for your children. This may or may not be the same person as the guardian - the people with the best parenting skills aren’t necessarily the most financially literate or able to manage money well. As with all designations, a backup or contingent guardian should be named as well.
Wrap-up
That was a quick overview of estate plan documents. But estate “planning” requires (duh) “planning.” Before you get started with that I urge you to read my next blog post, where I will review the role of an executor, when you should develop an estate plan, how much it should cost, and what you can do to limit that cost by being prepared before meeting with an estate attorney. Oh--and also a touch of my personal experience. And for the obligatory Monty Python reference: “I’m not dead yet!”