Reaching Semi-Retirement in Three Years as a Travel Therapist: Jared’s Story

Written by: Jared Casazza, PT, DPT

The Past

Education

I spent a total of 8 years in college (3 of which were in community college trying to decide my direction in life) which culminated in a Doctor of Physical Therapy degree, earned in May of 2015. Even though I was very proud of this accomplishment and the incredible amount of work it took to achieve it, I knew that physical therapy was not something that I would spend the next 20-30 years of my life doing full time. I’ve had various interests throughout my life and knew myself well enough to know that eventually I would likely become bored with physical therapy like so many of my passions in the past.

My Personality

You see, I get consumed with an area of interest for a period of time, before eventually becoming mostly disinterested once I feel that I’ve achieved a certain level of proficiency in the area. I seem to find something I like and throw myself into being the best that I can be in that area, which ultimately leads to me burning out with the pursuit. In my 30 years, this has happened with basketball, chess, video games, diet/nutrition, powerlifting/bodybuilding, and now to some degree physical therapy and finance. I still enjoy all of these things, but I no longer feel an intense urge to learn everything or be “the best” at them anymore like I did with all of them at one point or another in my life. At some juncture, the return on invested time and energy in any area of interest leads to a point of diminishing returns, and this is always where I seem to gradually disengage. At 30 years of age, I still don’t know if this is a good or bad thing, but I have accepted it as a part of my personality.

Knowing about this personality trait (flaw?), I was skeptical whether the time and money investment that is synonymous with 3 years of graduate school (after already completing 5 years of undergraduate work) would be worth it when I had no idea how long I would be passionate about the field. I ultimately decided that it was, and I am very happy with where I am now because of the choice. Although, I would be lying if I said I never questioned whether a DPT degree is worth it.

Student Loan Debt

Upon graduation in 2015, I had about $95,000 in student debt from grad school alone, and that included trying my best to be frugal by living at home and commuting to classes. Even though this is a massive sum, it is generally on the low end of the debt range of what many physical therapists graduate with. Terrified by this student debt, I became engrossed by the idea of increasing my income and decreasing my expenses to pay down the loans as quickly as possible.

After hundreds of hours of research and performing my own calculations and projections for the future, I ultimately decided that it would be in my best interest to pay the minimum on my loans while investing heavily in retirement and brokerage accounts. This has turned out to be a very good choice so far, with my student debt growing at an effective rate of about 3.2% per year while on the REPAYE plan, and my investment portfolio growing at a rate of around 9% since I started heavily investing (this was closer to 11% before the big drop in December 2018)… and this isn’t even accounting for the tax savings from utilizing the retirement accounts. This plan isn’t for everyone, of course, but I do think it should be a consideration for those trying to reach financial Independence as soon as possible with a lot of student debt.

Financial Independence

As for financial independence, while researching what to do with my student loans in late 2014, I stumbled upon a couple of blogs talking about saving heavily and retiring early, and I was immediately sold. Once I knew the math behind achieving financial independence and calculated “my FI number,” I knew that was the goal I needed to reach as soon as possible. My main motivation for pursuing financial independence so aggressively was to have as many options as possible for the future in case my interests shifted again and I became passionate about something different and wanted to pursue that.

Traveling Physical Therapy

In my first year of physical therapy school, I researched the options and found that the easiest way to make the most money as a physical therapist, in order to reach my financial independence goal, is by taking travel contracts. In some cases a travel physical therapist can make twice as much or more when compared to a therapist taking a permanent full time job in one location, especially as a new grad.

Whitney, my significant other of over 5 years and also a physical therapist who graduated at the same time as me, also liked the idea of making extra money while going on adventures, moving to and working in new places around the country together. Without a doubt, this was one of the best decisions that either of us have ever made.

Living in a Camper

Finding affordable short term housing at each assignment location can be the biggest difficulty of being a travel therapist, and to combat that we saved our money and paid cash for a fifth wheel camper and truck to haul it after our first 6 months of working and saving aggressively. For the majority of our travel careers, we have lived and traveled in the camper. Whether or not we have come out ahead financially with this decision is still up for debate, but we did enjoy the simplicity of finding somewhere to live while traveling in the fifth wheel and also the consistency of our living arrangement. There have been many pros and cons to traveling in a fifth wheel, but overall we wouldn’t change our decision.

Maximizing My Income and Savings Rate

After having a goal of financial independence in my cross-hairs, I wasn’t content with just making more money as a traveling therapist, so I did everything feasible to minimize my expenses while simultaneously finding ways to make more money along the way. This led to working as many hours as my travel assignments would allow with hundreds of hours of overtime in total over three years, taking part time jobs when available, creating this blog (just as a hobby initially with hopes to eventually generate some income), and going a little overboard with credit card rewards.

In reality, I hustled so much and minimized my expenses to a point that I have been able to save 100% of my income earned from my regular 9-5 travel physical therapy jobs, and even extra on top of that some months. The first two years, I was able to live on just the money earned from credit card/bank account sign up bonus combined with overtime hours and part time work. The last year, to my surprise, the FifthWheelPT blog actually started consistently bringing in enough money to cover all of my living expenses most months.

The Present

After 3 years of living frugally and saving my entire full time paycheck as a travel therapist (each year with a savings rate of between 85-90% of my total income), combined with the investment returns I mentioned above, I officially “semi-retired” in July 2018 at 29 years old. I tracked my progress to financial independence with my monthly “Path to 4%” posts each month for the past 2.5 years along the way, and will continue to do so until I fully reach my “FI number.” Even though I haven’t fully reached that number yet, there were various reasons that I went ahead and transitioned into semi-retirement when I did, with a primary one being our desire to travel internationally.

I refer to what I’m currently doing as “semi-retirement” because I still plan to write on this website, write on the FifthWheelPT blog, andhelp those interested in travel therapy get started, which takes up about 5-10 hours per week, and I will also likely continue to work one travel assignment (3 months) per year to keep my physical therapy skills from getting rusty. I still enjoy the job and helping patients, but I no longer wish to do it full time for the entire year.

We celebrated this semi-retirement with a 5 month trip around the world at the end of 2018, which was a wonderful and eye opening experience. By utilizing credit card points to keep expenses lower while traveling, I was able to spend less than an average of $37/day on the trip, all of which was able to be covered by money brought in from this blog. This meant that I didn’t even have to start withdrawing money from my investment accounts, which was a blessing with the market taking such a hit at the end of 2018! This trip really made us realize that life is short and there is so much that we want to see and do before settling down and having kids. We plan to take several more 3-6 month long trips all over the world for the next few years before deciding what’s next for us. We’re currently planning a 15 week trip to Europe in May, which we are extremely excited about.

The Future

Right now, we still own our fifth wheel and truck, but we are considering selling them between now and May when we leave on our next trip, so that we don’t have to pay personal property taxes, insurance, storage fees, and deal with further depreciation while taking these long trips and not using the truck and camper. I have to admit that this has led to a bit of an identity crisis for me, since many people know me as the “Fifth Wheel PT” now… if we sell it do I have to rename the blog?!

We haven’t worked as physical therapists in 7 months since leaving for our Around the World Trip, but after searching for jobs since we returned to the US in December, Whitney finally found a Travel PT contract about 3 hours from home. She started work this week, however I still don’t have a job lined up as of now. I’m working on trying to set up a short term contract or PRN work in the same area as Whitney. But, if I don’t end up working before leaving on our next trip to Europe in May, then I will most likely find a travel contract in September when we get back from the trip. Although that will mean I will have a 15 month gap in my work history, which I’m a little concerned about.

We plan to go to a few physical therapy conferences each year to network with other therapists and students and talk about travel therapy as well as finances and how these things have so positively impacted our lives. I may not be as ravenous with learning new things about personal finance and investing as I once was, but I still enjoy writing and talking about it. I’m also not nearly as involved with travel therapy as I once was, but I have learned a ton and want to spread the knowledge and let others know that an exciting and lucrative adventure is possible.

I’m considering writing a book in the future about personal finance and investing from the perspective of a physical therapist, and possibly even more specifically from the perspective of a travel therapist, but I don’t know that I have the motivation required to do that right now. Nonetheless, I plan to continue to write about whatever interests me on the FifthWheelPT website and to write articles about travel therapy on this website.

Ultimately I’m grappling with the realization that financial independence and retiring early is really just the beginning, not the end of the journey. With time and brain power freed up to a large extent, I’m not sure where I’ll go from here, but I’m okay with that uncertainty.

Conclusion

It has been a wild ride for both Whitney and me since graduation in 2015. I would have never anticipated doing what I am now back then, but I’m very grateful that things have turned out the way that they have.

I undoubtedly sacrificed on some things to reach semi-retirement so quickly, but by no means was I a “miser,” living an unfulfilling life in those 3 years of saving aggressively. We took dozens of weekend trips all over the east coast (Whitney has written all about those trips here); spent a few days in Canada; stayed at an all-inclusive resort in Jamaica for a week; I took my brother to Aruba for his high school graduation; Whitney and I went on a cruise to the Bahamas; and we bought plenty of stuff that we really didn’t need (you know, the American way).

I really didn’t do anything special to get in the position I’m in besides looking for ways to maximize my income and minimize my spending while still having a good time. This combined with a cultivated urge to learn as much as possible in my areas of interest have paid dividends. No two paths are the same, but I feel that just about everyone has room to make headway on these fronts.

Thank you for reading this. If you’re a regular reader, then I hope that you have a little better insight into who I am, and if you’re a new reader, then this should be a good introduction to me and my life. Feel free to reach out to me with questions or comments!

 

This article was originally published on our personal blog. You can learn more about Jared’s story by visiting our blog at FifthWheelPT.com.

Is Contributing to a Company 401k Worth it as a Travel Therapist?

Written by: Jared Casazza, PT, DPT

What Makes Travel Therapy Different?

Travel therapists are in a unique position with respect to 401k accounts. When working with most travel healthcare companies, therapists will be eligible to contribute to the company sponsored 401k plan. The 401k benefit eligibility will vary company to company, but most companies provide it in some form. However, since many travelers switch between travel companies pretty frequently, it is a common concern whether contributing to the company 401k plan makes sense for them, or if it would just be additional hassle. Unsurprisingly, since most of my articles on FifthWheelPT are finance related, this is definitely one of the top five most common questions I get asked by current and prospective travelers. In addition to wanting to know if using the 401k plan is worth the hassle if switching between companies, I often hear that there is concern about what happens with account once the individual leaves the company or stops contributing to the account.

I hope to shed some light on my thoughts about 401k plans for travelers in this post, but I do not intend this to be specific advice for any of you. This is just what I’ve done and what works for me, but everyone’s situation is different, so be sure to do your own research on the topic as well.

What is a 401k?

First let’s cover the basics of what a traditional 401k plan is and why one would choose to contribute to it in the first place. Most travel companies don’t offer a Roth 401k option, so we can skip over that for now, but if you’re interested in my thoughts on Roth vs. Traditional accounts, you can check that out here.

A traditional 401k is a retirement account that is offered by an employer and allows the employee to contribute pre-tax money to the account from each pay check. The amount contributed is up to the employee, but it is usually based on a percentage of the employee’s taxable income. Since the money isn’t taxed when it’s contributed, it’s able to grow in the account tax free for however long it remains in the account. When withdrawals are made (usually in retirement), the money withdrawn each year is then taxed along with any other earnings (social security, investment income, rental income, etc.). The big benefit of this account is that it allows you to contribute money while working and earning a lot, therefore in a higher tax bracket, and instead paying taxes on the money in retirement while (hopefully) in a lower tax bracket. The money also grows more quickly in a 401k than in a regular investment (brokerage) account since the amount that would have been taxed is compounded. The maximum that an individual is able to contribute to a 401k in 2018 is $18,500, and for 2019 it will be $19,000. Taking advantage of the tax benefits of a traditional 401k (and additionally, a traditional IRA) is a huge part of what has allowed me to semi-retire and travel around this world this year after only three years of full time work as a travel therapist.

401k Employer Match

A 401k sometimes has the added benefit of employer matching. The amount that is matched, if any at all, is determined by the employer and will usually be somewhere between 3%-6% of the employee’s taxable income. The employer can also include a contingency that it is only matched if the employee contributes a certain amount as well. This is the employer’s way of helping the employee have a more secure retirement by contributing to their retirement account. In many companies, the employer match took the place of a pension that used to be standard but has now disappeared in most public sector jobs. An employer match is in no way equal to a pension since the benefit is comparatively small, but any extra money toward retirement is a great thing!

The employer match is great if the company offers one, but for the majority of travelers this will be a moot point. Most travel companies offer a 401k with some sort of employer match, BUT they have a vesting schedule. The vesting schedule determines how much of the employer match you get to keep if you leave the company early, which makes this an incentive for the employee to stay with that employer. Many of the companies require that you have to work between 3-5 years with the company to keep all of the employer match. Some plans will have a tiered vesting schedule: something along the lines of at one year you keep 20% of the matched amount, at two years you keep 40%, etc. However others have a “cliff” vesting schedule: something like if you work three years or more you keep all of the matched amount, but if you leave before three years you don’t keep any of the amount that has been matched. Basically, the 401k employer match is great, but unfortunately it won’t apply to travelers that switch between companies often or that don’t plan to work three years or more as a traveler. In that case, an individual retirement account could make more sense and involve less hassle for the traveler.

Traditional Individual Retirement Account

A traditional IRA (Individual Retirement Account) is another option which has the same benefits as a traditional 401k, and doesn’t require an employer to utilize, and one other big difference, the contribution maximum. A traditional IRA allows a maximum contribution of only $5,500 for 2018 and $6,000 for 2019. If you’re a big saver like me and plan to reach financial independence as quickly as possible and maybe even retire early, then that’s a relatively small maximum each year.

If you plan to switch companies often, and therefore won’t benefit from the employer match, and don’t plan on putting $6,000 or more toward your retirement account each year, then foregoing the 401k and choosing an IRA instead could be the best choice. An IRA does have the added benefit of more flexibility between investment choices. With a 401k, the investment choices are usually limited to 10-20 options chosen by the company, whereas with an IRA the investment options are essentially limitless.

Utilizing a 401k and an IRA

For those, like me, that plan to put more than $6,000 toward retirement each year, then contributing to a 401k account in addition to an IRA will likely be necessary even if the individual won’t benefit from the employer match.

Luckily, having a 401k and an IRA is pretty easy, even if you switch travel companies often. (Keep reading below to learn more about that process if switching companies.) I’ve switched between companies on a few different occasions and have always taken advantage of a 401k account if offered, while also contributing the maximum amount to both the 401k and an IRA.

There are income limits where the benefit of an IRA (the tax savings) starts to diminish if the individual is also contributing to a 401k, but the limit is higher than most traveler therapists will make at $63,000 of adjusted gross income (tax free stipends are not factored into this number).

In my opinion, if you plan to save more than $6,000 toward retirement each year, then it makes the most sense to me to contribute the maximum to an IRA, and then any additional money you wish to save would be invested in the 401k. This is assuming that you wouldn’t benefit from the employer match, but if you would, then it would be foolish to pass up that match.

Here is the general order of operations that I have used and that I think makes the most sense:

  1. 401k contributions up to the amount to get the full employer match (if applicable)
  2. IRA contributions up to the maximum ($6,000 for 2019)
  3. 401k contributions up to the maximum ($19,000 for 2019)
  4. After tax investments (brokerage account, real estate, etc.)

If your company doesn’t offer an employer match on the 401k or if you won’t be able to benefit from it due to the vesting schedule of the company, then skip #1.

What Happens to the Money and 401k Account When Switching Companies?

Let’s say that you follow the order of operations above and stay with the same company for your first year as a travel therapist, but then get a better offer from a different company and decide to switch. You knew that you would probably be changing companies eventually, either for a better paying job or a job that your company may not have, so you assumed you wouldn’t benefit from the employer match. You maxed out your traditional IRA and contributed an extra $10,000 to your 401k. Great job!

Now, since the IRA isn’t associated with the employer, it isn’t affected at all by switching companies. That account belongs to you only. But the 401k is affected by switching companies, so you’ve got a decision to make.

Here are your options:

  1. You can have the money paid out to you.
    • This is almost never a good idea since you will not only pay taxes on the money, but also penalties!
  2. You can keep the money in the 401k account of the employer
    • This will occasionally involve additional fees since you no longer work for them.
  3. You can roll the 401k over from your previous employer’s 401k account to your new employer’s 401k account.
    • This could also be a hassle if you don’t plan to stay with the next company very long.
  4. You can roll over the 401k into your already existing traditional IRA account.
    • In most cases, and what I’ve always chosen to do. It makes sense to roll the 401k balance over into your traditional IRA. This gives you the increased flexibility with investment options mentioned above, which usually means lower fees on the investments as well which is a wonderful thing. The account is also yours and not associated with any employer, so you don’t have to worry about moving it around again at a later time. And the accounts work the same way with taxes, and you won’t have to pay penalties.

401k Rollover to Traditional IRA

By rolling the money over into your traditional IRA account, you have essentially contributed the full $16,000 (investment in the IRA to the maximum plus the investment in the prior 401k plan that is now rolled over) to your traditional IRA. This is an easy way to effectively contribute more than the maximum amount to an IRA when switching companies. This simplifies your finances (less accounts to keep track of) and gives you more investment options which are both great things. The rollover process is very simple and can be repeated every time you leave an employer and have a 401k balance with them. I have rolled my 401k balance into a traditional IRA several times and it has never taken more than 30 minutes.

For those travel therapists that are saving a significant amount toward retirement each year, I think that this is the best option with all things considered. I max out my IRA, contribute as much as possible to my 401k, and then roll the 401k into the IRA each time I leave a travel company to give myself the most investment options and to keep my financial life as simple as possible, while still contributing over $20,000/year to the accounts that wouldn’t be possible with a traditional IRA alone.

If you do this as well then you’ll want to make sure that it is a direct rollover. More information on the different types of rollover can be found here.

Conclusion

I know that for those of you that aren’t very familiar with saving and investing, this can all sound intimidating, but it really isn’t very difficult and takes minimal time to figure out and implement.

For those travel therapists that don’t plan to save more than $6,000 toward retirement each year, then just foregoing the 401k and choosing an IRA instead is the most simple option. For those that want to save more than $6,000 per year and also switch companies often, it’s worth the extra effort to contribute to the company’s 401k plan once you’ve maxed out your IRA for the year and roll that 401k over each time you leave a company. Once you’ve done it once it’s a piece of cake and will take you no time.

Above all else, make sure that you’re saving for retirement in some capacity no matter what account(s) you choose to utilize!

Remember to do your own due diligence before implementing anything that I talk about, since this is not intended to be specific advice for you. Thanks for reading and I hope that this post helped to clarify things for you.

If you have any questions about this post or anything else travel therapy related then contact us and we’ll do our best to help you out. If you need assistance finding a good travel therapy company or recruiter then reach out to us and we can help you there as well.

How do you currently handle your retirement accounts as a travel therapist? Let us know in the comments!

 

Travel Therapy: Paying Off Student Debt… or Not?

Written by Jared Casazza, PT, DPT

How and Why I Got Started with Travel Therapy

I first decided that travel therapy was the direction I wanted to go just after finishing my first year of physical therapy school. I had spent a significant amount of time researching average PT salaries for my hometown and wasn’t happy with the numbers I was finding, especially when factoring in the amount of debt I knew I would have after graduating.

With this low salary to high student debt dilemma in the forefront of my mind, I was looking for a solution to help bridge the gap. Coincidentally, soon after I started looking into ways to increase my salary, in my first clinical after that first year of school I met a travel DPT who told me how much he was making and I was shocked! What really stuck out to me was that he was working the same job as all the other permanent PTs at the facility, but making almost twice as much as they were! Before that, I didn’t how anything about travel PT, but after meeting him and learning more, I was certain that would be the path I would take, at least for a few years to pay off my debt.

What I Chose to Do About My Student Loans

Fast forward two years and I was just finishing up my last clinical and two weeks away from graduation. I had already made contact with several travel therapy recruiters and was looking for Travel PT jobs to start as soon as possible after graduation. In the meantime, I decided that I should use a conservative estimate of what my travel income would likely be to start planning out a budget and a goal to completely repay my student loans.

I determined that in just two years of traveling and living frugally, I could easily repay my full $100,000 in debt!

Compare that to the standard 10 year repayment, or perhaps around 5 years working hard to pay it down aggressively while working a permanent job! My plan was that after that two years of paying off my loans aggressively while traveling, I would divert all the money that had previously been going toward my loans into investing in retirement accounts and brokerage accounts for the future.

But wait. That’s not the end of the story.

I started to wonder what I would be passing up in investment returns if I paid off my student debt quickly instead of putting that money into investment accounts right away. I figured out that for my scenario, it actually wouldn’t make sense for me to aggressively pay off my debt when instead I could invest the money and yield a higher average return. So instead, I decided to utilize the tax benefits of being a traveler to enroll in an income-driven repayment plan, while choosing to invest the majority of my savings early in my career rather than pay down all my debt early. I eventually wrote several blog posts about this decision and all the factors I took into account to come to that conclusion (check them out here, here, here and here!).

Whether or not to pay off your student loans quickly, invest, or do a combination of the two is a very individual decision and one that you should spend some time considering. However, one thing is for certain, working as a travel therapist can set you up to have a lot more financial choices and opportunities compared to working a permanent position.

I’m going to highlight below the benefits that travelers have when it comes to student debt!

Higher Income

This one is a no-brainer and something that every traveler, or prospective traveler, is aware of. Travel therapists make more money than permanent therapists, and in some cases the difference can be huge. Making more money makes it much easier to pay down large amounts of student debt, which is one major reason people decide to pursue travel therapy in the first place.

There are undoubtedly some “cons” that go along with the financial “pros” (check out the top 5 pros and cons of travel therapy here) of being a travel therapist, and everyone’s situation is different, but overall it’s a good situation for most therapists. For travelers who are dead-set on getting rid of their student debt as quickly as possible by making big payments each month, travel therapy is hard to beat!

Tax Advantages

The tax advantages that come with taking travel assignments outside the area of your tax home are a big reason for the increased pay that travelers receive. Getting tax free stipends for meals, housing, and incidentals is what ultimately leads to the much higher net pay that travelers enjoy… provided that they are eligible. The tax free stipends combined with a slightly lower taxable hourly pay rate means that less money goes to federal, state, and FICA taxes. This is especially the case when considering federal taxes which are marginal in nature, meaning that having the lower taxable pay makes a big difference in the total effective tax rate paid.

Income Driven Repayment Plans

As I mentioned above for my own situation, a big advantage for travelers as far as student loans go is the increased likelihood of eligibility for income driven repayment (IDR) plans, and more specifically, REPAYE. Since the income driven repayment plans are based on adjusted gross income (AGI), this will benefit travelers because AGI is lower due to the lower taxable income mentioned above. Therefore, most travelers will have a very low monthly student loan payment on an IDR, sometimes even $0/month depending on how many weeks per year the traveler works. The reason that REPAYE is particularly advantageous in this scenario is due to the fact that under this plan, half of the accumulated interest (due to the monthly payment not covering the interest accruing each month) is subsidized. For someone with a $0/month payment, this means that their effective interest rate is cut in half while on the REPAYE plan! This is something that simply wouldn’t be an option for almost all permanent full time employees due to having a higher taxable income, with a subsequent higher income driven monthly payment, which negates most of the benefit of having the accumulated interest subsidized under REPAYE. As a traveler, having your interest rate significantly reduced in this manner can easily tilt the decision to pay down debt or invest in favor of investing and keeping the debt. This was a big factor in my decision to keep my student loan debt and invest all of my savings instead.

If you’re someone that is ultra conservative with your finances, is very debt adverse, or doesn’t trust yourself to actually invest the money that would have been used to pay down your debt, then this is probably not the best choice for you. On the other hand, if you’re a natural saver, like me, and want to optimize your money, then this is an option that shouldn’t be overlooked while traveling.

Conclusion

There are a few financial advantages that travel therapists have over permanent full time employees when it comes to repaying student debt. Of most importance to everyone is making a significantly higher after-tax income each year due to the tax advantages of traveling. Additionally, there is also a big opportunity to be had in the form of income driven repayment plans, especially REPAYE, which offer a lower monthly payment for those travelers that can trust themselves to invest their extra income instead of paying down their student debt quickly.

Whether you plan to pay your student debt off as quickly as possible or plan to pay the minimum and eventually shoot for loan forgiveness while investing heavily for your future, travel therapy is a great way to reach your goal!

What is your plan for your student loans? Are you planning to pay them off as quickly as possible or invest your extra money instead? Let us know in the comments below! If you’re interested in getting started with travel therapy and would like assistance then reach out to us and we’d be happy to help!