The Single Biggest Advantage of Travel Therapy

Written by: Jared Casazza, PT, DPT


In the past I’ve written several articles on the financial advantages of being a travel therapist and how those advantages have allowed Whitney and me to embark on an alternative lifestyle full of international travel. In fact, I’ve always made it known that the financial aspects of being a travel therapist are the biggest reasons I was so dead set on going down the path of travel therapy even two years prior to graduation. However, there is one even bigger advantage that I’ve been thinking a lot about lately that is even more important to me than making more money… and that is flexibility.

The Many Faces of Flexibility

Flexibility as a travel therapist comes in many forms. There’s the flexibility to take extended periods of time off.

  • I’m currently writing this after last working over 6 months ago.

There’s the flexibility to try out different settings for a three month stint to see if you have any interest in that area.

  • I’ve now worked in outpatient ortho, acute care, home health, skilled nursing, and wound care while traveling.

There’s the flexibility to choose to invest money instead of paying down student debt.

  • This is primarily due to travel therapists having lower taxable income meaning a lower monthly income based payment due each month. And this is the path I’ve chosen for my own finances.

There’s even the flexibility to decide if pay or travel location is more important to you for the next three months and to change your mind about that decision after each assignment.

  • Occasionally these two coincide, but generally higher paying contracts are in less desirable areas.

Flexible Time Off

Starting out traveling as a new grad, I was most concerned about making as much money as possible to offset my student loan debt (and in my case, start investing heavily early in my career). For that reason, pay was the primary consideration for me, but I’ve recently found that the flexibility to take time off is even more important. These things go hand in hand to some degree, because without making so much more money as a traveler, it would be difficult to take extended time off of work, but the flexibility goes beyond that.

If I had taken a permanent job out of school, there’s little doubt it my mind that I also would have saved a large percentage of my income despite the lower total pay at a permanent job. After a couple of years, I would have likely had enough saved to take an extended trip out of the country, but because of the nature of a permanent position this would have been impossible. After all, it’s difficult to find a permanent employer in healthcare that is willing to let an employee take two consecutive weeks off, much less 5 months! So to me, the flexibility in time off allowed by travel therapy is huge.

Flexibility to Try New Settings

The flexibility to try out different settings is something that I didn’t know at first would be a benefit of traveling. I was always most interested in outpatient ortho as a student and undoubtedly would have taken a permanent job in this area had I not decided to travel. Whitney with her Athletic Training background was 100% in agreement with me in this area. To my surprise, after taking a couple of contracts in other areas, I found that I actually really enjoy home health and even wound care!

As a student, wound care was something that I was terrified of, and I would have never willingly taken a job with that requirement if it wasn’t for knowing it was only for three months. Home health is an area that I started to become interested in, but I most likely wouldn’t have taken the leap into trying it out at a permanent job due to fear of the unknown. As a traveler, it is much easier to get over that fear when you have a predetermined end date that you know will be there pretty quickly if it turns out you really don’t like the job (this was skilled nursing for me).

Flexibility to Invest Instead of Paying Down Debt

I’m not sure if investing instead of paying off my debt is something that I would have done if I had taken a permanent job, but there’s no doubt that it’s more feasible as a travel therapist. The biggest reason is that with a lower taxable pay as a travel therapist comes a lower income based student loan payment. Ordinarily, this wouldn’t be a big deal, but when using the REPAYE income based repayment plan, this becomes more important.

The reason is that under REPAYE, half of the accumulated interest each month is subsidized, which ends up being a massive benefit for travel therapists who choose an income driven repayment plan. For me, this is the difference between having an effective interest rate of 6% on my loans versus an effective interest rate of 3.2%. Or, to put this in different terms, it’s the difference between my student debt growing at $500/month versus growing at $266/month.

If you take into account that the stock market returns on average 7-10%, then you can see why investing your money to get that return instead of paying off low interest debt at 3% would make sense. Having the interest accumulate much more slowly makes investing instead of paying down my student debt a no-brainer in my current situation.

Flexibility to Choose Between Pay and Location

Since the primary motivator of travel therapy for Whitney and me was pay, to this point we’ve always chosen to take higher paying travel contracts in rural areas. In addition to the higher pay, we like the slower pace, caring people, and lower cost of living that goes along with traveling to rural areas. Although rural areas are great for us, they lack the excitement of being closer to bigger cities and more desirable areas.

In the future, as money becomes less and less of a motivating factor for us as we approach financial independence, location is likely going to become more important. For example, we’ll likely sacrifice pay and low cost of living at some point to take travel assignments in Hawaii and southern California, which is something that we would never have done three years ago when starting out.

Take Home Points

It’s inevitable that priorities change throughout one’s life. The many different forms of flexibility offered by travel therapy have made pursuing these changes in desires and priorities much more feasible for Whitney and me. Starting out, we never would have guessed that some day we would value being able to take 5 months off to travel around the world, being able to experiment with different settings, or being able to try out the city life without committing to it long term. Travel therapy has given us the ability to do all of the above due to the flexibility, and that has been priceless!

 

jared doctor of physical therapy

Author: Jared Casazza, PT, DPT – Traveling Doctor of Physical Therapy – Aggressively seeking Financial Independence early in his career

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!

 

Understanding a Travel Therapy Contract Bill Rate

Written by: Jared Casazza, PT, DPT

All travel therapists want to get the most money possible out of their contracts. In fact, the increased pay associated with travel therapy is the #1 reason that most people that we talk to choose to travel in the first place, so not getting as much money as possible would be no good. While there can often be room to negotiate when presented with an initial offer from a recruiter, there is, of course, a limit to how much they can actually pay a traveler for each contract. The big limiting factor in the equation of pay for any travel contract is the “bill rate.”

What is a Bill Rate?

A “bill rate” is the amount of money that the facility (hospital, clinic, nursing home, etc.) pays the travel company for each hour that a traveling therapist works. As travelers, this is a number that we rarely ever find out about, since it is negotiated between the travel company and the facility usually before they ever even list the job or present it to travelers. Most recruiters do not wish to share this number with travelers either, but you really can’t blame them for that. The bill rate is much higher than the hourly rate that the traveler receives, but that is because it has to account for all overhead costs and company profits as well, so sharing the bill rate could make the traveler feel like they’re being taken advantage of, even when that’s not the case. BluePipes wrote a great article on other reasons why travel companies don’t divulge bill rates as well, which you can find here.

How Much is an Average Bill Rate?

Bill rates vary drastically depending on setting and area of the country (just like traveler pay), but I’ve heard of ones as low as $60/hour and as high as $80/hour, which shows why there can be such variation in traveler pay across the board, since it’s all based on the bill rate. In some situations, the bill rate can even be higher if the facility is in urgent need of a traveler and is willing to pay more to get someone there quickly. In general, the facility is going to pay the travel company as little as possible, while ensuring that their opening will be filled, so how desperate they are can have a big impact on the bill rate.

So if a company is receiving around $70/hour ($70 x 40 = $2,800/week) from the facility, while the traveler is only getting a take home pay of about $1,600/week, where is that extra money going?!

Costs that have to be Subtracted from the Bill Rate

Overhead costs of running a travel company can be pretty high. The company has to pay staff (recruiters, managers, payroll department, benefits department, etc.), for rent and utilities on their offices, for marketing, for taxes, and they also have to make a profit in order to stay in business. This all usually adds up to about 20-25% of the total bill rate, depending on how big the company is and how much their overhead costs in total. That means that after overhead costs are subtracted out, that $2,800/week turns into about $2,100/week.

From there, we have to consider that the company pays for part of the traveler’s health insurance (assuming the traveler chooses one of the company sponsored plans); maintenance fees on 401k plan; CEUs (if offered by the company); FICA taxes on the traveler’s hourly pay (7.65%); and credentialing costs for the traveler for each assignment such as: license reimbursement, travel reimbursement, drug tests, TB tests, and backgrounds checks.

They also usually have to keep a small percentage to account for contract cancellations, since when a traveler’s contract is cancelled early, not only does the traveler lose out on money, but so does the travel company. I think of this as like an “emergency fund” for the travel company for when unexpected events occur.

It’s also important to keep in mind that the “take home pay” amounts that we usually use to discuss travel contracts is after the traveler’s taxes are subtracted out, which means that the travel company actually pays you more than that amount, but that’s the amount you see on your paycheck after federal, state and FICA taxes are subtracted. So “take home pay” refers to after-tax, or net pay, not gross pay.

For example, a $1,600/week “take home pay” usually means that the travel company actually pays out $1,800/week in gross pay to the traveler. It’s easy to see how the $2,100/week devoted to the traveler’s pay can quickly be reduced to much closer to that $1,800/week figure paid out to the traveler each week, once all of the above costs are factored in.

Getting the Highest Pay Possible

In most cases, honest recruiters are doing their best to offer the highest pay possible to the traveler, within the bounds of the bill rate that they have to work with. Many travelers hear about how high some bill rates can be and quickly assume that recruiters are trying to take advantage of them, without first considering all of the costs incurred by the company, taxes they have to pay, and also also the benefits offered to the traveler that aren’t seen in the weekly take home pay number. Don’t forget to consider these factors before jumping to conclusions! But, it doesn’t hurt to push for more money when you feel it’s warranted, have considered all the “extras” already included in your pay package, and have considered the type of job, location, and cost of living!

The bill rate is also the reason that it is important for travelers to push for higher pay for overtime hours worked. Overhead costs don’t need to be factored into overtime hours worked, due to them already being accounts for in the initial 40 hours. With overtime, the company will get the same bill rate (sometimes 1.5x the bill rate even), while the traveler only receives 1.5x their taxable pay rate in most cases. This is a great situation for the travel company, but a terrible situation for the traveler. So understanding how the bill rate works and how your pay is broken down is a key factor here in advocating for yourself with a higher overtime rate!

Conclusion

It’s very important to have an understanding of the bill rate and all the costs that must come out of that hourly pay amount the travel company receives from the facility, in order to understand how your weekly take home pay is determined as a travel therapist. The more you understand, the better you can advocate for yourself and get the highest pay possible.

I hope you have a little better insight into how the weekly take home pay amount is calculated now with a basic understanding of bill rates!

Thanks for reading and feel free to ask any questions you may have on bill rates or anything else travel therapy related in the comments below or contact us directly. If you need some recruiter/travel company recommendations that we trust to not take advantage of you as a traveler, then send us a message here and we’ll help you out!

Should You Get a Contract Extension Bonus as a Travel Therapist?

Written by: Jared Casazza, PT, DPT

The Benefits of Extending a Contract

If you are a prospective or current traveler whose primary goal with travel therapy is to earn as much money as possible (likely to pay off student debt), then extending contracts when possible is a great idea. Whitney and I always try to extend contracts in places that we enjoy, and I actually extended my very first contract as a new grad twice for a total of nine months there. Extending a contract means less, or hopefully no, downtime between contracts since you don’t have to move to a new location. Most travelers choose to take at least a week off between contracts to move to their new assignment location. but that missed work means less money earned. Mitigating time off is a primary way to earn more throughout the year. Additionally, extending a contract is also easier because you’re already accustomed to the facility, staff, and patients.

Another big benefit of extending a contract is that you can almost always earn more money on the extension than you did on the original contract, either in the form of a bonus or an increase in taxable hourly pay. We usually try to get about $1-$2/hour extra when extending a contract, which ends up being $40-$80 more per week or $500-$1,000 more over the course of a 13 week contract! A dollar or two extra per hour may not sound like much, but it really adds up over time. Another option is to have the travel company reimburse travel expenses incurred while traveling back to your tax home if you plan to do that at any time during the contract. A reimbursement is almost always better than increase in taxable pay, if possible, because reimbursements aren’t taxed and therefore will mean more money in your pocket.

Understanding “Extension Bonuses”

Some travelers believe that getting an extension bonus means that the recruiter was keeping more money than they needed to be on the original contract, and now they’re somehow able to offer you more money the second go round, but that is not the case. So where does the extra money come from? Let’s investigate the answer to this question!

When you start a new contract as a travel therapist, the travel company has some upfront costs that they have to cover in order for you to start. These costs include things like: travel reimbursement for you to get to the new place, license reimbursement if applicable, background check, drug test, and TB test. All of those costs added together can end up being a significant amount of money that the company pays out in the beginning before you ever start working at the new place. These costs have to be accounted for by the company of course, so they reduce the amount that you make each week so that these costs can be recovered throughout the course of the contract. This reduction in the traveler’s pay is to be expected since all of our pay, reimbursements, and the travel company’s overhead costs, as well as their profits, come out of the “bill rate” that the facility pays the company. In other words, all the money has to come from somewhere, and that somewhere is what the facility pays the travel company. Under normal circumstances where the traveler moves to a new facility after every contract with no extensions, the company has to incur these costs again before each new contract. On an extension however, these costs aren’t incurred again, which means that there is extra money that can be added to your pay!

Negotiating Extension Bonuses with Your Recruiter

Most experienced recruiters understand that by the traveler extending in a location, there will be extra money to allocate to the traveler on the extension. But I’ve worked with recruiters in the past that say that an extension bonus isn’t possible since the bill rate is the same for the extension, and the facility “isn’t offering any additional money.” Unfortunately, they were overlooking these costs that the company would be saving on the extension. After explaining how they would be saving money on the things I mentioned above for my extension, I’ve always been able to negotiate some amount of extra pay or bonus for the extension.

It’s important to discuss this with your recruiter and make sure you are on the same page. You are your own biggest advocate and need to be an informed and educated traveler.

Bottom Line

Less missed work and higher pay on an extension make it a no-brainer if you’re at a facility and location that you enjoy AND the facility needs continued help. Always be sure to ask for more money on an extension if the recruiter doesn’t automatically give it to you, and be sure to mention the costs that they would save by you extending instead of taking a new contract to back up your request.

If you have questions on this topic or would like recommendations from us on a contract, extension, or working with travel recruiters/companies, please reach out to us and we will be happy to help!

 

Paying $0 in Federal Taxes and $0 in Student Loans Payments as a Travel Therapist

Written by: Jared Casazza, PT, DPT

Managing student loans as a new grad therapist, or even as a seasoned clinician, is one of the most common concerns that I’ve heard over the last few years. In addition, paying down student loans is also the most common reason that I’ve encountered for why new travelers choose to take travel contracts. Some of my most popular articles of all time on FifthWheelPT have to do with how I’ve chosen to manage my student loans, and this was also the topic of a recent post on this site, Travel Therapy: Paying Off Student Debt… or Not?

Today I want to talk about how it’s possible to pay $0 in federal taxes while also having a $0/month student loan payment while on an income driven repayment plan as a travel therapist. I will ignore state taxes, since this will differ for each individual based on the state in which they work and the state in which they have their tax home. I will also ignore FICA taxes since they are owed every dollar of income earned regardless of income level.

Some of the terminology and ideas in this post may get complex, so if you’re confused, check out the post linked above on Student Loans, as well as some of the links contained in that post for more background info.

Before I start, I do want to say that this is not meant to be personal advice for your individual situation, as I am not a financial advisor or accountant and have no formal training on these topics. This is information that I’ve learned from reading and researching over the past few years and implemented in my own situation, but everyone’s situation is different and tax laws change regularly. If you’re interested in doing anything similar, then do your own research or reach out to a licensed professional for help, as this post is meant for illustration and entertainment purposes only!

Alright, now with that disclaimer out of the way, let’s look at how I would plan to keep my federal taxes and student loan payments both at $0 for the foreseeable future as a full time travel therapist!

Example Situation Information

Let’s say that I’m a 26 year old new grad traveler, single tax filer, without any kids or dependents. I’m a DPT who’s home state and tax home is in Virginia. My primary goal as a travel therapist is to earn and save as much money as possible in order to increase my net worth as quickly as possible, to get to a point where I can transition into either part time work in a single location or taking fewer travel contracts each year to have more free time for family, other hobbies, or leisure travel. To do this, I invest heavily in tax deferred retirement accounts to decrease my tax burden and my student loan payment, which both allow me to save even more for the future. I have student loans of $100,000 with an average interest rate of 6%. After reading more about the various income driven repayment plans, I’ve decided that REPAYE will make the most sense for me financially, and that I plan to eventually qualify for student loan forgiveness. I also understand that half of my accumulated interest is subsidized each month while on the REPAYE plan, so the lower my monthly payment (ideally $0), the lower my effective interest rate will be!

Income, Taxes, and Student Loan Payment

As a traveler, I work about 48 weeks per year while spending a month at home each year as a vacation and to spend time with family and friends. My taxable pay on contract is $21/hour, with tax free stipends received for lodging, meals, and incidentals while on assignment traveling. In this situation, assuming I work 40 hours each week, my yearly taxable pay would equal $40,320. (21 x 40 x 48 = 40,320) The 40 hours a week is a safe assumption since I always make sure to have a 40 hour guarantee in my travel contracts (as we recommend that other travelers do)!

If I were to not try to optimize this situation at all, I would have a federal tax bill of approximately $3,208 for the tax year of 2018. I would also have a monthly student loan payment of $184, which is equal to $2,208 for the year. That’s definitely not bad but I want to do better. I’d rather keep that $5,416 in my own retirement accounts to grow and improve my net worth! Below are pictures of both the taxes and the student loan payment for this scenario. The student loan table was generated using the federal student loan website’s repayment estimator and the tax chart was generated using SmartAsset.com.

student loan repayment initial.png

income taxes initial.png

Optimized Scenario

The key to paying less in taxes and having a lower monthly income driven student loan payments lies in reducing your Adjusted Gross Income (AGI). One of the easiest ways to do this is to contribute to tax deferred accounts such as a traditional 401k, a traditional IRA, or a Health Savings Account (HSA). These accounts are very advantageous because not only do they reduce your tax liability, they also benefit you in the future through the money growing in the accounts over time (provided the money is invested wisely). For my purposes, I want my AGI to be low enough that I don’t owe anything in federal taxes and I have a student loan payment of $0. However, the two numbers to achieve these goals are unlikely to be the same, so this takes some research on my part.

In 2018, the standard deduction is $12,000, which means that any income up to that amount is taxed at 0%. but you can actually go higher than this amount before owing any money in federal taxes. In my situation in this optimized scenario, by contributing to retirement accounts, I also qualify for the saver’s credit. This means that as long as I contribute at least $2,000 to a retirement account and have an AGI below $19,250. I get a $1,000 tax credit that will completely wipe out any federal taxes owed at that income level. As far as federal taxes for a single traveler without kids who contributes at least $2,000 to retirement accounts are concerned, $19,250 is the sweet spot to owe nothing. This is assuming that no other deductions or credits are available to be claimed, which in the scenario above would be true.

To have a student loan payment of $0, $19,250 is a little too high and will still lead to me having a $10/month payment. That definitely isn’t bad at all, but I can do better while only contributing a little more to the tax deferred accounts mentioned above. After playing around with the repayment estimator, I find that to have a $0 student loan payment on the REPAYE plan, the highest AGI that I can have is $18,809.

student loan repayment $0

This means that if I’m able to reduce my AGI from $40,320 down to exactly $18,809, I will achieve my goal of paying $0 in federal income taxes while also having a $0 student loan payment!

Implementation

Reducing your AGI by almost $22,000 may sound difficult, or even crazy. For most people who make only $40,000/year, that would probably be the case. However, travelers are different.

Since we receive tax free stipends which usually cover most, if not all, of our living expenses, living on a taxable income of $18,809/year isn’t nearly as hard. In fact, my girlfriend Whitney and I have each lived on much less than this each year since we began traveling, and we have met and mentored dozens if not hundreds of others that do as well. If you live an expensive lifestyle in a high cost of living area, then this might not be possible for you. But if your primary goal is to keep as much of your money as possible, while saving and investing for the future by living a modest lifestyle to achieve financial independence as quickly as possible, then this is 100% doable!

Implementing this strategy is fairly straight forward. Utilizing the tax deferred accounts mentioned above, I would need to contribute $21,511 to reach the $18,809 AGI amount talked about above. Here’s the course of action that I would take:

Since an HSA is an extremely valuable account to save for future medical expenses, or even to use as an extra retirement account, that is the first account that I would want to contribute to. I choose to utilize a high deductible health insurance plan through my travel company specifically to have access to this amazing account! The contribution limit for a HSA for a single individual is $3,450 for 2018. So I would contribute the full $3,450. ($21,511 – $3,450 = $18,061 still to contribute).

The next $5,500 (the contribution limit for IRAs in 2018) would go into a traditional IRA account. I prefer maxing out an IRA before a 401k due to the increased number of investment options available in the IRA compared to a 401k. Having more options for where to put the money will ultimately mean lower fees paid and more money in retirement. ($18,061 – $5,500 = $12,561 still to contribute).

At this point, I would have $12,561 left that I would put into the 401k plan offered by my travel company. I refuse to work with any travel company that doesn’t offer a 401k because of how valuable I find being able to contribute to these tax deferred accounts to be. A 401k has the largest limit of the accounts talked about above at $18,500 for 2018. I wouldn’t even need to max out the 401k completely since contributing just the $12,561 would get me to my goal, but if my income happened to be higher for some reason (possibly working overtime on a contract, or having other sources of income) then there would still be some wiggle room to contribute more and still achieve the magic AGI amount of $18,809.

Conclusion

As a traveler, it’s possible to have both a $0 federal tax bill and simultaneously have a $0 income driven student loan payment. Subsequently, this will allow the traveler to utilize the money saved to invest for the future and possibly achieve financial independence more quickly.

The key to achieving this is the traveler reducing his/her AGI by contributing to tax deferred accounts (401, traditional IRA, HSA). The magic AGI needed in the scenario above to reach this goal is $18,809, with anything below that amount being unnecessary. In the scenario above, using this strategy and putting the $21,511 needed into the tax deferred accounts would save the individual $5,416 between federal taxes and student loan payments, which is a 25% savings on the amount put into the accounts in the year contributed! Instead of that money being paid to the federal government and the student loan servicer, it would be invested and subsequently compounding tax-deferred over the years.

Being able to do this is relatively unique to travelers, since many of our expenses are reimbursed tax free while traveling, making living on the much lower AGI completely feasible; whereas, someone without the tax free stipends may struggle. Whitney, Travis, and I here at Travel Therapy Mentor have all taken advantage of tax deferred accounts to reduce our tax burdens while traveling, which we believe is a smart way to not only save money on taxes but also to set yourself up for a financially comfortable future!

Thanks for reading and making it through all of that! Do you take advantage of tax deferred accounts to reduce your income taxes and student loan payment while traveling? Let us know in the comments below! Reach out to us with any questions or for clarification on anything mentioned above. If you’re getting started with travel therapy and you need help finding a good recruiter/travel company, then send us a message to get our recommendations!

How Much Money Do Travel Therapists Make? The Comprehensive Guide to Travel Therapy Pay

Written by Jared Casazza, PT, DPT

Often the reason that people choose to pursue a career as a travel therapist, or even just decide to work a few travel therapy contracts, is to make more money. For people coming out of school with massive student loan debt, finding a way to deal with that debt is a primary concern, and travel therapy is a great way to make more money especially when starting out as a new grad. This leads to the most common question people have when first researching the pros and cons of travel therapy: How much money do travel therapists make?

Understanding Pay Differences for Travelers

Travel therapist pay is a little different from that of permanent full time positions, and therefore it commonly leads to some confusion for those first looking into pay differences between travel and permanent positions. Travel therapists’ compensation is made up of a combination of taxable pay and untaxed money (stipends for housing, meals, and incidentals) assuming that you meet the requirements for receiving the untaxed stipends. Since part of the money is untaxed, this leads to significantly higher net pay for a travel therapist. This is best illustrated through examples of each scenario.

Permanent Job Pay

First, let’s break down what a traditional pay package would look like at a permanent physical therapist job. This scenario would be comparable for an OT or SLP job as well. For PTA and COTA, the values would be lower, but the principle is the same.

Many new grads PTs accept a job with hourly pay in the $30-$35/hour range, but of course this can vary depending on the setting and the area of the country as well as your negotiating skills. I’ve talked to physical therapists that have taken a permanent job as a new grad making as low as $20/hour and others that have negotiated $40/hour, so the true range is massive, but around $30-$35 seems to be the average. We’ll take the top of that average range and find the gross yearly pay for someone working a permanent full time job making $35/hour:

  • $35/hour X 40 hours per week X 52 weeks per year = $72,800 annual salary

Gross pay is pretty straight forward and simple to understand, but determining how much of that gross pay you actually get to keep (i.e. net pay) is harder to understand and often overlooked when therapists talk about their hourly compensation or salary. Let’s look at how much of that money is yours after Uncle Sam takes his cut. The total percentage will depend on where you live, but on average across the country, a person making $75k is going to have about 25% taken out for taxes.  Click here for more information on tax rates in major cities across the country.  Here’s a look at the permanent physical therapist’s net pay after taxes based on the average 25% tax rate:

  • $72,800 X .75= $54,600 annual salary
  • $54,600/52= $1,050/week (if divided out into weekly pay in order to better compare to travel jobs )

This is an approximate bring home pay per week based on a $35 per hour job working 40 hours per week.  If you have offers for higher salary positions than that, feel free to use the calculations above to estimate your pay.  Note that all 401k (traditional), HSA contributions as well as all medical, dental, life, disability costs will come out of the gross salary.

For a more specific example we’ll use Virginia’s state tax rate. Not only is this where Whitney and I live and maintain our tax home, but it’s also near the middle of the range as far as state income taxes go, which makes it closer to the average for everyone. Pay Check City has a great tool to use for your specific scenario and is the site I’ll use to calculate the take home pay below.

paycheckcity example.png

$1,024/week would be the weekly take home pay for a permanent physical therapist in the above scenario who lives in Virginia, which is pretty close to the $1,050/week using the 25% rule of thumb above. For quick calculations, multiplying your salary or hourly rate by .75 is a good way to get an estimate of how much of your gross pay you actually keep.

Travel Job Pay

Now let’s take a look at how travel therapist pay differs. Travel pay consists of a few different parts:

  1. Hourly Rate (taxable)
  2. Housing allowance (not taxed)
  3. Meal and incidental allowance (not taxed)

Travel pay will generally be presented in a total gross or net weekly amount. If a gross weekly pay number is presented, then that would include the hourly taxable rate x 40 hours, then adding in the housing, meals, and incidentals stipends. If the net pay number is given, then that is usually calculated using the 25% tax rule of thumb above, which as we saw with the specific example isn’t always accurate, but it’s a good estimate of what the traveler’s tax rate might be. This would be gross pay x .75 then adding in the housing, meals, and incidentals stipends. If you know that your tax rate is different, for example if you have a family, then when a recruiter presents you with a gross and/or net weekly pay number, you need to be sure to run the numbers based on your tax rate.

Here are examples of two potential travel PT pay packages that Travis recently received to further help illustrate how travel therapist pay actually works:

Position 1:

  • Hourly rate: $20/hour (taxed)
  • Housing allowance: $630/week (not taxed)
  • Meals and Incidentals allowance: $230/week (not taxed)

Total take home pay (net pay using 25% rule of thumb above for the hourly wage) per week before deductions for benefits: $1,460 per week

Position 2:

  • Hourly rate: $20/hour (taxed)
  • Housing allowance: $730/week (not taxed)
  • Meals and Incidentals allowance: $330/week (not taxed)

Total take home pay (net pay using 25% rule of thumb above for the hourly wage) per week before deductions for benefits: $1,660 per week

How are Hourly Rates and Stipend Amounts Determined?

You may be looking at the travel pay package examples above and thinking, “If the stipends aren’t taxed, then why not make them as high as possible with a lower hourly wage to maximize net pay?” That’s a great question and something that I wondered when first starting out, which led to me doing a lot of research on the topic. There are a couple of reasons why this is illegal based on IRS tax laws.

The taxable hourly rate should be a reasonable amount for the job position in order to avoid “wage recharacterization.” To read the IRS definition of wage recharacterization, check out this link, but basically it means avoiding taxes by changing compensation from a taxable hourly wage to a nontaxed stipend. There is debate about what a reasonable wage is for various therapist positions, and it’s always best to consult a tax expert if you’re in doubt, but us here at Travel Therapy Mentor (all of whom are travel physical therapists) choose to keep our taxable wages at $20/hour or above to be safe and not take any risks as far as wage recharacterization is concerned for a physical therapist. This number may be different based on your profession and comfort level with the IRS law interpretation.

The other reason it isn’t possible to have massive stipends and a very low taxable wage is due to the GSA guidelines. The GSA determines the maximum allowable stipends for housing, meals, and incidentals in different areas throughout the country, and it applies to anyone traveling for work, including travel therapists. These numbers vary drastically depending on the area of the country you’ll be working in due to variance in the cost of living in each location. Keep in mind that these are the maximum amounts and not necessarily how much you will receive in stipends for that area. Depending on how much the facility that you’ll be working at as a traveler is able to pay for the position, you may receive significantly less than the maximum amounts. We always consult the GSA website before accepting a job offer to make sure that the stipends we will be receiving are not above the maximum amounts for that particular area.

These guidelines exist to keep people honest and not allow people to take advantage of the tax code, which is a good thing even though it’s a bummer that we can’t increase our pay more by paying even less in taxes as travel therapists. This leads to the next topic: what offers can you expect to receive as far as pay is concerned as a travel therapist?

Average Pay for Travel Therapists

Just as with permanent positions, travel pay can vary significantly depending on setting and location. I’ve talked to other physical therapists that make as low as $1,200/week take home pay and others that make as much as $2,200/week take home. That’s quite the range! And again, this will vary based on your specialty (PT, OT, SLP, PTA, COTA).

In general, the highest paying contracts are seen with home health and lowest paying are skilled nursing facilities, in our experience. Also in general, jobs on the west coast pay more than the east coast, and jobs in rural areas pay more than cities and urban areas. These observations were a surprise to us when starting out, since this is often different than the factors affecting pay in permanent positions. Taking the above into account, it’s easy to see why someone working a home health job in a rural location in California would make a lot more than someone working a skilled nursing job in Richmond, VA. Another factor that affects pay significantly is how desperate the facility is to fill the position quickly. Whitney and I once found contracts on the east coast at a wonderful outpatient facility in a great location that paid us very well because they needed the positions filled very quickly and we were ready to go!

With the above factors in mind, an average pay range for a traveling physical therapist is between $1,600-$1,800/week after taxes in our experience based on the US as a whole and all settings considered. Whitney and I have personally averaged around $1,650/week after taxes over the past three years while taking contracts exclusively on the east coast and almost always in outpatient facilities. The range has been between $1,500/week to $1,900/week.

We don’t recommend any traveling PT’s, OT’s and SLP’s, even new grads, take pay packages less than $1,500/week after taxes in any area. Some companies and recruiters will do their best to take advantage of new travelers, new grads especially, by offering them very low pay, knowing that they don’t really have a baseline of what pay should be yet as a traveler. This is why having a mentor in your corner as a new traveler is vital to keep from getting taken advantage of when starting out! Reach out to us with questions and for recruiter/company recommendations and we will be happy to help you!

How to Accurately Compare Pay for Travel Jobs to Permanent Positions

When comparing pay from a travel job to a permanent job, I often find that people get confused by the weekly take home amounts quoted for travel contracts. An individual that has never taken a travel contract will see $1,650/week take home, multiply that by 52 (weeks in a year) and then compare that to their permanent job gross salary and determine that travel isn’t worth it.

As we figured out above, that is no where near an accurate comparison. You have to either convert the gross permanent pay into a weekly take home amount (using the 25% rule of thumb above or the PayCheckCity site) as we did above, or convert the weekly take home pay of a travel therapist into an equivalent amount if it was a permanent position. The second is a more difficult calculation with no easy rule of thumb since tax rates increase significantly as pay gets higher, but luckily PayCheckCity makes it much easier using their “Gross Up” calculator. Let’s see what gross pay you’d have to make at a permanent job to equal the $1,650/week after taxes that Whitney and I have averaged while traveling.

Paycheckcity example2

We would have to make a staggering gross pay of $2,390/week at a permanent job to bring home the same $1,650/week take home pay that we have while traveling! That’s the equivalent of $60/hour or a salary of well over $120,000/year at a permanent job! When expressed in these terms, it’s easy to see how much more lucrative travel therapy is over a permanent job and how I was able to save over $100,000 in 1.5 years as a new grad travel therapist.

Based on our experiences and the hundreds of others travel therapists that we have talked to and mentored, it’s not unrealistic for a new grad travel therapist to make 1.5-2 times as much as they would if they took a full time permanent job right out of school.

The Bottom Line on Perm vs. Travel Jobs

It is important to remember that despite the significantly higher pay, there are some trade offs to traveling, which Whitney did a great job of outlining in her pros and cons article mentioned above. The big downsides to remember in terms of pay are that travel therapists don’t get paid time off for vacations like permanent therapists do, and it can be difficult to move from place to place in only a weekend, meaning that sometimes unwanted time off between contracts is inevitable. These factors eat into the pay of travelers, but even so, it is still significantly higher with all things considered.

I hope this helps clarify the differences in pay for permanent vs travel jobs. Please contact us or ask questions in the comments below if we can help you further understand pay, or if you have suggestions for travel topics for us to cover in the future.

What has your experience been as far as pay for permanent jobs or travel jobs? Do the numbers in the article match what you’ve seen? Let us know in the comments!