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How to Balance Physical Therapy Retirement Planning and Student Debt

Being able to make a difference in someone’s life as a physical therapist can be one of the benefits of the job. One of the downsides? You might have a lot of debt to show for it. According to a 2017 survey by the American Physical Therapy Association, recent physical therapy graduates owe an average of $96,000 in total debt, including credit cards as well as other loans. Many graduates leave with a total of $83,000 in student loan debt, on average.

Having so much debt can impact your finances as a physical therapist. You might even wonder how to manage your retirement planning in the process. In this guide, we’ll cover some steps you can take to stay on top of your physical therapy retirement plan.

Physical therapy retirement planning

The first step in planning for retirement as a physical therapist is to review your current situation and your future goals. Here are some questions to consider:

  • How much do you earn now?
  • How much do you currently have in retirement savings?
  • How much can you reasonably afford to put toward retirement each month?
  • Does your employer offer a match?
  • What physical therapist retirement benefits does your job offer?
  • Do you work full time or part time?

All of these answers will affect how you approach retirement. For example, if you’re starting from ground zero, you might want to boost your retirement savings. If you have a match, definitely contribute up to that amount.

Looking at your earnings and how much you can set aside in your budget should guide how much you save. According to data from the Bureau of Labor Statistics, the median pay in 2018 for physical therapists was $87,930 per year. Of course, whether you end up working full time or part time may have a big role in how much you can put away.

Saving for retirement might not feel sexy, but your future self will thank you. Consider cutting out certain expenses or putting bonuses or raises straight into your retirement savings.

Student loan strategy and retirement planning

When planning for retirement, you also want to consider your student loan strategy. For example, your retirement plan will differ depending on if you’re going for student loan forgiveness or planning to pay off your loans ASAP.

If you work in a government setting or in the public sector, you may be eligible for student loan forgiveness after 10 years. Through the Public Service Loan Forgiveness (PSLF) program, physical therapists who work with a qualified employer, make 120 payments and meet other program requirements can get 100% of their loans forgiven. This program can be a great option for those who qualify, especially because there are no tax consequences.

Another option for student loan forgiveness is an income-driven repayment plan, where your monthly payments are capped at 10% to 20% of your discretionary income based on the plan. After 20 to 25 years, your loans will be forgiven. However, unlike PSLF, you’ll owe taxes on the forgiven amount.

If you plan on pursuing student loan forgiveness, then you’ll want to put the extra funds that would have gone to your student loan payments toward retirement. That way, you’re making payments as you should with the plan to get your loans forgiven while putting your “extra” money toward retirement.

You might want to supersize your monthly payments if you want your loans gone ASAP. In that case, you may have less money to contribute to retirement.

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How to structure your finances

One of the tough things about personal finance is competing priorities. You’d like to pay off debt and save for retirement. You want to have fun but also save for a rainy day. It can seem like you must choose one or the other. But there’s actually a way to structure your finances so you’re managing all of your financial priorities.

Travis Hornsby, founder of Student Loan Planner®, recommends a three-pronged financial strategy:

  1. Get an emergency fund.
  2. Save 10% for retirement
  3. Go for loan forgiveness and save

Obviously, if you’re not going for loan forgiveness, then the third part can be paying your student loans as normal.

Get an emergency fund

For your emergency fund, strive for three to six months’ worth of expenses. This will help you weather any storms that can come your way and help you avoid further debt. Once you have your emergency fund set, you can put additional money toward debt or retirement — and have some for fun, too.

Save 10% for retirement

To make the second part easy, you can automatically save 10% of your paycheck to put in your retirement account. You may be able to do this with an employer-sponsored 401(k) or set up automatic transfers from your checking account to a retirement account. If you don’t have a brokerage account for your retirement, we recommend online robo-adviser Betterment.

Student loan forgiveness options

If you want to pursue student loan forgiveness as a physical therapist, make sure you recertify each year on an income-driven repayment plan. You can also submit your Employment Certification Form as part of PSLF.

To manage student loan payments, you can consider autopay for federal student loans and get a 0.25% interest rate reduction. If you’re not opting for student loan forgiveness, you can also consider student loan refinancing.

Student loan refinancing can cut down your interest rate and help you pay down the principal faster. But it’s key to know that you give up federal benefits that can help you down the line. When you refinance, your loans are paid off, and then you have a private loan. So that means no more income-driven repayment and no more student loan forgiveness.

Whatever you choose to do, you can have a plan to plan for physical therapist retirement benefits and pay off your student loans at the same time.

If you need help to figure out a custom payoff plan, get in touch with us!

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  1. Foggy October 6, 2019 at 4:36 PM

    Could you also write an article about PDPM and PDGM and what you believe will be future of the profession. I appreciate all the articles you do. I have used them to make career decisions. Thank you.

    • Travis Hornsby October 8, 2019 at 4:40 PM

      Can you explain more about these changes Foggy? I’m actually not super familiar with them and it looks like they’re happening very soon

      • Foggy October 8, 2019 at 7:57 PM

        PDPM happened on Oct. 1st and many Physical Therapists, Occupational Therapists, and Speech Therapists were either: laid off, had their hours cut, were converted from FT/PT to PRN. The PDGM changes will occur on January 1st and will be aimed at Home Health. There are many more stories in the “Rehab Therapists for a Union group” on FB. The ASHA, AOTA, and APTA have also wrote some stuff about it. I was wondering what your take on the future would be for each of these professions as I was considering going into one of the rehab disciplines.

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