Key Terms, Defined for Locum Physicians.
Definitions written for the context that matters: a high-income physician building independence through the 1099 model.
1099 Income
Income reported on IRS Form 1099-NEC — earned as an independent contractor rather than an employee. Creates both greater tax exposure and greater tax opportunity compared to W-2 income.
Asset Protection
Legal and financial structures designed to shield income and accumulated assets from lawsuits, creditors, and liability exposure. Becomes increasingly important as income and net worth grow.
Backdoor Roth IRA
A strategy allowing high-income earners to contribute through a non-deductible traditional IRA and convert to Roth — one of the most valuable tax-advantaged tools available.
Benefits Optimization
The process of replacing employer-sponsored coverage with a customized combination of health insurance, disability protection, retirement accounts, and other benefits — structured for cost efficiency and better fit than the group policy left behind.
Cash Flow Optimization
A system for managing variable 1099 income so that tax payments, savings contributions, and investment allocations happen consistently even when assignment income fluctuates month to month.
Cost Segregation
An IRS-approved strategy that accelerates depreciation deductions on investment real estate, often recovering a significant portion of the purchase price in immediate tax benefit.
Defined Benefit Plan
An advanced retirement vehicle allowing high-income earners to contribute substantially more than a Solo 401(k) — often $100,000 or more annually — based on a formula tied to age and income. Used by locum physicians to dramatically reduce taxable income in peak earning years.
Disability Insurance
Coverage that replaces a portion of income if a physician cannot work due to illness or injury. The most financially consequential protection for any physician whose income depends on their ability to practice — and more complex to evaluate correctly for locum physicians than for employed ones.
Estate Planning
The process of structuring how assets are managed, protected, and transferred — including wills, trusts, beneficiary designations, and healthcare directives. Requires ongoing revision as income grows and family circumstances change.
Fiduciary
A legal standard requiring an advisor to act in the client’s best interest above their own. Not all financial professionals are fiduciaries.
Financial Independence (FI)
The point at which income from investments and assets is sufficient to cover living expenses without depending on active clinical work. Not a vague aspiration — a specific, calculable target the Locum Wealth System is built around.
Financial Independence Number
The total invested asset base required to generate enough passive income to sustain your desired lifestyle without active work. Typically calculated as annual expenses divided by a sustainable withdrawal rate.
HSA (Health Savings Account)
A tax-advantaged account paired with a high-deductible health plan offering a triple tax benefit: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. One of the most efficient vehicles available to a 1099 physician.
Locum Tenens
Latin for “to hold the place of.” A physician provides temporary or contract-based coverage, typically with compensation received as 1099 income.
Malpractice Insurance
Professional liability coverage protecting physicians against legal claims arising from patient care. For locum physicians working across multiple agencies and assignments, policy structure — occurrence versus claims-made, tail coverage, per-assignment versus annual — requires specialist evaluation.
Passive Income
Income generated from investments or assets — real estate, dividends, business interests — that does not require active clinical hours. Building passive income alongside active income is central to the path toward financial independence.
Practice Entity
The legal structure through which income flows — sole proprietorship, LLC, or S-Corporation. Determines tax treatment, deduction access, and retirement contribution structure.
Real Estate Investing
The use of investment property — short-term rentals, long-term holds, or passive syndications — to generate income, build equity through leverage, and capture tax advantages that are particularly powerful for high-income 1099 physicians.
S-Corporation Election
A tax designation allowing income to be split between W-2 salary and distributions — reducing the portion subject to self-employment tax.
Solo 401(k)
A retirement plan for self-employed individuals allowing contributions as both employee and employer, with combined potential significantly higher than most employer plans.
Student Loan Optimization
A strategic approach to physician student debt that evaluates forgiveness programs, income-driven repayment, and refinancing options in the context of your tax situation — with the goal of minimizing total lifetime cost rather than just reducing the monthly payment.
Umbrella Insurance
Additional liability coverage that extends beyond standard auto and homeowner policies, providing broader protection for high-net-worth individuals against claims that exceed primary policy limits.
Information Gets You Ready. A Strategy Session Gets You Started.
These definitions give you the vocabulary. A strategy session applies it to your specific situation.