How to use locums to retire early as an NP

Sophia Khawly, ARNP, MSN, a veteran locum tenens nurse practitioner, offers expert guidance on building savings and planning for early retirement.

Locum tenens is more than a flexible way to practice medicine—it can also be a path to financial independence. With higher pay, covered expenses, and tax advantages, locum tenens work allows clinicians to save more money and potentially retire years ahead of schedule.

Here are 5 ways that locum tenens can help you prepare for early retirement as an NP.

1. Reduce fixed costs through provided housing

Housing is usually the largest monthly expense, and many locums assignments include provided housing. If you can cut or pause a rent or mortgage payment while you travel, that money can go to savings instead.

By giving up your personal home and relying on the housing provided during assignments, you can eliminate nearly 30% of your monthly expenses. The money you save can go toward savings or investments. To maintain your home residency, you might choose to rent a room from someone else, stay with relatives, or downsize to a smaller, more affordable space.

What perks come with locum tenens? CompHealth's benefits for NPs

2. Eliminate the need for a personal vehicle

Another major expense you can reduce through locum tenens work is car ownership. While on assignment, locum providers are typically provided with a rental car for the entire duration of the assignment, including weekends and days off. This eliminates the need to maintain your own vehicle. If you lease a car, you can return it at the end of the lease; if you own one, consider selling it instead.

When you return home between assignments, you can rent a personal car using rewards or points earned from your work rentals. Cars have become increasingly expensive in recent years due to factors like higher manufacturing costs and limited inventory, so eliminating a car payment can significantly boost your savings. With the average added costs of insurance, maintenance, and registration, going without a personal vehicle can free up substantial money to invest toward long-term goals like retirement.

3. Optimize pay and tax benefits

Pay. New locum NPs should aim for at least $10 to 20 an hour more than a comparable permanent role, according to our NP contracts guide. For current rates by specialty, see our NP pay article.

W-2 or 1099. How you are classified changes your tax situation. W-2 employees have taxes withheld and may have access to employer benefits. 1099 contractors pay self-employment tax, make estimated payments, and can deduct some business expenses.

With CompHealth, nurse practitioners are W-2 employees, who earn benefits, 401(k) contributions, and more.

Tax home. Travel and meal deductions generally depend on having a tax home. The IRS generally treats your tax home as your main place of business. A mailing address or a permanent address for tax purposes does not establish one. If you have no regular or main place of business, you may be considered an itinerant and may not be able to deduct travel costs. Read IRS Publication 463 and talk to a CPA before you change where you live.

Deductions. Where travel deductions apply, business meals are generally limited to 50%. Self-employed health insurance is generally deducted using Form 7206, is limited to your net self-employment income, and is generally not available for months when you are eligible for an employer-subsidized plan. Licensing and certification costs may be deductible as business expenses for contractors.

Earn more, work less: How pay works for NPs

4. Save and invest: 401(k), solo 401(k) and SEP-IRA

Higher pay only helps if it gets saved. Your options depend on your classification and whether your assignment offers a plan.

If you work as a 1099 contractor, a solo 401(k) or SEP-IRA lets you save more than an IRA allows. The combined limit for a solo 401(k) and the cap for a SEP-IRA are both $72,000, and a SEP-IRA contribution is generally up to 25% of compensation, according to the IRS.

Two things to plan for. Contractors do not get an employer match, so every dollar is yours to fund. And income can vary across assignments, making steady contributions harder. Many people set a percentage of each paycheck aside rather than a fixed dollar amount.

Here is a simple example. If you save an extra $10,000 a year for 10 years, you will have set aside $100,000 before any investment growth. Your own numbers will differ.

This is not tax or financial advice. Consult a CPA or financial advisor.

Want to learn if locums will work for you? Check out the nurse practitioner's guide to locums

5. Plan your transition: insurance, Social Security and multi-state taxes

Retiring early means covering gaps that work normally fills.

Health insurance before Medicare. Medicare generally starts at 65. If you retire earlier, you will need coverage in between, such as a marketplace plan, a spouse's plan, or COBRA, if available. Compare costs before you set a retirement date.

Social Security timing. Full retirement age is 67 for anyone born in 1960 or later. Claiming at 62 permanently reduces your monthly benefit by about 30%. Waiting increases it.

Multi-state taxes. Working in several states can mean filing non-resident returns in each one. Read our guide to maintaining multiple NP state licenses, and ask a CPA how your states apply.

For the bigger picture, see the long-term career guide.

6. Risks and tradeoffs

Locum tenens is not a guaranteed shortcut. Plan for gaps between assignments with no pay, no paid time off, and benefits you may fund yourself. Higher hourly pay does not always mean higher annual income if you work fewer weeks.

7. FAQs

Can NPs retire early with locum tenens? It may help. Locum NPs can lower some costs and may earn more per hour, but results depend on hours worked, taxes, gaps between assignments, and how much you save. [Answer to be reviewed; 40 to 60 words.]

Do locum NPs get a 401(k)? With CompHealth, we offer a 401(k) with an employer match.

What is a tax home? It is generally your main place of business, and it determines whether travel and meal costs are deductible. A mailing address alone does not establish one. Talk to a CPA.

How do I get health insurance before Medicare? Options include a marketplace plan, a spouse's plan, or COBRA, if available. Compare costs and coverage before you leave work.

How much do locum nurse practitioners make? See our NP pay article for current rates.

Interested in learning more about locum tenens jobs for nurse practitioners? Give us a call at 800.453.3030.