Physician Finance Interview #3

This is Physician Finance Interview #3. Each person interviewed is either a doctor (or married to one) and the interview allows us an in depth view of their life and financial decisions.  The focus of the interview is to investigate how other physicians have handled their money, income earning potential, assets, debts, and much more.

Tag along as we discuss success, failures, and advice that I hope will prove useful to many!  Please, leave comments below about the answers and your thoughts!

My questions are in bold.  The answers then follow.

If you want to read the previous Physician Finance Interviews,
you may do so here:
Physician Finance Interview #1
Physician Finance Interview #2

Email me if you are interested in being interviewed and sharing your stories and experiences. The questions below are emailed to the person being interviewed and responses are returned, formatted, and published. 

Your Story & Background

1. Take a second to tell us about yourself so that others can see if their story relates. 

I’m a 62-year-old female pediatrician in the southern US. I have been single for 8 years. I’ve been out of training for 33 years, I have taught and practiced general outpatient pediatrics in various cities across the south and southwest.  I tried private practice twice and hated running the practice both times. (It took twice, I’m a slow learner).

2. What is your financial background? 

I had limited financial education and my family handled their finances by saving but not investing. The entire family has a horror of debt and a fear of the stock markets born of the great Depression and passed down through 3 generations.  We knew how to save but no one knew how to invest.

I lived frugally, went to college in my home town and lived at home, went to medical school and residency on the Gulf coast and lived in very sketchy housing with roommates. We had several hurricane scares and evacuations but also some great memories of hard work, a vertical learning curve, good friends and lots of beans and rice, gumbo, music and fishing, crabbing and sailing.

No one had any money and only a few of the residents had come from money so it didn’t really matter how poor we were then. The richest I’ve ever been in my life was the first paycheck from residency. I bought a new (NEW) couch.

3. Were you given a head start in the financial world in anyway? Let us know if the opposite is true, too. 

You asked about disadvantaged background. Not really, I was about the same as everybody else I knew, middle class in a modest sized town.

My grandfather sold our family farm before he died, my mom inherited the money and my brother-in-law helped her manage it and make it grow for about 20 years. When she died 8 years ago I inherited $400,000 as did my siblings.

My life partner was disabled military and had a small veteran’s disability and health care through the VA. We also purchased additional insurance on the economy because my insurance did not cover her for her many surgeries with private surgeons and additional health care needs. She was the stay at home part of our family though we did day care for the children until they were well along in school because she could not move well enough and quickly enough to wrangle 2 active children all day long.

We used the savings, 401K, and mortgaged and remortgaged houses to pay for infertility, care for complex mental health, orthopedic, and mobility concerns for my partner for much of our life together until her death 8 years ago. 

We also had some health problems for one of the children. In the last 8 years since my mother’s and my partner’s death I have been focused on straightening up our finances, caring for myself and our children and stabilizing the immediate and extended family.

We are slowly on the mend and doing pretty well in the last 5 years.

4. What is your current net worth? List the assets that compromise your net worth. 

My current net worth is about $3,300,000. I have a 4-bedroom house adapted in an excellent school district with a current mortgage of $200,000 at low interest. 

Home Equity = $460,000 ($200,000 remaining on home worth $660,000)
Taxable account = $893,600
Rollover IRA (from prior 403B and 457) = $638,500
Roth IRA = $55,000
Emergency Fund  = $46,000
A single premium immediate annuity = $670,000.
Whole Life Policy (Fully-funded) =  $300,000 

Funds for the kids:
Kid’s school fund x 2 = $136,000
Grad school (or 20s fund) = $100,000

5. When you finished training how much student loan debt did you have?

I borrowed $80,000 for medical school, about the cost of a nice3-bedroom house in the area. It was an enormous sum of money for me at the time. I paid it off in 7 years by living like a resident.

I have had several jobs as an employed physician and 2 tries at private practice. The first one ended decently but the last one did not, and I declared bankruptcy in my 40s.

I went to work as an employed physician againat the age of 49 and have stayed in that job until health-related retirement late last year.

Dollars & Debt

1. List your current sources and size of debt. 

Mortgage = $200,000.

All of us have older vehicles that run well. We have no credit card debt, no auto loans, and all the medical bills for all family members are completely paid off at this time.

I have no other loans or debt.

2. If you have a mortgage, what’s the plan to handle that?

I’ve paid back almost $100,000 in principal in the last 2 years on my mortgage and have $200,000 to go. I’ve been a prodigious saver. We have paid off and remortgaged this house twice to cover medical expenses and for needed remodeling.

Income & Spending

1. What is your household annual income and will it be changing in the near future? 

Our family’s maximum salary has been about $180,000. That still seems a princely sum of money when I write it down. Most years I have earned between $90,000 and $160,000.

I have not been able to work full time much of my career due to illnesses of various family members. We have lived well below our means and saved as much as possible. I became serious about savings 8 years ago. And I’ve only gotten serious about investing in the past 2 years.

2. Do you use a monthly budget or track your spending? List your major expense categories for each month in your budget/spending. 

My basic annual lifestyle spending is $48,000 to $70,000. That is below what my passive income should bring in with some wiggle room in retirement.

Our vacations have been to travel to family, camp and fish. Our one extravagance has been a series of boats. We have had small and medium sailboats, fishing boats and now an older ski boat that we use for fishing, skiing, family get togethers and general relaxation. We love being on the water. I hope to eventually relocate back the coast at some point.

I have had several vacations to travel with family to large American cities through the years. I’ve presented papers at various academic meetings which has allowed me to travel as well. I do hope to travel internationally someday. I’d like to go to language school in Mexico or Central America to improve my Spanish.

3. Does giving to charity or causes you believe in play a part in your financial life? If so, what percentage of your annual income goes towards this endeavor?

We have tithed most years. I’m active in our parish. My various practices have worked with rural and migrant health, refugee care, and indigent care most of my career. This population touches me deeply. My father was an immigrant and my mother’s people struggled as small farmers.

We had a discussion just after Christmas to direct the charitable contributions above our tithe to the church as a family decision. I want the children to take on stewardship of resources to the betterment of others. They choose where a portion of our charitable funds go.

We have supported animal shelters, coastal rehabilitation, Heifer International, Medicinas sin Froneras and refugee agencies. I do not have a donor advised fund at this time but may consider it.

Saving & Investing

1. Do you have an emergency fund? Why or why not? 

At this point in my life, my emergency fund has an emergency fund. I have 12 months of salary salted away, taxes and property taxes funded by late January, cash and tax advantaged savings for the children’s education and young adulthood.

Once we were not hemorrhaging money for health care, it was pretty easy to start cleaning up the savings side of the finances.

2. What percentage of your income do you save towards retirement/investments each year? How did you determine this level of saving?

I retired at the end of last year from active teaching and practice and now do PRN and contract work. This brings in about $50,000- $100,000 year. This year I am starting my solo 401K and will put $50,000 into it. I also have a small HSA. 

At this point in my life a Roth is not as good a choice for me as just putting money in the solo 401K because of the proportionality and my age. I did do a Roth for the children as a Mommy Match starting with their first jobs at age 16.

3. You mentioned your assets above. What is your investing philosophy? 

I rolled over my 403B and 457 to an IRA and had a large financial house manage it until I read a lot of financial books, started following blogs like Get Rich Slowly, Simple Dollar, retirement and FIRE blogs, WCI/POF/Retirement Research-Wade Pfau/Nerd’s Eye View/ Retirement Café and others.

Last month I gathered my courage and took back financial control of my money. I’m working my way toward a 3-5 fund portfolio.

4. If you have kids, are you saving for their college education? If so, describe where and how. For those with kids who don’t plan on saving for their college, please tell us why. 

I have fully funded 2 children’s educations through graduate school thorough tax advantaged savings. The children are in college.

Retirement Goals & Gaffes (Mistakes)

1. What is “your number” and your age that you feel will allow you to retire? How’d you arrive at this number; give us some details. 

SoFi

My retirement practical planning is starting in earnest. The number is 2.4 million. I’m there and well more. The generation that I am in is the first on both sides to have financial security. My sister and brother-in-law have been able to establish a solid foundation for the family by helping my mom. I helped with daily life and they helped with financial skills and care.

I would not mind having more of  a nest egg. But my own health is not great, I’ve lost my partner to long chronic illness. I know enough to quit while I can still dance and move and sing. In planning, I had thought of retirement as a great vacation.

My real day to day experience is that it is like a really really long weekend. Laundry, gardening and everyday living take the same amount of time they always did. It is far too easy to fritter time. Retirement takes discipline. That was a surprise to me. The perfect balance for me is working 2-3 days a week in some form of medicine.

2. How much will you be spending annually in retirement? Give us some details. 

I’ve just started my own retirement early this year. I’m planning at this point to have passive taxable income of about $90,000 to $120,000 from pensions, annuity payments, and dividends.  I plan to delay social security to age 70 and spend/save what I make from locum work and the consultations. That will be replaced by required minimum distributions as I slow down the medical practice part of my income around age 70.

My hope is to not pull out more than 4% of my nest egg. 

3. If you plan on retiring early (before age 65), how do you anticipate handling health care costs?

I had hoped to retire sooner. The sticking point for me has been health insurance. Timing now is based on the availability of health insurance for retirees at age 62 from a former job. My health insurance is covered by a government retirement and I have 2 small pensions totaling about $20,000/year. 

The children are covered for health insurance in my policy to age 26 and I have excellent and reasonably priced health insurance for the rest of my life. That health insurance is a blessing. We have had lesser insurance in the past and have dealt with the bureaucracy of the VA. The actual medical care for the most part was superior for my partner. The user experience, not so much.

I decided not to purchase long term care insurance. I watched family members who purchased it and were denied the use by the many exceptions in the policies. We were not able to use many of the VA benefits for my partner that were promised due to cumbersome processes. My mom found that the care at home was cheaper and better than what was provided in rehabilitation centers. At this point I plan to self-insure.

4. If you are nearing retirement, what is your plan?

I’m trying to work out what part of my income will be from taxable savings and what part will be from required minimum distributions from 401K and IRA. This is the part I’m still learning about. I’m just now taking the reins of the IRA and taxable plan.

I am pretty anxious about being in charge of the money. My brother-in-law the accountant, and the current advisor I work with, the numbers and data from all the FIRE types and all the readings I am doing are pretty compelling for the shift to passive investment and self-management over a wealth management service.

My will is up to date, my plans are written down. We had a discussion just after Thanksgiving for years going back with all family members to keep everyone on the same page about finance, future plans, and final details. I used to hate having that discussion years ago. Now it makes sense and I am forcing my children to participate in it as well.

Head in the sand is not good future planning. 

I plan to downsize to move back to the coast in the next few years. I miss the salt air and sailing in the bay. I don’t need a large house alone. The taxes for our school district are quite expensive. They make sense for people with children but not any longer for my situation. 

5. What are your future goals?

I find that I am remarkably content.

I have had a wonderful life, the chance to do a great deal of good in the world, a deep love, children that are about as special as possible. I’ve lived close to severe illness and disability. I do not take a single day for granted.

I like plays, libraries, music, volunteer work and birding. My needs are few and my wants are not extravagant. The fish and the birds do not care how fancy the boat and I like my bed enough to not want to anchor out overnight anymore, so a ski boat works well.

The coast is very adaptable to lower income living. It is much easier to live a simple life in the bayous than in large cities and suburbs. I do look forward to being on the water on a daily basis. I may travel. I find that I have to be very intentional about creating social support networks for myself. That is harder than I had expected in retirement.

I am making myself attend more social events than my introverted self would normally choose. I’m choosing dance over exercise at home, volunteering in community and church and being very deliberate about the ration of time I allow myself for social media. People are more important. Get up and go do things. I’m lucky, I didn’t come from great wealth so not having it makes a lower level lifestyle easier.

Mostly, I want to be a good steward for my patch of the world, garden for my own food and for the birds I love, give back to the world as I’m able, be an awesome grandmother in the future and putter around with fishing and boat yards.

Advice & Farewell

1.  What advice would you give to The Physician Philosopher readers who may be a younger (or current) version of you?

Figure out what is most important in your own life, find its cost and pay it without whining. You are in charge of your own finances. Start early. Have excellent health and disability insurance. Buy the flood insurance. Pay the money for good insurance, it is worth it.

You can do this, even if you blow it until your 40s like I did. It is however, far easier to start early. I’m told that money invested begins to make its own serious money starting at about year 17. Start now. Take advantage of compound interest. Don’t be afraid to invest. Savings works wonders but investing makes money make money.

Eat healthy foods, live beneath your means, move your body, learn to like managing money, find someone to love who loves you back madly. Buy term insurance in appropriate amounts, (I didn’t, and it cost me) Buy the disability insurance while you can get it. Keep your paws out of your 401K. Even in emergencies, bad idea. (I know, I learned)

2.  What is the toughest challenge facing physicians who are just finishing training?

I think it is tougher now to come out of medical school. My son is looking at much more expense than I ever did in tuition for medical school. Technology is changing. The EMRs have to get better. Medicine is an honorable profession. You don’t have to make $300,000+ to have a good life. You can be a great doc working for less or working part time. Live beneath your means. Always. Make a game out of frugality. That makes it more fun and makes it seem less like a sacrifice. No one cares more about your money than you do.

3.  What are the top two-three resources you would recommend to a reader outside of The Physician Philosopher website (book, blog, podcast, etc)?

Read, Read, Read! 

Get out of debt with Dave Ramsey but don’t use his investing advice (TPP: Completely agree!). Listen to podcasts while walking the dog, study the White Coat Investor book and blog and basic financial planning books like you were studying for your boards.

You can do this, but it is easier if you start early.

4 thoughts on “Physician Finance Interview #3

  1. “Figure out what is most important in your own life, find its cost and pay it without whining. ”

    That is awesome advice. Too often we ruin the experience of something by over analyzing it. Just enjoy it without the whining

    • Thanks, Hatton.

      I thought she did a wonderful job. Lots of really helpful information and great advice. She has had a tough road, but made the most of it!

      I love bird watching. We have to buy the spicy bird food though to keep the squirrels and Chipmunks away from it. The only kind I can find in my area (I like supporting local business) is like $40 a bag. And the bird destroy it in about two to three weeks!

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