This is Physician Finance Interview #6.
Today’s post comes from none other than Hatton1 who is a well-known commenter on many physician websites. Hatton now runs a blog of her own over at Doctor of Finance MD focused on the retirement aspect of personal finance.
As always, my questions are in bold, and then the responses from the person being interviewed follow.
If you are a doctor, or married to one, and want to discuss your personal finance background, decisions, and future goals; please email me and I can send you over the email interview questions!
Your Story & Background
1. Take a second to tell us about yourself so that others can see if their story relates.
I am likely to be the oldest doc you will interview at 61. I am OB/GYN and retired from OB at 56. It may be useful to know that I live in the deep South. I am divorced, and 31 years out of training.
2. What is your financial background?
I knew nothing about personal finance until age 31. If my residency had a retirement plan for residents no one ever mentioned it. I started working with a commissioned stock broker at 31. He taught me the importance of saving money and then investing it.
At the time everyone worked with brokers. This person really got me interested and I started reading and learning on my own. The key point I learned from him was even if the investment does not make much money or even loses money you have not spent the money.
3. Were you given a head start in the financial world in anyway? Let us know if the opposite is true, too.
My father was an Army Warrant officer who then worked for the Army as a civilian. He never bought a stock, invested in CDs, and taught me the importance of living within your means. He also showed me how to save for goals (Christmas, vacations). I inherited about $300k from him at age 50. It did not move the needle. My parents bought me a couple cars and paid for undergrad.
4. What is your current net worth? List the assets that compromise your net worth.
Here is how they breakdown:
- Traditional IRA and SEP IRA = $1.8
- Roth IRA = 100k (thru conversions)
- Taxable account = $5.4 million
- Checking = $40k
- Home equity = $400k
- Deferred annuities = $80k (a mistake)
- Antiques, etc = $180k
5. When you finished training how much student loan debt did you have?
$29000. I want the young readers to digest this figure. This shows how training institutions have inflated your tuition. That 29K includes living expenses for 4 years. I did have a small academic scholarship.
Dollars & Debt
1. List your current sources and size of debt.
I am debt free. I paid off student loans and a mortgage. Please do not finance cars. Please do not run up credit card debt.
2. Did you pay down your debt or invest when given the choice?
I invested in the market over paying off my mortgage. After the 2001 bear market I focused on paying off the mortgage and did so.
Income & Spending
Probably around $250k.
2. Do you use a monthly budget or track your spending? List your major expense categories for each month in your budget/spending.
I track expenses with Quicken, but I do not specifically budget. I like knowing my yearly expenses because it makes figuring out if you can retire fairly easy.
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?
I started a Donor Advised Fund last year. I also give lots of items to a local animal rescue thrift store
Saving & Investing
1. Do you have an emergency fund? Why or why not?
I never had a real emergency fund when I was doing OB. Given that I owned the practice, in reality the practice checking was there if I needed it. I now have $200k in checking, MMF, and short term bond funds. Most of this is in a taxable account at Vanguard.
2. What percentage of your income do you save towards retirement/investments each year? How did you determine this level of saving?
I really no longer save money. I never calculated my percentage when I was in my peak years.
3. You mentioned your assets above. What is your investing philosophy?
I have a very mixed bag.
I own several active funds that I bought mainly in the 90s. The capital gains are too large to sell. I no longer re-invest any dividends or capital gains in them. New money and the payouts from the Zombie active funds go into Vanguard indexes.
I will not be buying any crypto. I have speculated quite a bit in individual stocks, including Apple stock that I bought in 2008. All other individual stocks have been sold. If we really have another tremendous sell off I might consider buying again.
The only real estate that I currently own is my house and VNQ. I have owned some rural agricultural property in the past.
Rebalancing occurs mainly with new money and income from stuff that I own. I run the portfolio analysis tool at Vanguard and fill in the gap so to speak.
Angel investing is something I dabbled in and lost the entire investment (only 15k). I think I would rather gamble with Powerball.
4. If you could tell other doctors about one thing you’ve learned about saving and investing, what would it be?
Watch your spending. Save early and often. Use some restraint on your home purchase.
5. Do you have anyone you plan on taking care of in retirement? Is there anyone else who will have an impact on your retirement planning?
My parents are both dead so I will not be caring for them. I have a couple of nieces that may require some assistance. This has not effected my retirement plans.
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.
I have long been able to retire. I choose to work part-time. My number was 5 million. I made it up.
I am too old to fire. Hitting the goal allowed me to quit OB with confidence.
2. How much will you be spending annually in retirement? Give us some details.
I always input $120k into retirement planners. I usually spend around $60k (not including taxes).
As far as safe withdrawal rates (SWR) go, I think 4% is safe above 60. Likely, a 3% SWR is safe below 60. I am looking at a 1% SWR. You can read more about the SWR in this post on my website.
I have a big taxable account so I will only tap retirement accounts as the government forces me to (RMD).
3. If you have already retired, tell us about it.
I decided to keep working after shutting my private GYN practice. At the time, I was approached by my hospital and offered 2 different jobs out of no where. I decided it would be nice to have good health insurance hopefully until I can COBRA it at 63.5.
In semi-retirement I am focusing on exercise, mindfulness, and learning new things. I think working part-time has lots of advantages if you are healthy enough to do it.
4. If you plan on retiring early (before age 65), how do you anticipate handling health care costs?
I have written several posts on this topic on my blog, including this one on The Top 10 Retirement Fears.
There is no really good answer to this question if you do not have a spouse who has health benefits or access to TRICARE. If you retire prior to 65 you accept some risk here.
Advice & Farewell
1. What advice would you give to The Physician Philosopher readers who may be a younger (or current) version of you?
- Try not to be trendy with investing (crypto, crowdfunding).
- Make yourself take enough risk (do not go to 100% MMF in the next recession).
- Stay away from Dr Jones.
- Buy a reasonable house.
- Save and invest.
- Read and learn.
- Always remember that you care more about your money than any financial advisor.
2. What is the toughest challenge facing physicians who are just finishing training?
The crazy student loan balances. Also young docs do not want to work for themselves. This allows hospitals, private equity, or others to control your fate.
3. What is the top financial mistake you see your colleagues making that you would advise our younger physicians and trainees to avoid?
Young docs always seem to want to buy a house. I did too. Today with these large loan balances and a hospital employed model I think you really need to wait and work the job a few years before buying a house. You will probably not want to stay with your first job and the house really complicates matters.
4. What are the top two-three resources you would recommend to a reader outside of The Physician Philosopher website (book, blog, podcast, etc)?
I, of course, like my website for the older readers. DoctoroffinanceMD.com.
I love the Millionaire Next Door series of books. A new is being published soon. I also like the books by Phil DeMuth. I really read lots of the physician written blogs. WCI recently listed 55 of them. If you check the list you can find one that applies to you. I subscribe to several of them.
The granddaddy is WCI. I also read Michael Kitces, Oblivious investor, and the Finance Buff. The Wall Street Journal has a really cool economic blog called the daily shot. It is all economic graphs. It really gives you a sense of where the economy is going.
5. What questions do you have that TPP readers might be able to answer?
Why the interest in Crypto? It seems like a good way for your money to disappear.