Physician Finance Interview #12

Financial Planning for Doctors

This is Physician Finance Interview #12, which is part of a series of posts is published each Friday. If you’d like to read the other PFI posts, you can find them here.

The focus of the interview is to investigate how other doctors 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 are a medical professional of any kind, 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 am a 56 year old ophthalmologist in the Midwest. I am married, have been out of training for 25+ years, and I recently retired.

2. What is your financial background?

I had no financial background and really never gave much thought to retirement planning other than knowing I should save money for retirement one day.  I never really thought about how much to save or what I would need.

It was always my assumption that I would work into my 70’s because I really loved my work and that is what most of my family had done.  I remember one day a co-resident pointed out an older attending that was near retirement and was known to be fairly wealthy.

He said all he had ever done was to invest in the stock market.

I asked him about that and that was exactly what he had done.  No real estate, no other business, and no fancy investments but he had done it for his entire career and had done very well.  I never forgot that conversation.

When I started out in practice I had some investment people offer their services to me, including whole life policies, etc.  I realized I knew nothing and I would be swimming in shark infested waters if I did not get some basic education.

A very simple book on finances that I read made me realize I only needed a few mutual funds and could do it myself.  I might not pick the #1 funds but by investing heavily in index funds I would do better than most.

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

My parents paid for undergraduate school but I paid for medical school.  That was a great head start but the best head start was seeing how my parents lived.  They lived well within their means and never bought anything on credit.  I never saw my parents use a credit card for as long as I lived at home.

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

Our current net worth is between 5-6 million.  The majority is in a taxable account, the remainder is in tax deferred accounts and about 700k includes our home.

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

I had close to 100k when I finished about 25 years ago.  We made that a priority to pay off and did so within two years.

Dollars & Debt

1. List your current sources and size of debt.

We owe about 100k on our current home. We moved to a new city a few years ago and took out a mortgage on our new home.  I hate having that debt but I decided a few years ago to stop paying it off early given how incredibly low our interest rate was.

It took a few years of debating whether or not to do that.  Looking back I wish I had stopped a few years earlier but I still was able to put that extra money into the market at a really good time.

2. If you had/have student loans, what is your student loan repayment plan?

Back when I was done training, the interest rates were quite high.  I did not look into refinancing.  We decided to take everything I made after paying for rent and funding retirement plans and pay off the loans as quickly as possible.

3. If you have a mortgage, do you plan to pay it off early or invest in the market? Why? If you don’t, why did you decide to rent?

As noted above, I stopped paying off my mortgage early about 5 years ago otherwise we would have been done with it.  Even though I knew I would have been better off not paying it off early given the low rate we had after refinancing shortly after the recession, I had always looked forward to being completely debt free.

Income & Spending

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

We had a combined income of between 550-650k while I was working.  My wife makes about 80k .  She enjoys her work and will probably work for another year or two at most.

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

We have never used a budget or taken much effort to track our spending.

Our major expenses have been college education for a our children and travel.  We enjoy traveling and do so many times a year.  We also commit to a few charitable organizations.

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?

Yes, we generally help to support a few charitable organizations with about 10-15% of our income.

Saving & Investing

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

I have never really designated an “emergency” fund.  I like to keep enough cash in a bank account to allow us to buy anything we may want or need such as a car (although we rarely do).

My taxable account provides  ready access to funds, but have always taken the attitude that I never want to need that money and never have.

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

We probably save at least 50% of our income and once our children graduated college, it increased.  Our savings rate is something we really never thought about.

We both feel we have everything we could want or need and save whatever we do not use.  A second home and expensive cars are not a big need for us.  We value the safety of a large savings much more than those “things”.

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

Up until a few years ago I invested in 3 mutual funds.  Most of our savings were in an S&P index fund.  I believed that given my long investment horizon I could afford to be invested in 100% stocks.

I tell younger investors  who think they want to do that to be sure they have the stomach for the volatility.  They may think they do but you only know for sure when you see half of your net worth disappear and have the fortitude to keep investing.

As we got closer to possible retirement age, I did seek the help of an adviser to help us invest in a less aggressive fashion and help stabilize our investments for the inevitable downturn that will come someday.

4. If you could tell other doctors about one thing you’ve learned about saving and investing, what would it be?

Medicine is changing and things happen in life.  Do not put your back against the wall by not being prepared to leave medicine, work less, etc if you either choose to do so or are forced  to make a change in your work and your ability to be a big earner.  Having that security and freedom is better than the big doctor house or the fancy sports car.

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

We did provide college education for our children.

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 had been told to have enough saved to live on 80% of our current income and that was what I asked our adviser to calculate our needs when we first met.  I then went home and thought about that after our meeting and realized we never came anywhere close to that now.

The next day, I called the adviser and gave him a new target spending rate for retirement and he informed us we were well past what we needed.  That was when I began to seriously think about retirement and start reading about FIRE.

I saw how people were retiring early with much less than what we had and knew we could walk away when we wanted.  A few years went by and work became less enjoyable and we made a plan to retire and enjoy our free time sooner.

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

We plan to live on about 2% of our savings a year or about 120k to start.  The plan is to use money form our taxable account first and then a 457b if needed [TPP: A great vehicle to use in early retirement if it meets the criteria needed to be worth investing in].

Some future inheritance is likely, although we never plan on that for our use.  That will be passed down to our children one day.  We also know we can increase our spending if we want but given how we live now, do not see that being necessary.

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

I retired this year.

I enjoyed my work immensely but some health concerns caused me to have to give up some of what I enjoyed doing most and that made the work less enjoyable.  The thought of being able to have the freedom to travel or do what we want while still healthy and relatively young became much more attractive.

I have not been retired for very long but am finding that it is quite easy to keep myself busy. I may or may not work part time doing some consulting or doing something else completely outside of medicine.  It is nice to be able to do that only if I am interested in something.

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

I am able to take my workplace healthcare with me. This obviously helped greatly in the decision to retire.

Advice & Farewell

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

Medicine is a great career.  Not only is the work enjoyable, it pays very well.  Most physicians are in the top 1% of earners in the USA and far above that in the world.

Before worrying about climbing up another small fraction of that top percentile, think about how far to the right side of the income graph you already are.  Enjoy the financial benefits of medicine by paying off your debts early and living well below your means and enjoy the freedom that financial security can give you and can be available to almost any doctor.

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

I believe the biggest issue is the loss of autonomy.  The corporate movement of medicine is taking the enjoyment of the career away and by doing so risks the mental and physical health of the people taking care of us.

We are already seeing a growing number of people retiring earlier and quitting clinical medicine and/or burning themselves out in the process.

3. What is the top financial mistake you see your colleagues making that you would advise our younger physicians and trainees to avoid?

Not being serious enough about their debt.  The sooner you can get out of debt and stay out of debt, the faster you can increase your wealth.

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 read The Millionaire Next Door near the beginning of practice.  While it did not require a change in my behavior, I found it a great resource for confirming my beliefs about how to build real wealth and why so many people who may look wealthy are not.

I recently read “The White Coat Investor” and think it is a great resource for young physicians.

5. What questions do you have that TPP readers might be able to answer?

I can not think of any now.  I very much enjoy hearing about other people’s financial journey.  We can all learn a great deal from people who have done well as well as the mistakes that have been made along the way.

Thanks for taking part in the Physician Finance Interview Series!

For anyone interested in taking part, shoot me an email.


4 thoughts on “Physician Finance Interview #12”

  1. Medicine is indeed changing. A lot of young graduating docs think that they are going to work a long time because they have this idealism regarding medicine. After a decade or so that idealism tends to fade and then you get these docs looking for an exit strategy.

    The key is to go in with the mindset that you will likely work 15-20 years as an attending and save accordingly. If you are one of the few docs that love medicine so much that after that time you still want to continue, then no harm no foul. You will still be able to work and even add more to the war chest.

    I also agree that 80% of your pre-retirement income does not really apply to physicians. That would have an anticipated retirement draw extraordinary large/unnecessary. For higher income individuals, the best is to just try and estimate your annual expenses and just add a buffer.

  2. Hey TPP,

    Just discovering your site. I will be back to check out the other interviews and the rest of what you have to say; this was a great read.

    I work in Clinical Informatics at the hospital in my city and can appreciate much of the advice regarding burnout that is happening to healthcare professionals. Planning for the future whether you love your job today is a necessity in any profession and healthcare is not exempt.

    Take care,

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