How much do you save/invest every year?

[Splenda88]

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Early 50's here, and I think all docs should have a mandatory finance class before they get out of med school. I am essentially self taught and still learning. Made many mistakes early on in my attending career and time is one thing you can not get back. Time can be more important than how much you earn.

Currently in the 1% NW in the US and likely will be in the 0.1% before 60. A few things to think about when you are a high earner, and high NW.

1. Plan early, look into estate planning, trusts - Protect your legacy, protect your kids from whoever they marry, protect your estate from the IRS. Once you hit $5M NW, 10-20K to create an estate plan will be the best money spent.
2. If you have kids, don't forget the 38K gift exemption if you have a spouse. I put 38K/yr in each of my kids taxable brokerage accounts starting around 15, I wish I did this when they were 1. When they hit 25 yrs, their accounts should be pushing close to $1M, when they hit 35 should be $3+M. See above with estate planning. If you are going to give them an inheritance anyhow, do it when they need the $$$ and helps with estate planning.
3. If you have a business that creates an income, start an LLC/S Corp. There are many ways to reduce your taxes. Employ your kids. Kids do not have to pay/file taxes on the 1st 15K income. We have 3 kids and thus 45K off our income. They can fund a Roth too. Employ your spouse. You and you spouse can each do $23.5K IRAs, 7.5K catch up IRA, and 21K PSP. So can defer taxes on a total of 104K of income. Create a Cash Balance Plan for both and defer up to another 400K+ depending on your age. My wife & I defer 500K+ yearly into our retirement.
4. Find a competent and aggressive CPA. Too many deductions to count but see #3. Your family are employees of your company. Family dinners/trips = Business dinners/Trips. August rule. I write off 300K+/yr in business expenses. If large corps can have business events in Hawaii and Vegas, then why not you?
5. If you have some interest/time, invest in Real estate. You don't have to manage it, get a property manager. Let the property appreciate, and this can be your tax free piggy bank in the future. Build equity, and live off the tax free refi.

Top 0.1% is 62M in today's money. That is a great goal to have.

 

[Nocturnist]

Early 50's here, and I think all docs should have a mandatory finance class before they get out of med school. I am essentially self taught and still learning. Made many mistakes early on in my attending career and time is one thing you can not get back. Time can be more important than how much you earn.

Currently in the 1% NW in the US and likely will be in the 0.1% before 60. A few things to think about when you are a high earner, and high NW.

1. Plan early, look into estate planning, trusts - Protect your legacy, protect your kids from whoever they marry, protect your estate from the IRS. Once you hit $5M NW, 10-20K to create an estate plan will be the best money spent.
2. If you have kids, don't forget the 38K gift exemption if you have a spouse. I put 38K/yr in each of my kids taxable brokerage accounts starting around 15, I wish I did this when they were 1. When they hit 25 yrs, their accounts should be pushing close to $1M, when they hit 35 should be $3+M. See above with estate planning. If you are going to give them an inheritance anyhow, do it when they need the $$$ and helps with estate planning.
3. If you have a business that creates an income, start an LLC/S Corp. There are many ways to reduce your taxes. Employ your kids. Kids do not have to pay/file taxes on the 1st 15K income. We have 3 kids and thus 45K off our income. They can fund a Roth too. Employ your spouse. You and you spouse can each do $23.5K IRAs, 7.5K catch up IRA, and 21K PSP. So can defer taxes on a total of 104K of income. Create a Cash Balance Plan for both and defer up to another 400K+ depending on your age. My wife & I defer 500K+ yearly into our retirement.
4. Find a competent and aggressive CPA. Too many deductions to count but see #3. Your family are employees of your company. Family dinners/trips = Business dinners/Trips. August rule. I write off 300K+/yr in business expenses. If large corps can have business events in Hawaii and Vegas, then why not you?
5. If you have some interest/time, invest in Real estate. You don't have to manage it, get a property manager. Let the property appreciate, and this can be your tax free piggy bank in the future. Build equity, and live off the tax free refi.

Great advice here, and congrats!

I'm going to have to push back on #5 a bit though. I'm glad it's worked out for you is but I vowed I'll never be landlord again after my experience.

I bought my 2 bedroom condo when I started residency in 2013. Waterviews, private dock, quarter mile from the medical center, all the amenities anyone could want. First of all, the sellers who bought it in 2001 sold it to me at a 10% loss. Imagine making mortgage and HOA payments for nearly 15 years just to have negative equity. Folk think the RE market is a piggy bank that only appreciates over time- like any investment that's not always the case.

I began renting it in 2017. First lease? Professional tenant. Never paid, wouldn't leave. Had to essentially do cash for keys to get him out. 2nd tenant? Covid hits. Government decides the legal contract signed by two consenting adults is null and void. They tell all tenants they don't have to pay and can't be evicted. My private property is now the property of the state, yet i have to keep making mortgage payments. I was lucky, mine paid- but when it came time to leave, told me "they knew their rights" and squatted an extra couple months despite me already signing a lease with new ones. Had to take them to court too.

3rd tenant was luckily great, and after a year made me a private offer to buy it for 2.5x what I paid 10 years earlier. I jumped on it and I'll happily never be a landlord again. Despite having a full time management company, I want to emphasize it was never at any point passive. The property manager can only be an intermediary between you and the tenant but you're still hearing, stressing, and making decisions about every single service request. I dollar cost averaged the proceeds into the stock market over the last couple years and it's been the best decision I've ever made.

At no point in those 7 years of renting it did I cash flow, and that's despite a 2.5% mortgage and buying it at pretty much the bottom of the market. Every time I tried to cash flow- something went wrong. A/c broke, ceiling leaked, dryer vent leak, had to replace the washer/dryer to a ventless unit, condo fees going up every year. Final straw was a special 25k assessment to replace the roof, which luckily my buyer agreed to pay. These days with 6-7% rates and home values at all time highs, I imagine there's very few pockets of the country left where real estate investment can still be considered anything but a suicide mission. Couple that with the general public sentiment that every landlord is a greedy bastard/feudal lord who deserves to be guillotined along with all the billionaires and I would not personally recommend it to anybody.

I tell anyone- stocks don't rot, decay, leak, require any maintenance, take months to sell nor require a large fee to do so. Most importantly, stocks have never disturbed my peace like landlording did.

 

[emergentmd]

#5 is a building block and gives you options. I have had my bad tenants too and some days gave me regrets. Now that I have $$, I just pawn it off to my property managers to deal with. I do not seek to cash flow anymore and in asset accumulation.

To make my point a little more clear, I bought a STR for 500K about 7 yrs, put in probably 400K for renovations. Cash flow probably paid for the renovations and house prob worth 2.5M with no debt. I will never sell as it is our vacation home and lots of memories. This is my tax free piggy bank. When rates go down or I need the $$$, I will take out a 70% loan tax free.

This is what rich people do. They just borrow against their assets and pay no taxes.

RE is definitely not for everyone but just another piece in building wealth. It has worked out for me and I have used the equity to buy into other investments.

 

[dpmd]

Great advice here, and congrats!

I'm going to have to push back on #5 a bit though. I'm glad it's worked out for you is but I vowed I'll never be landlord again after my experience.

I bought my 2 bedroom condo when I started residency in 2013. Waterviews, private dock, quarter mile from the medical center, all the amenities anyone could want. First of all, the sellers who bought it in 2001 sold it to me at a 10% loss. Imagine making mortgage and HOA payments for nearly 15 years just to have negative equity. Folk think the RE market is a piggy bank that only appreciates over time- like any investment that's not always the case.

I began renting it in 2017. First lease? Professional tenant. Never paid, wouldn't leave. Had to essentially do cash for keys to get him out. 2nd tenant? Covid hits. Government decides the legal contract signed by two consenting adults is null and void. They tell all tenants they don't have to pay and can't be evicted. My private property is now the property of the state, yet i have to keep making mortgage payments. I was lucky, mine paid- but when it came time to leave, told me "they knew their rights" and squatted an extra couple months despite me already signing a lease with new ones. Had to take them to court too.

3rd tenant was luckily great, and after a year made me a private offer to buy it for 2.5x what I paid 10 years earlier. I jumped on it and I'll happily never be a landlord again. Despite having a full time management company, I want to emphasize it was never at any point passive. The property manager can only be an intermediary between you and the tenant but you're still hearing, stressing, and making decisions about every single service request. I dollar cost averaged the proceeds into the stock market over the last couple years and it's been the best decision I've ever made.

At no point in those 7 years of renting it did I cash flow, and that's despite a 2.5% mortgage and buying it at pretty much the bottom of the market. Every time I tried to cash flow- something went wrong. A/c broke, ceiling leaked, dryer vent leak, had to replace the washer/dryer to a ventless unit, condo fees going up every year. Final straw was a special 25k assessment to replace the roof, which luckily my buyer agreed to pay. These days with 6-7% rates and home values at all time highs, I imagine there's very few pockets of the country left where real estate investment can still be considered anything but a suicide mission. Couple that with the general public sentiment that every landlord is a greedy bastard/feudal lord who deserves to be guillotined along with all the billionaires and I would not personally recommend it to anybody.

I tell anyone- stocks don't rot, decay, leak, require any maintenance, take months to sell nor require a large fee to do so. Most importantly, stocks have never disturbed my peace like landlording did.

It is one of those things that if it goes well can go really well. Can also go really badly.

 

[eyeeye_captain]

Our practice owns real estate, and frankly the biggest benefit is not having to move and build out new clinics. It’s been a minimally profitable headache, including tax benefits, despite having spots that should be appreciating and be a big resale boon in theory.

While I admit I’m not super savvy in that particular market, I also *really* don’t like having my assets non-liquid and possibly difficult to move.

 

[Nocturnist]

#5 is a building block and gives you options. I have had my bad tenants too and some days gave me regrets. Now that I have $$, I just pawn it off to my property managers to deal with. I do not seek to cash flow anymore and in asset accumulation.

To make my point a little more clear, I bought a STR for 500K about 7 yrs, put in probably 400K for renovations. Cash flow probably paid for the renovations and house prob worth 2.5M with no debt. I will never sell as it is our vacation home and lots of memories. This is my tax free piggy bank. When rates go down or I need the $$$, I will take out a 70% loan tax free.

This is what rich people do. They just borrow against their assets and pay no taxes.

RE is definitely not for everyone but just another piece in building wealth. It has worked out for me and I have used the equity to buy into other investments.

If you cash flowed 400k in 7 years on a 500k property- hat's off to you. That's an insane, very atypical ROI.

We also have a vacation home; we thought about doing a 9 month off season rental but the risk of tenants squatting through the summer was too high. To add insult to injury, the rent wouldnt cover the mortgage. Thought about short term rentals but I dont want hundreds of people sleeping on my bed. So we just make memories there and let it appreciate, but I dont really think about it as a piggy bank.

I think you do have to be honest with folks though, anyone who bought real estate pre-pandemic is in a vastly different boat than anybody looking to invest now. Like you mentioned, the house would be 2.5M now- would it cash flow if you bought it today at 6% interest? I dont think you can just blanket statement say real estate in 2026 is a building block of wealth without recognizing the facts on the ground. It can also be a huge headache and a financial downfall.

You mentioned you plan to take out a 70% loan someday- have you borrowed against a property before? I believe you're referring to a HELOC, unless there's some other financial product you're thinking about? I actually had a heloc on my condo which I cashed in full at some point. It's a variable rate loan that must be repaid monthly and immediately. Yes its 'tax free' in the sense you don't pay income taxes on it, but you also don't have to pay back your income monthly like you do with a loan. So I actually don't understand what these "buy, borrow, die" folks are blabbing about with "it's tax free money". No, it's a loan, and unlike a mortgage the interest can and will change on you frequently and unpredictably. I guess if you use this loan to buy another cash flowing property then it may make sense, but then you're double leveraged and risk losing all your properties to the bank.

Btw you can borrow against any asset the same as real estate and much more easily. A heloc took weeks to get approved including property evaluations and a financial biopsy same as the mortgage. I could call up my investment bank and have a line of credit against my stocks today. Again there's not much that is easier or more convenient about real estate as an asset, even borrowing against it.

 

[emergentmd]

I think you do have to be honest with folks though, anyone who bought real estate pre-pandemic is in a vastly different boat than anybody looking to invest now. Like you mentioned, the house would be 2.5M now- would it cash flow if you bought it today at 6% interest? I dont think you can just blanket statement say real estate in 2026 is a building block of wealth without recognizing the facts on the ground. It can also be a huge headache and a financial downfall.

You mentioned you plan to take out a 70% loan someday- have you borrowed against a property before? I believe you're referring to a HELOC, unless there's some other financial product you're thinking about? I actually had a heloc on my condo which I cashed in full at some point. It's a variable rate loan that must be repaid monthly and immediately. Yes its 'tax free' in the sense you don't pay income taxes on it, but you also don't have to pay back your income monthly like you do with a loan. So I actually don't understand what these "buy, borrow, die" folks are blabbing about with "it's tax free money". No, it's a loan, and unlike a mortgage the interest can and will change on you frequently and unpredictably. I guess if you use this loan to buy another cash flowing property then it may make sense, but then you're double leveraged and risk losing all your properties to the bank.

Btw you can borrow against any asset the same as real estate and much more easily. A heloc took weeks to get approved including property evaluations and a financial biopsy same as the mortgage. I could call up my investment bank and have a line of credit against my stocks today. Again there's not much that is easier or more convenient about real estate as an asset, even borrowing against it.

I think RE like any other investment has risks and there is no denying it. Obviously if we can look back 5-10 yrs, buying property was a no brainer. No different than buying NVDA 10 yrs ago would have been a no brainer. There are always risks in any investment, you just have to weigh if it is right for you. Nothing is magical including RE. I am still loading up on NVDA and I will load up on RE if I see a good deal. I won't cash flow but if I can buy RE at a 30% discount in a 6-7% interest environment, I know It will appreciate 30% when rate drops below 5%.

To you point in the past yr, I bought 2 homes in the 1M range at a 6-7% rate. It does not cash flow. i lose money every month. But I know the area, and I know the homes will be back up over 1.3M when rates start to drop. It is a calculated risk but I have done this before. I put 300K to close and spending about 20K/yr in carrying costs. In 2-3 yrs, if rates drop below 5%, buyers will come back and home will be worth 1.3M. I will refinance my current 600K loan into a 900K loan then pocket my original 300K closing costs. I now have 400K in equity. IMO, if you are able, it is a good time to buy RE at the current 30% discount from 3 yrs ago.

My point with RE is if you have a good amount equity, you can always do a cash out Refi without paying taxes on the $$$. If I really needed to, I could do a cash out refi and pull well over $1M out of my vacation home in about 45 dys. Yeah, I now have a loan on it but it is good debt IMO.

 

[Nocturnist]

I think RE like any other investment has risks and there is no denying it. Obviously if we can look back 5-10 yrs, buying property was a no brainer. No different than buying NVDA 10 yrs ago would have been a no brainer. There are always risks in any investment, you just have to weigh if it is right for you. Nothing is magical including RE. I am still loading up on NVDA and I will load up on RE if I see a good deal. I won't cash flow but if I can buy RE at a 30% discount in a 6-7% interest environment, I know It will appreciate 30% when rate drops below 5%.

To you point in the past yr, I bought 2 homes in the 1M range at a 6-7% rate. It does not cash flow. i lose money every month. But I know the area, and I know the homes will be back up over 1.3M when rates start to drop. It is a calculated risk but I have done this before. I put 300K to close and spending about 20K/yr in carrying costs. In 2-3 yrs, if rates drop below 5%, buyers will come back and home will be worth 1.3M. I will refinance my current 600K loan into a 900K loan then pocket my original 300K closing costs. I now have 400K in equity. IMO, if you are able, it is a good time to buy RE at the current 30% discount from 3 yrs ago.

My point with RE is if you have a good amount equity, you can always do a cash out Refi without paying taxes on the $$$. If I really needed to, I could do a cash out refi and pull well over $1M out of my vacation home in about 45 dys. Yeah, I now have a loan on it but it is good debt IMO.

A cash out refi isn't tax free income.
You're just replacing a smaller loan with a bigger loan. Instead of buying a bigger house, you get a fat check, but you still gotta pay it back.
You can pull that 1M out of your vacation home, but you'll be paying the bank back an extra 6k a month for the next 30 years at 6%. Where is that money coming from? And if you're "stuck" with a sub 3% interest loan like many of us, refinancing (or moving) is likely never an option.

Not sure where you are geographically but here in the northeast homes don't go down. Not even during the great recession. Certainly not 30%. There's usually some seasonality, homes are 2-3% cheaper in the winter before the spring resets the whole market to a new higher baseline. Average appreciation has been 4-5% yearly consistently since I was an embryo.

30% drop in 3 years isn't a sane real estate market. If I wanted that kind of volatility I'd just buy some crypto, at least it won't fly away in a hurricane and I can liquidate it in minutes. Again i dont know where you live but generally homes in the US are sitting at all time highs. The last time homes were at a 30% discount, strippers were qualifying for zero down loans without proof of income and even that discount was only apparent through a 10-15 year hind sight.
Anybody telling you their real estate is definitely appreciating 30% in the next few years is a bs artist.

 

[emergentmd]

I understand what a refi/loan entails. I never said it was free money but it is tax free. If you go to work and make $1M, you will pay taxes. If you take out a $1M from a refi, it is not a taxable event. When rates drop below 5%, it gets close to free money as rent gets close to paying the carrying costs.

Not wanting to make this too complicated; if I had 2M tomorrow, history tells me I could beat 5% debt with simple investing. I have conviction in Tsla and would be happy to sell $2M worth of Tsla Covered calls exp 1 yr out with strike at current 450 price earning about 23% or $450K. $450K would pay for about 4 yrs of the loan note even discounting rent/deductions.

 

[Monocles]

2. If you have kids, don't forget the 38K gift exemption if you have a spouse. I put 38K/yr in each of my kids taxable brokerage accounts starting around 15, I wish I did this when they were 1. When they hit 25 yrs, their accounts should be pushing close to $1M, when they hit 35 should be $3+M. See above with estate planning. If you are going to give them an inheritance anyhow, do it when they need the $$$ and helps with estate planning.

Great post!

So I have a specific question re #2 above. This is super relevant as we have an under 1 y/o. Part of my big overarching financial goals is to make sure that our kid will NEVER have to work in medicine and can choose other creative endeavours (art, etc) if they wish to.

With conservative estimates of 7% we will have about $6M liquid when our kid is 18. A part of me is worried about going the UTMA/UGMA route is letting an 18 y/o have unrestricted access to millions of dollars. Of course we will do our utmost in parenting and financial literacy, but I wonder how you would weigh the tax benefits of gifting $38k yearly starting in infancy vs gradual release of funds in adulthood once our kid shows "good" financial judgement (ex: $100k every year until age 25, then $250k every year etc)

 

[emergentmd]

Great post!

So I have a specific question re #2 above. This is super relevant as we have an under 1 y/o. Part of my big overarching financial goals is to make sure that our kid will NEVER have to work in medicine and can choose other creative endeavours (art, etc) if they wish to.

With conservative estimates of 7% we will have about $6M liquid when our kid is 18. A part of me is worried about going the UTMA/UGMA route is letting an 18 y/o have unrestricted access to millions of dollars. Of course we will do our utmost in parenting and financial literacy, but I wonder how you would weigh the tax benefits of gifting $38k yearly starting in infancy vs gradual release of funds in adulthood once our kid shows "good" financial judgement (ex: $100k every year until age 25, then $250k every year etc)

This is my understanding and could may not be completely correct.

UTMA (UGMA old) is an investment account you set up for your kid and can fund. No limit on funding but gift exemption applies. They can invest in almost anything. When they get to majority (18 or 21 depending on state), they own it.

What I am doing is essentially the same. I set up custodial accounts at a brokerage and fund to the gift limit. When they become 18-21 then they will own the account.

In reality, it sounds the same to me without much difference if you are setting up a brokerage account like I am. A UTMA account sounds almost exactly like a custodial account to me.

 

[Monocles]

This is my understanding and could may not be completely correct.

UTMA (UGMA old) is an investment account you set up for your kid and can fund. No limit on funding but gift exemption applies. They can invest in almost anything. When they get to majority (18 or 21 depending on state), they own it.

What I am doing is essentially the same. I set up custodial accounts at a brokerage and fund to the gift limit. When they become 18-21 then they will own the account.

In reality, it sounds the same to me without much difference if you are setting up a brokerage account like I am. A UTMA account sounds almost exactly like a custodial account to me.

I guess the practical hair splitting difference is having the funds under your name vs the kid's name.

So scenario 1) a UTMA the kid gets the entirety of the millions upon age 18 but you take advantage of the taxes under the gift limit
vs
scenario 2) you slowly "drip" the money from your brokerage account to the kid over the course of their adult lifetime but this may not be as tax beneficial

 

[emergentmd]

I think it is essentially the same. I don't drip from my brokerage. I set up a custodial at schwab and link it to my bank account. I do a transfer of 38K to the gift limit and the money is in the custodial.

Tax treatment seems the same with both and age of Majority likely the same per state. The more I read up on it, it appears essentially the same.

 

[dpmd]

I think it is essentially the same. I don't drip from my brokerage. I set up a custodial at schwab and link it to my bank account. I do a transfer of 38K to the gift limit and the money is in the custodial.

Tax treatment seems the same with both and age of Majority likely the same per state. The more I read up on it, it appears essentially the same.

They are referring to what happens when they turn 18 (or 21) and immediately have access to all this cash. Versus if you didnt gift them money until after they turn 18 and do only a small amount at a tine so they can't potentially blow the whole amount on stupid stuff like hookers and blow.

 

[eyeeye_captain]

blow the whole amount on stupid stuff like hookers and blow.

Dunno, I’m failing to see the problem with this strategy

 

[emergentmd]

They are referring to what happens when they turn 18 (or 21) and immediately have access to all this cash. Versus if you didnt gift them money until after they turn 18 and do only a small amount at a tine so they can't potentially blow the whole amount on stupid stuff like hookers and blow.

I can not predict the future. I have limited control over our kids when they hit 18-21. I have a great influence when they are still in the household and raise them to be responsible adults.

From my POV, I rather my kids blow the money than give it to them when they are 60 then have their spouse/kids blow it.

Another reason why I am semi retired and spend like a drunken sailor. My kids are well taken care of and their inheritance set. It is my time to enjoy my next 20 yrs when I am still healthy.

 

[dpmd]

I can not predict the future. I have limited control over our kids when they hit 18-21. I have a great influence when they are still in the household and raise them to be responsible adults.

From my POV, I rather my kids blow the money than give it to them when they are 60 then have their spouse/kids blow it.

Another reason why I am semi retired and spend like a drunken sailor. My kids are well taken care of and their inheritance set. It is my time to enjoy my next 20 yrs when I am still healthy.

Fair enough. I know i would have been responsible enough if I had a huge account balance when I turned 18. Not that I wouldn't have done some unwise things with some of it, just that I wouldn't have blown through it.

 

[RangerBob]

Early 50's here, and I think all docs should have a mandatory finance class before they get out of med school. I am essentially self taught and still learning. Made many mistakes early on in my attending career and time is one thing you can not get back. Time can be more important than how much you earn.

Currently in the 1% NW in the US and likely will be in the 0.1% before 60. A few things to think about when you are a high earner, and high NW.

1. Plan early, look into estate planning, trusts - Protect your legacy, protect your kids from whoever they marry, protect your estate from the IRS. Once you hit $5M NW, 10-20K to create an estate plan will be the best money spent.
2. If you have kids, don't forget the 38K gift exemption if you have a spouse. I put 38K/yr in each of my kids taxable brokerage accounts starting around 15, I wish I did this when they were 1. When they hit 25 yrs, their accounts should be pushing close to $1M, when they hit 35 should be $3+M. See above with estate planning. If you are going to give them an inheritance anyhow, do it when they need the $$$ and helps with estate planning.
3. If you have a business that creates an income, start an LLC/S Corp. There are many ways to reduce your taxes. Employ your kids. Kids do not have to pay/file taxes on the 1st 15K income. We have 3 kids and thus 45K off our income. They can fund a Roth too. Employ your spouse. You and you spouse can each do $23.5K IRAs, 7.5K catch up IRA, and 21K PSP. So can defer taxes on a total of 104K of income. Create a Cash Balance Plan for both and defer up to another 400K+ depending on your age. My wife & I defer 500K+ yearly into our retirement.
4. Find a competent and aggressive CPA. Too many deductions to count but see #3. Your family are employees of your company. Family dinners/trips = Business dinners/Trips. August rule. I write off 300K+/yr in business expenses. If large corps can have business events in Hawaii and Vegas, then why not you?
5. If you have some interest/time, invest in Real estate. You don't have to manage it, get a property manager. Let the property appreciate, and this can be your tax free piggy bank in the future. Build equity, and live off the tax free refi.

Good advice re passing on money to kids early, when they can use it.

One does need to be cautious with employing family. You do need to pay them a reasonable wage based on what they're doing (you can't pay your kids $100/hr to file papers) and their work/hours to be documented.

Calling family dinners/trips business dinners/trips is really pushing it. Especially the trips. That is an audit waiting to happen, unless you can clearly show the primary purpose of these dinners/trips are for serving/advancing your business.

 

[dpmd]

Good advice re passing on money to kids early, when they can use it.

One does need to be cautious with employing family. You do need to pay them a reasonable wage based on what they're doing (you can't pay your kids $100/hr to file papers) and their work/hours to be documented.

Calling family dinners/trips business dinners/trips is really pushing it. Especially the trips. That is an audit waiting to happen, unless you can clearly show the primary purpose of these dinners/trips are for serving/advancing your business.

I guess it depends on how high audit risk the rest of his taxes are. I am pretty sure that it wouldn't survive and audit, but I dont know that it would trigger an audit.

 

[RangerBob]

I guess it depends on how high audit risk the rest of his taxes are. I am pretty sure that it wouldn't survive and audit, but I dont know that it would trigger an audit.

Correct. I used bad phrasing. I agree--it's not likely to trigger an audit itself.

 

[emergentmd]

Yes, agreed. Well documented. CPA agrees it is legit as we have meetings/agendas documented. But given how much my company pays in taxes relative to deductions, I am about as low as you can get on the totem pole.

 

[Mman]

-Saving becomes virtually meaningless at this point. For example, my 2.5M invested will grow to 16.8M @10% in 20 years if I dont save another penny. On the other hand it'll only grow to 19.2M if I put the 40k a year in retirement every year til then.

the relative value of on going savings depends on the return rate in the assumptions. You assume 10%. Seems a bit on the high side. I mean not impossible, but probably not likely, especially if we are talking about real (net of inflation) returns. I would assume you would not maintain a 100% equity exposure for the next 20 years, so something like 3-5% real return is probably the most likely outcome. If you got back that rate of return and saved an additional 40K per year (adjusted up each year for inflation), it would make a far bigger difference in the final value.

 

[Nocturnist]

the relative value of on going savings depends on the return rate in the assumptions. You assume 10%. Seems a bit on the high side. I mean not impossible, but probably not likely, especially if we are talking about real (net of inflation) returns. I would assume you would not maintain a 100% equity exposure for the next 20 years, so something like 3-5% real return is probably the most likely outcome. If you got back that rate of return and saved an additional 40K per year (adjusted up each year for inflation), it would make a far bigger difference in the final value.

My 403 has returned 11% averaged over the last 5 years, my 457 returned 13%, and my taxable returned 15%.

The s&p returned 9-11% over the last 70 years, so yes i generally use 10% return for simplicity as a general assumption. I plan to stay relatively close to 100% stocks for the next 10-20 years.

At 8% return, I'll be at 11.6M without further savings, or 13M with 40k a year. Even if we take it down to 5%- it'll be 6.6M without and only 8M with savings.

It's not that I don't think inflation is real, just that inflation adjustment is frankly, for poorer people who are trying to thread the needle with their retirement savings. For example if I thought I needed exactly 3.8M to retire today but instead it'll be the equivalent of 5.6M in 20 years (totally made up numbers). In the most pessimistic scenario I'll have over around 10M plus paid off homes vs more optimistic scenarios put me at 25M+. The impact of inflation won't be whether I get to eat or buy my medicine that month, rather mostly about how many millions I'll leave to my grandkids. So, who cares?

Either way you look at it, the point is that the returns on my investments far exceed my capacity to save and so saving becomes more negligible each year. Saving is no longer the driving force growing my wealth.

 

[Mman]

My 403 has returned 11% averaged over the last 5 years, my 457 returned 13%, and my taxable returned 15%.

The s&p returned 9-11% over the last 70 years, so yes i generally use 10% return for simplicity as a general assumption. I plan to stay relatively close to 100% stocks for the next 10-20 years.

The S&P has return 14.8% over the last 5 years, but that's nominal returns, not inflation adjusted. It has returned 9.9% adjsuted for inflation over the last 5 years.

Over the last 70 years, the S&P has returned 10.5% per year. But again that isn't adjusting for inflation, after inflation it has only returned 6.7% per year.

The point isn't that inflation is for poor people trying to thread the needle, it is a drag that reduces your stock returns by nearly 1/3 per year. You can't just say I expect stocks to return 10% a year and just pretend inflation doesn't exist. And that's historic inflation rates, future inflation is being priced higher than that so it may eat into it even more than it has averaged the last 70 years. Inflation really matters when you start looking at the value of accounts 20 years out. Not adjusting for inflation means your account will only have half the value you think it will.

I'm not trying to argue you should pick up a 2nd job and work full time until you are 90, I'm just pointing out that if you want to draw out the math it is misleading to do it the way you did. I've been fighting this fight here for probably 20 years as an educational point for other people reading. Nominal rates of return are fun to see, but completely irrelevant in terms of purchasing power (which is the only thing anyone cares about in regards to the value of their money). Gotta think about inflation. $1M in 1980 was worth a lot more than it is today.

Or to put it another way, 4% inflation for 20 years means your nominal dollar value you expect to have at that point is only worth 45% of what it would be today. So you functionally have less than half as much as you expected to.

 

[Nocturnist]

The S&P has return 14.8% over the last 5 years, but that's nominal returns, not inflation adjusted. It has returned 9.9% adjsuted for inflation over the last 5 years.

Over the last 70 years, the S&P has returned 10.5% per year. But again that isn't adjusting for inflation, after inflation it has only returned 6.7% per year.

The point isn't that inflation is for poor people trying to thread the needle, it is a drag that reduces your stock returns by nearly 1/3 per year. You can't just say I expect stocks to return 10% a year and just pretend inflation doesn't exist. And that's historic inflation rates, future inflation is being priced higher than that so it may eat into it even more than it has averaged the last 70 years. Inflation really matters when you start looking at the value of accounts 20 years out. Not adjusting for inflation means your account will only have half the value you think it will.

I'm not trying to argue you should pick up a 2nd job and work full time until you are 90, I'm just pointing out that if you want to draw out the math it is misleading to do it the way you did. I've been fighting this fight here for probably 20 years as an educational point for other people reading. Nominal rates of return are fun to see, but completely irrelevant in terms of purchasing power (which is the only thing anyone cares about in regards to the value of their money). Gotta think about inflation. $1M in 1980 was worth a lot more than it is today.

Or to put it another way, 4% inflation for 20 years means your nominal dollar value you expect to have at that point is only worth 45% of what it would be today. So you functionally have less than half as much as you expected to.

No argument on inflation existing.
No argument about it eating away at our purchasing power.

But we all use nominal projections for the same reason we use our gross income- it implicitly assumes that number doesn't reflect our spending power; just like everyone assumes when I say I made 475k that I didn't take home 475k- but it simplifies and equalizes the conversation across the board.

We all experience taxation differently, just like we all experience inflation differently. Inflation is a really broad measure composed of dozens of categories that vary significantly depending on who you're asking and whose numbers you're using. Are we talking CPI, PPI, CPE, GDP deflator? CPI-U or CPI-W? Median or trimmed mean? Housing is 40% of CPI and transportation is another 20%- Does inflation of 4% hit someone with multiple paid off homes, cars, and 10M invested same as it does someone living paycheck to paycheck, paying rent, and has 5 years left on their car loan?

For those reasons it's just simpler to say "at 10% I'll have 20M in 20 years" and let us all implicitly know it'll mean we'll have less purchasing power then. How much less? Depends on your very personal situation.

Now, I believe we started this exchange with the premise of whether or not savings are still relevant to my wealth anymore. At 6.7% growth real return, I'll have an inflation adjusted 9.15M in 20 years if I dont save vs 10.7M if I continue maxing my retirement account. Except it won't be 9 vs 10M, it'll be 17 vs 19M which will have the purchasing power of around 10M- got it). Can we agree that 9.1 vs 10.7M is irrelevant? We're talking about having 366k vs 428k a year adjusted for inflation. Despite 20 whole years of max savings, we're not talking double, or triple- we're only talking about a 17% difference. Either way, it's more than i could ever spend. So whether the millions i leave my grandkids only buys them a mansion or a happy meal in 100 years, let them eat cake I suppose...

 

[Mman]

Can we agree that 9.1 vs 10.7M is irrelevant? We're talking about having 366k vs 428k a year adjusted for inflation.

to me that is a significant difference and would change how long I worked for by several years

 

[Nocturnist]

to me that is a significant difference and would change how long I worked for by several years

Sigh, I feel like we're just arguing for the sake of arguing at this point? It's my fault, I shouldn't have asked such a subjective question.

Lets make it a little more objective:

If I had a million invested, maxing retirement for 20 years would amount to an extra 50%.
If I had 500k, saving would double it. That to me starts to get significant, but different folks different strokes.

Objectively- the more you have invested, the more negligible further savings become. Exactly at what point you'd consider it to be negligible, only you and God know. Luckily it wouldn't take you "several years" to make up the difference- just a year and change of coasting to make up for 2 decades of lost savings.

 

[Mman]

Sigh, I feel like we're just arguing for the sake of arguing at this point? It's my fault, I shouldn't have asked such a subjective question.

Lets make it a little more objective:

If I had a million invested, maxing retirement for 20 years would amount to an extra 50%.
If I had 500k, saving would double it. That to me starts to get significant, but different folks different strokes.

Objectively- the more you have invested, the more negligible further savings become. Exactly at what point you'd consider it to be negligible, only you and God know. Luckily it wouldn't take you "several years" to make up the difference- just a year and change of coasting to make up for 2 decades of lost savings.

I'm not trying to argue. I agree that the larger your investment size, the less relative importance there is to on going savings. It's the earliest savings rate in your career that makes the biggest difference decades later.

 

[Splenda88]

to me that is a significant difference and would change how long I worked for by several years

Are you being tongue-in-cheek?

 

[Monocles]

For those of you in the "boring middle" of your FIRE journey, how do you stay motivated for the clinical stuff? I'm at the point where a 1% change in the market far outpaces my monthly medicine salary (although I am academic, part time) and then I see my clinic schedule and Im just "ughhhhh". I wish I had a mug that says "I'm just here to mitigate sequence of returns risk".

Can anyone relate?

 

[Mman]

Are you being tongue-in-cheek?

a difference of $1.6M in retirement assets isn't significant to you? I mean that's probably 5 years of withdrawals for me.

And I just realized I already discussed real returns vs nominal returns in this same thread 4 years ago on page 1. I guess it's a drum I like to beat.

 

[Splenda88]

a difference of $1.6M in retirement assets isn't significant to you? I mean that's probably 5 years of withdrawals for me.

And I just realized I already discussed real returns vs nominal returns in this same thread 4 years ago on page 1. I guess it's a drum I like to beat.

Not if it is 10M vs. 11.6M. These numbers can provide identical lifestyle. You can live in a nice neighborhood, eat at nice restaurants, travel 1st class 3-4x per year and stay in 4/5 stars hotel, have a chef prep/cook your meals 2 times a week. I am assuming you have no mortgage/car payments. (withdrawal rate 4.7%)

 

[Splenda88]

Has anyone here stayed in this hotel in Chicago? Good or bad for the price.

Luxury 5-Star Hotel in Chicago | The Langham, Chicago

Enjoy the best of the Windy City at our luxury hotel, boasting gorgeous views of the Chicago River and cityscape.

www.langhamhotels.com

 

[Mman]

Not if it is 10M vs. 11.6M. These numbers can provide identical lifestyle. You can live in a nice neighborhood, eat at nice restaurants, travel 1st class 3-4x per year and stay in 4/5 stars hotel, have a chef prep/cook your meals 2 times a week. I am assuming you have no mortgage/car payments. (withdrawal rate 4.7%)

the reason it is significant is because I would have retired sooner. If people want to work longer and build up an extra $1-3M in their accounts before they retire, that's fine and dandy, but it's still significant.

 

[Splenda88]

the reason it is significant is because I would have retired sooner. If people want to work longer and build up an extra $1-3M in their accounts before they retire, that's fine and dandy, but it's still significant.

Ok if you look at it that way. In any case, you guys in EM are in a position of privilege. You can grind for 10 yrs to save aggressively, then work 5-6 shifts per month while still making ~200k/yr.

 

[eyeeye_captain]

Has anyone here stayed in this hotel in Chicago? Good or bad for the price.

From my times in Chicago, it’s in a cool spot. Probably overpriced. Last time I was in that area I did the London House which was very nice and historic but way more affordable. Just know the river area is loud as all get out overnight if you’re not a city dweller.

If you’re staying in that vicinity, absolutely get a cheezeborger at the original Billy Goat Tavern. It was on SNL for a reason. Cash only. Darn good burgers, history, and ambiance buried sorta underground. Don’t do less than a double. One of the best local recommendations I’ve ever gotten.

 

[Mman]

Ok if you look at it that way. In any case, you guys in EM are in a position of privilege. You can grind for 10 yrs to save aggressively, then work 5-6 shifts per month while still making ~200k/yr.

i'm an anesthesiologist, while I could grind locums if I wanted to work part time, my day job is full time. I won't complain about my compensation in any way.

 

[mmmcdowe]

Has anyone here stayed in this hotel in Chicago? Good or bad for the price.

Luxury 5-Star Hotel in Chicago | The Langham, Chicago

Enjoy the best of the Windy City at our luxury hotel, boasting gorgeous views of the Chicago River and cityscape.

www.langhamhotels.com

Have not. Alternatives I can vouch for would be university club, union league club, and trump hotel (politics aside).

 

[abolt18]

Finally got around to looking at all the numbers from last year and updating my spreadsheets.

My gross income increased 9.8% despite taking 3.5 more weeks of vacation.
My savings was 34.01% of gross earnings (down from 34.08%!). 36.11% if you include employer match which started this year.
My spending was 34.21% of gross earnings (up from 33.57%). This includes the mortgage.

Net worth increased from $494K end of '24 to $956K.

I'm excited by the crazy growth. I'm pleased that our savings/spending stayed the same percentage-wise unintentionally (though I felt like we completely let loose and just bought whatever we wanted whenever we wanted). I'm satisfied with the rapid rise early in my career, but already backing off to take more vacation in 2026. I don't need to make/save/spend that much every year. I'm more than happy to get more of my life back and the only way to really do that at my work is to take more vacation and give up weekend calls (I give up one of the weekend days each month consistently now). Last year I focused a lot more on my health, got in shape, lost >35 lbs, optimizing lab values and whatnot. This year will be focused on my mental health (aka much more time in the mountains doing things I love).

 

[DisorderedDoc417]

I just did my tentative attending budget plan and I realized that I will only be able save/invest 80-85k/yr (on a 330k/yr salary)? Is that even good considering I plan to be FI in 10-12 yrs.

I might have to pick up some extra shifts because the goal was to save/invest 100k+/yr.

How much you guys/gals save/invest every year?

Plan for 2026 is 401k: 24.5k (tax deferred), 457b: 24.5k (tax deferred), roth + spouse roth backdoors: 15k, HSA: 8.75k, Ater-tax Brokerage: 12k, Employer contributions to 401k - 16k-ish , try to keep this total around 100k. I make more but have been working towards finishing off student loan debt (finished hopefully this March). The step up in cash flow will go to HYSA for more fun with family and kids and likely more to the after tax brokerage. You're doing a great job, keep it up!

 

[Monocles]

Net worth increased from $494K end of '24 to $956K.

That's quite amazing! High earner or good investment returns? (or both?)

We had a similar year back in '23 (NW went from like 452k->841K) but mostly due to getting extremely lucky on owning a house in a desirable area and having like a +20% increase in our official home evaluation

 

[abolt18]

That's quite amazing! High earner or good investment returns? (or both?)

We had a similar year back in '23 (NW went from like 452k->841K) but mostly due to getting extremely lucky on owning a house in a desirable area and having like a +20% increase in our official home evaluation

Definitely both. Saved $300K including employer match. Great returns in retirement and brokerage accounts, and then just held onto a little more cash compared to the year before.

 

[clubdeac]

Early 50's here, and I think all docs should have a mandatory finance class before they get out of med school. I am essentially self taught and still learning. Made many mistakes early on in my attending career and time is one thing you can not get back. Time can be more important than how much you earn.

Currently in the 1% NW in the US and likely will be in the 0.1% before 60. A few things to think about when you are a high earner, and high NW.

1. Plan early, look into estate planning, trusts - Protect your legacy, protect your kids from whoever they marry, protect your estate from the IRS. Once you hit $5M NW, 10-20K to create an estate plan will be the best money spent.
2. If you have kids, don't forget the 38K gift exemption if you have a spouse. I put 38K/yr in each of my kids taxable brokerage accounts starting around 15, I wish I did this when they were 1. When they hit 25 yrs, their accounts should be pushing close to $1M, when they hit 35 should be $3+M. See above with estate planning. If you are going to give them an inheritance anyhow, do it when they need the $$$ and helps with estate planning.
3. If you have a business that creates an income, start an LLC/S Corp. There are many ways to reduce your taxes. Employ your kids. Kids do not have to pay/file taxes on the 1st 15K income. We have 3 kids and thus 45K off our income. They can fund a Roth too. Employ your spouse. You and you spouse can each do $23.5K IRAs, 7.5K catch up IRA, and 21K PSP. So can defer taxes on a total of 104K of income. Create a Cash Balance Plan for both and defer up to another 400K+ depending on your age. My wife & I defer 500K+ yearly into our retirement.
4. Find a competent and aggressive CPA. Too many deductions to count but see #3. Your family are employees of your company. Family dinners/trips = Business dinners/Trips. August rule. I write off 300K+/yr in business expenses. If large corps can have business events in Hawaii and Vegas, then why not you?
5. If you have some interest/time, invest in Real estate. You don't have to manage it, get a property manager. Let the property appreciate, and this can be your tax free piggy bank in the future. Build equity, and live off the tax free refi.

Tell me more about this 38k gift exemption. Can you use this for your grown children as a way to draw down your savings and essentially pass inheritance on to your children tax free before death?

 

[emergentmd]

Tell me more about this 38k gift exemption. Can you use this for your grown children as a way to draw down your savings and essentially pass inheritance on to your children tax free before death?

You can each give anyone 19k/yr. You can give each kids 19k, grandkids, brothers, sisters, friends.

It’s a good estate planning tool but once u give, u can’t take back

 

[Mman]

Tell me more about this 38k gift exemption. Can you use this for your grown children as a way to draw down your savings and essentially pass inheritance on to your children tax free before death?

You can do whatever you want with the $19K per person ($38K per couple) annual gift exemption. The estate tax exemption in 2026 is $15M so you would need a pretty large inheritance to a grown child before they would be paying taxes on it anyway. It has also been rising by several hundred thousand dollars per year (4 years ago it was $12M) so it seems like $38K per year is essentially irrelevant from a tax point of view for your heirs.

 

[clubdeac]

You can do whatever you want with the $19K per person ($38K per couple) annual gift exemption. The estate tax exemption in 2026 is $15M so you would need a pretty large inheritance to a grown child before they would be paying taxes on it anyway. It has also been rising by several hundred thousand dollars per year (4 years ago it was $12M) so it seems like $38K per year is essentially irrelevant from a tax point of view for your heirs.

I believe my state has an inheritance tax so it stop may begone me to try and dump some of I can. But thank you for the info

 

[emergentmd]

You can do whatever you want with the $19K per person ($38K per couple) annual gift exemption. The estate tax exemption in 2026 is $15M so you would need a pretty large inheritance to a grown child before they would be paying taxes on it anyway. It has also been rising by several hundred thousand dollars per year (4 years ago it was $12M) so it seems like $38K per year is essentially irrelevant from a tax point of view for your heirs.

You are under the assumption that a dem/socialist president+congress will not roll back this to 10 or 5M. Better to plan now than look down a barrel of a gun without options.

38K per child is not a drop in the bucket. We have 3 kids and doing 114K per kid every year. We are early 50's in 30 years if we both live to life expectancy at 10% is 21M. If the estate tax does not change, that is likely 21M that would be taxed at the current 40% is a large amount.

Time is your friend, plan early. Every little bit helps.

My plan is not only the gift exemption but also put $10M into a irrevocable trust very soon. 30 yrs, 10%, no further contributions is $175M.

Add both together and that is a $200M estate that will only count $10M towards my current $30M estate allowance.

Don't forget some states have the estate tax too. Here is AI for a Washington state person who died with $100M. You are essentially taking $60M from your heirs.

With a $100 million estate in Washington state (as of 2025/2026), you will pay a significant amount in combined taxes. Estimated taxes include over $30 million+ in Washington state estate tax and over $30 million in federal estate tax, totaling over 60% of the estate

 

[Nocturnist]

You are under the assumption that a dem/socialist president+congress will not roll back this to 10 or 5M. Better to plan now than look down a barrel of a gun without options.

38K per child is not a drop in the bucket. We have 3 kids and doing 114K per kid every year. We are early 50's in 30 years if we both live to life expectancy at 10% is 21M. If the estate tax does not change, that is likely 21M that would be taxed at the current 40% is a large amount.

Time is your friend, plan early. Every little bit helps.

My plan is not only the gift exemption but also put $10M into a irrevocable trust very soon. 30 yrs, 10%, no further contributions is $175M.

Add both together and that is a $200M estate that will only count $10M towards my current $30M estate allowance.

Don't forget some states have the estate tax too. Here is AI for a Washington state person who died with $100M. You are essentially taking $60M from your heirs.

With a $100 million estate in Washington state (as of 2025/2026), you will pay a significant amount in combined taxes. Estimated taxes include over $30 million+ in Washington state estate tax and over $30 million in federal estate tax, totaling over 60% of the estate

Here's the 30 year evolution of the estate tax covering 4 full democratic presidential terms. It has never been rolled back a single penny.

I'd say that's a fair assumption.

 

[RangerBob]

You are under the assumption that a dem/socialist president+congress will not roll back this to 10 or 5M. Better to plan now than look down a barrel of a gun without options.

38K per child is not a drop in the bucket. We have 3 kids and doing 114K per kid every year. We are early 50's in 30 years if we both live to life expectancy at 10% is 21M. If the estate tax does not change, that is likely 21M that would be taxed at the current 40% is a large amount.

Time is your friend, plan early. Every little bit helps.

My plan is not only the gift exemption but also put $10M into a irrevocable trust very soon. 30 yrs, 10%, no further contributions is $175M.

Add both together and that is a $200M estate that will only count $10M towards my current $30M estate allowance.

Don't forget some states have the estate tax too. Here is AI for a Washington state person who died with $100M. You are essentially taking $60M from your heirs.

With a $100 million estate in Washington state (as of 2025/2026), you will pay a significant amount in combined taxes. Estimated taxes include over $30 million+ in Washington state estate tax and over $30 million in federal estate tax, totaling over 60% of the estate

Is this a troll post? Research seems to suggest one of the worst things we can do for our children is pass on enough wealth they don't need to do anything.

Learning how to good person whose heart isn't based on/ruled by wealth is one of the primary things we should focus on teaching them. It is very hard for most humans to learn that when they are given a large sum of money, much less one they haven't worked for or earned.

I can certainly see helping them with their education and perhaps a down payment for a home is reasonable--depending on the kid and their personality.

I want to give our kid everything. But even at my age I realize I can't give it to them or buy it for them, and after the basics, the more I give/buy them, the more I make it impossible for them to actually get it. Metaphorically speaking.

 

[Mman]

With a $100 million estate in Washington state (as of 2025/2026), you will pay a significant amount in combined taxes. Estimated taxes include over $30 million+ in Washington state estate tax and over $30 million in federal estate tax, totaling over 60% of the estate

I will assume you can count on one hand the number of physicians that have left a >$100M estate in Washington over the last decade, none of whom made that money from the clinical practice of medicine. Seems pointless to worry about on SDN.