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10 MILLION DOLLARS

Discussion in 'Anesthesiology' started by DrCommonSense, Dec 20, 2017.

  1. DrCommonSense

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    Is this the magic number needed to retire at any age from medicine and say F it all?

    What is everyone's magic number to get out?
     
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  3. pgg

    pgg Laugh at me, will they?
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    Required income in retirement is proportional to how many ex-wives, boats, airplanes, pre-college-graduate kids, and mortgage payments you need to support ... and inversely proportional to one's "fed up with this ****" quotient.


    If I played the lottery, which doesn't happen, and the Navy let me go, which wouldn't happen, it would probably take a post-tax haul of about $5 million for me to consider walking away tomorrow. My figures in the above line are zero, zero, zero, three, two, and "only occasionally a little bit fed up". In a few years when the numbers are zero, zero, zero, zero, zero, and probably "more fed up" the number would be less, and very much dependent exactly how much more fed up I am.

    Also ... you walk away from this job prematurely and change your mind about having enough ... maybe it's not so easy to walk back into the job.
     
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  4. HomeSkool

    HomeSkool Excelsior! ASA Member!
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    Zero, zero, zero, four, one, and only when I'm particularly cranky. We sat down with a financial planner and crunched the numbers. Assuming the market follows its long-term historical trends, my wife would need a payout of $3.5 million if I died today to pay off our outstanding debt (including our mortgage), educate the kids, and live out the remainder of her predicted natural life with the same lifestyle and no requirement that she work. So I'd need to wake up on the wrong side of the bed and find that much money in the ol' mayonnaise jar to walk away right now.
     
  5. IlDestriero

    IlDestriero Ether Man
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    I don’t see how one would need anywhere near that much unless they blow money at a really impressive rate, plan to continue to do so for decades, and/or want to leave a substantial estate to someone/something.
    My requirements are far lower, I have extreme longevity on both sides, and I’m not exactly thrifty.
    No ex wives is the key in this equation.


    --
    Il Destriero
     
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  6. dr doze

    dr doze To be able to forget means to sanity
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    -If you aren't old and you ain't working, you are probably spending. I know I do.
    -How much to budget for personal healthcare, including obtaining insurance?
    -How long you plan to live?
    -How much do you want to spend?
    -How much you want to leave to heirs?
    -How much risk that you want to take that financial markets won't do anything worse than they have in the last 100 years?
    -How much of a cushion you want, just in case?
    -How prudently you allocate your assets?
    -Political risk of confiscatory, redistributionist tax policy? A lot can happen over a few decades.
    -Natural disaster that wipes you out and being underinsured?
    -Increased unanticipated need or desire to support loved ones?

    There are plenty of black box financial calculators that will spew out lots of precise, but not necessarily accurate data.

    Short version, what you are looking at is what is known as a "sustainable withdrawal rate" Assuming that you have a reasonably prudent portfolio and financial markets don't throw us anything worse than the great depression, political risks don't show up, you are bullet proof with a 2% withdrawal rate, very probably safe at 3%, probably OK at 4%. Allows for inflating contributions.
    Anything more than that you are taking some risk of running out of money. Interestingly, assuming that the future is not that different from the past, there is not that much difference statistically in financial retirement risk of running out of money living 30 years vs living forever.
    1. 2% 10 million= $200K
    2. 3% 10 million= $300K
    3. 4% 10 million= $400K
    Roll the dice.
     
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  7. pgg

    pgg Laugh at me, will they?
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    It's argued that a reasonable sustained withdrawal rate is around 4%. More conservative people might say 3%.

    A $1 million retirement account with a SWR of $30-40K/year doesn't go very far, even if you don't have a mortgage to pay and kids to support, if you plan on doing much more than sit at home.

    $5 million is about $150-200K/year of pre-tax spending money. That's not an outlandish lifestyle for a retired physician.
     
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  8. HomeSkool

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    Particularly when you consider the effect of inflation and the market's propensity for volatility.
     
  9. DrCommonSense

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    Im thinking worst case scenario where the market goes to sh-t with very low returns going forward over the next 30 years coupled with a large inflation potential.

    Also the ex wife thing is VERY hard to prevent considering the divorce rate these days.

    Also, consider the level of risk when continuing to do anesthesia that can expose one to a large multi million dollar lawsuit quite easily. If one has 5 million in assets, with much of it outside of a 401K or special homestead protection, there is true risk to continue working.

    With a 1/3M insurance policy, lawyers will be quick to go after assets that has been accumulated in a malpractice. It could be a liability to continue practicing as well after having enough in assets.
     
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  10. GravelRider

    GravelRider SDN Lifetime Donor
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    $10 million? That seems really high. I view retirement as a phase and not an event.

    I have a fairly low number to cut call ($1.5-2 million)and another number to go part time. There are too many unknowns to put an exact number on it. We'll see how I feel when I get there. All I can do I maximize my savings and control my spending. Life is way too short to spend it sitting in an OR.
     
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  11. pgg

    pgg Laugh at me, will they?
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    A safe SWR incorporates both inflation and market volatility (the "sequence of returns" problem) in its claim of safety. Backtesting against history, picking the worst possible time to start retirement, even accounting for stock market crashes and periods of high inflation, it appears that - as dr doze noted in his post - 4% is safe, 3% is very safe, 2% is perfectly safe.

    The reality is that those numbers are probably even safer than that, because those figures assume constant, robotic withdrawal, come hell or high water. People aren't robots. If the market dips or some other horrible event comes to pass, you're not required to spend exactly 4%. Maybe you travel less for a couple years and take 2%.
     
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  12. DrCommonSense

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    If the withdrawal was done through blue chip dividend stocks or even an SP500 Vanguard fund (1.85% dividend yield: Vanguard - Product overview - S&P 500 ETF), you could withdraw that money at a FAR lower tax rate than conventional income tax.

    If had 10 million stashed in an SP500 fund, you could live off the dividends at 185,000/year that is taxed at a 15% rate. This yield would be equivalent to making about 300-350K per year income. Living off the dividends while allowing the principal to appreciate in the fund would be the ideal scenario.

    That is where I got the idea of the 10M figure.

    Even at 5M, that would produce about 100K/year in an SP500 fund with post tax of 85K/year (equivalent to 150-200K per year if earning an income) if you lived off the dividends whereby you let the principal appreciate.
     
  13. HomeSkool

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    I know. That's what I was getting at -- the 150-200K you cited are on the low end and should be pretty easily doable even with fluctuating market performance. I agree with both of you.
     
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  14. DrCommonSense

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    The problem with continuing to do anesthesia after accumulating higher levels of assets is the liability as well (especially with only a 1/3M malpractice insurance).

    Forensic accountants will help malpractice lawyers target you for higher malpractice lawsuits over your insurance limits if they think you have considerable assets to target.

    After a certain point, the NPV of the assets accumulated will be higher than the future revenues generated by continued anesthesia practice. Is it worth continued practice at that point considering the risk profile?
     
  15. MirrorTodd

    MirrorTodd It's a gas.
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    I mean...not to be too morbid or anything, but if you're truly gonna walk away from it...ex wives are easily taken care of. ;)
     
  16. Ezekiel2517

    Ezekiel2517 Anesthesiologist
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    You planning on living on Mars?
     
  17. dr doze

    dr doze To be able to forget means to sanity
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    Although not unheard of, actually losing personal assets due to malpractice is exceedingly rare. Assuming that you don't provide care while drunk or high or sexually assault your patients under anesthesia or do things that you absolutely have no business doing.
    You could always buy lots of extra insurance. It's what I do and exceedingly simple. Fancy asset protection strategies are out there, but probably a waste of money. Especially if you live in Texas.
     
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  18. rakotomazoto

    rakotomazoto ASA Member
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    My game plan is also to go part time some point in the distant future (once loans/mortgage is paid off, etc), rather than going from full time employment straight into complete retirement. Seems like in the right scenario, you could keep up your skills in case you later on decide you want/need to work more. I don't think I need 100% free time to have what I would consider to be a high-quality life.
     
  19. dr doze

    dr doze To be able to forget means to sanity
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    Dividend yield of the S&P 500 is not guaranteed, (like a Treasury Bond, chortle). That was the premise of the book "Dow 36,000" published in 1999. Essentially the author argued that dividends were rock solid as a treasury bond and that stock prices should be bid up to reflect this. How did that go?

    BTW, tomorrow there is a treasury auction reopening of the 5 year TIPs. Anticipated real yield around 0.5%. Woo hoo. Throwing a chunk of IRA money at it. Not great, but better than a TIPs note has been in several years. Pretty good place to put your safe money.
     
    #17 dr doze, Dec 20, 2017
    Last edited: Dec 20, 2017
  20. sevoflurane

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    There is no way I personally would retire on 2, 3 or even 5.
    8-10 isn't a bad number for the reasons you listed- I do like to splurge from time to time.
    I plan on seriously cutting back in the next 5 years (50-60%)... and then ride the part time train some time thereafter.
    I do like the social aspect of our jobs.
     
  21. DrCommonSense

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    How can you tell that? I am reading about 10-40 million dollar lawsuits almost weekly these days against physicians.

    This is the most recent one: Torture death of 8-year-old Gizzell Ford leads to $48M jury award over doctor missteps

    Unless you directly work for the county who assumes all liability, what happens when you get a 48M judgement against you? The plantiff lawyers just walk away at 1M insurance?

    Also, Texas offers unlimited Homestead but who wants to put all their assets into a home?
     
  22. DrCommonSense

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    1.85% dividends on the SP500 is around the lowest in history on a sustained basis (>3 years). Do you think it can go down lower?

    S&P 500 Dividend Yield
     
  23. aneftp

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    Seriously. Most people plan on retiring between ages 55-65 when they hit they magic number (in today’s money aka 2018). You ain’t gonna to live more than 20-25 years max. And u ain’t gonna to be a high roller after age 70.

    I’ve worked in a primarily retirement area for a bit and met a lot of wealthy retired people. Most retired by age 60. They golf. Drink etc.

    They got money. But many of told me they’ve gotten all their toys, fancy cars, big homes already. They traveled the world by than already. Nothing else for them to do except enjoy retirement. Enjoy friends and family.

    They simply don’t feel the need to spend outrageously at age 65 as they were when they were age 35-50 like many of us in this forum.

    They downsize to 1200-1700 square foot single level 3 bedroom/2.5 bedroom homes.

    I’ve met retired MDs, ceo’s, lawyers, business owners etc. most tell me they used to spend 20-25k a month routinely. But since they retire. They literally spend 1/5 that amount. Plus still get their monthly social security checks.
     
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  24. teeva

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    Why does everyone at age 55-65 still plan on buying $100,000 cars and going on $20,000 vacations?

    I’m not even 35 yet, but if I had $2-3M and owned a home outright, I’d drop everything and just be happy to never ever work again, and I’d do everything necessary to make that money last. In other words, I’d adjust my lifestyle so I can love comfortably.

    I don’t know why people are so hung up on maintaining lifestyle. I make 4x as much as my parents did and they never struggled for mortgage, food, toys, vacations, or education. Homes in CA were a lot cheaper back then I guess.

    In this job market and with the cost/time of getting a medical degree/career, it’d take me two lifetimes or a lucky bet on bitcoin many years ago to ever reach $10M.
     
    #22 teeva, Dec 20, 2017
    Last edited: Dec 20, 2017
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  25. BLADEMDA

    BLADEMDA ASA Member
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    My personal goal is similar to the OP's opening number but I may not get there. My withdrawal rate during retirement will be about 2-2.5% because I'm conservative. I could see a 3% withdrawal rate for others.

    Another thing to consider is working part-time 2 days per week which would really reduce your overall "number" to retire earlier.
     
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  26. nolagas

    nolagas Member
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    I'd say I could retire today without any big changes with 5 million dollars. That number goes down 100k per year as my kids get older and my mortgage gets smaller. I have zero ex-wives, boats, or 100k cars.
     
  27. nolagas

    nolagas Member
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    What possible scenario would lead you to a 2% withdrawal rate?
     
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  28. Mman

    Mman Senior Member
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    Here's a life expectancy calculator from John Hancock.

    55 year old male in good health can expect to live to about age 95. 65 year old male in good health can expect to live to about age 96.

    Not going to live more than 20-25 years max???? Even allowing a median life expectancy in the US of like 75-80 years of age at this point, that includes everybody that dies young. Once you get to age 55 or 65 in good health, you can reasonably expect another 30+ years to go.

    I work with colleagues who still go full time in their 70s and you'd probably still call them a high roller. You don't think if someone retired 15 years before that they couldn't maintain the same lifestyle as someone their age working full time? Damn. I'd be living even larger if I didn't have to bother with work.


    For me, about $10M is my rough and tumble easy to think of number to walk away. I'd see it as basically $300K per year adjusted for inflation for life (because I'm always nervous and conservative and use 3% as my SWR guesstimate). Could I retire with significantly less? Sure. But why? I like my job and while I can be really frugal with some things, I have found very enjoyable ways to spend money that I'd like to continue to do without worry. And so to just up and walk away from a great paying career for good, I'd feel like I need near 100% certainty of maintaining my perfectly desired lifestyle forever.

    Now that said, I'm not working forever to attain that $10M. To me that's the walk way early number. If I was 65 and had 5M I'd likely say I've had more than enough and don't want to work anymore. But still in my early to mid career, I'd need a lot to just walk away.
     
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  29. Mman

    Mman Senior Member
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  30. skypilot

    skypilot 2K Member
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    A buddy of mine just retired at 63 with $2mil, mortgage paid off, never divorced, and kids out of college. He is loving life and has plenty of money as long as he doesn't go crazy.
     
  31. dhb

    dhb Member
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    10Mil is huge: over a 30 year career that's 330k/annum even 5Mil is impressive.

    How much is a SS check for the average MD? Here we can expect 1000€/month at age 67...
     
  32. Lecithin5

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    I believe max SS check is about 3 grand a month these days
     
  33. dhb

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    Not bad
     
  34. Lecithin5

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    I got this figure from a family friend who is a physician (thus contributing max to SS throughout his career) and waited the longest before collecting SS (either 67 or 70 yrs old- I forgot)
     
  35. Mman

    Mman Senior Member
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    well sure. I know people retired with less than 7 figures to their name and they are happy. I'm just pointing out that for me to walk away from potential decades of very well paid work that I enjoy doing, it's going to take a lot of money.

    I fully plan on going crazy and continuing to enjoy life, mostly in terms of insane vacations.
     
  36. skypilot

    skypilot 2K Member
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    How about making an offer to your current employer. I will not take call and I will not supervise. Just gonna do cases. Take it or leave it. You can pay me less. We will come up with a rate, but that's what I am going to do. Or maybe I will work 3 days a week and take a few weekend calls but no supervision. I wonder whether they would just laugh and show you the door.
     
  37. Apollyon

    Apollyon Screw the GST
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    To be very, very simple, to be a successful anesthesiologist or EM doc, have one or fewer houses, and one or fewer spouses.

    And, always remember: if you can't keep it in your pants, it's coming out of your pocket.
     
  38. BLADEMDA

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    I'm a conservative investor who has a nice retirement fund already. I like working but am looking for a less hectic job. Still, my goal is $10 million so I can comfortably leave $3 million to my children once I'm gone. My life expectancy is likely 82-85 based on family history and current health. Of course, I could die tomorrow but the life insurance combined with my current savings would leave my wife and kids financially secure. This gives me peace of mind.

    My wealth isn't about fancy cars or expensive items. In fact, I live frugally compared to some others on SDN who have 1/4 my assets. The money means security and the option of walking away at any moment of my choosing. I CHOOSE to work because I want to and not because I have to. That really changes your mind set about the job and work/life balance.

    If I was a new grad in this environment I'd probably just plan for $4 million then look at all my options. I think a new grad could save up $4 million by age 65 with a little effort and restraint.

    Compound Interest Calculator

    Compound Interest Calculator | Investor.gov
     
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  39. anbuitachi

    anbuitachi ASA Member
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    thats a lot of moneyf or your children. 4m is a good # after all that loan payment, and mortgage
     
  40. HalO'Thane

    HalO'Thane New Member
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    I am pretty far from retirement so pardon my ignorance, but doesn’t the IRS require a minimum withdrawal amount from your accounts once you reach a certain age or you risk being penalized? I believe this is called the required minimum distribution. Does that need to factor into the dollar amount needed for retirement?
     
  41. Mman

    Mman Senior Member
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    RMDs for 401Ks and IRAs start (I'm pretty sure) at age 70.5. They are structured so that you can't just build up a tax free (or continually tax deferred) nest egg forever. They will not cause you to die before you run out of money as they are relatively minimal from the total (hence the minimum in RMD).
     
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  42. BLADEMDA

    BLADEMDA ASA Member
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    On $4 million the RMD is $146,000. That's just over 3.5% but likely some of your nest egg at age 70.5 won't be in an IRA. Typically, high income wage earners have savings outside their IRA/401K. For me, it's 2/3 (outside) vs 1/3 (IRA/401k). I expect the opposite for a new grad today working as an employee (2/3 IRA/401K and 1/3 personal investments).

    Minimum IRA Distribution Calculator: What Is My Minimum Required IRA Distribution?
    IRA Required Minimum Distributions Table
     
    #40 BLADEMDA, Dec 22, 2017
    Last edited: Dec 22, 2017
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  43. BLADEMDA

    BLADEMDA ASA Member
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    How much should you save every month?
    Many sources recommend saving 20 percent of your income every month.
    According to the popular 50/30/20 rule, you should reserve 50 percent of your budget for essentials like rent and food, 30 percent for discretionary spending, and at least 20 percent for savings. (Credit for the 50/30/20 rule goes to Senator Elizabeth Warren, who reportedly used to teach it when she was a bankruptcy professor.)
    We agree with the recommendation to save 20 percent of your monthly income. But it’s not always that simple to suggest the right percentage of income for YOU to save.
    If, for example, you’re a high earner, you’d be wise to keep your expenses low and save a much larger percentage of your income.
    On the other hand, if saving 20 percent of your income seems implausible, or even impossible at the moment, we don’t want you to get frustrated. Saving something is better than nothing.
    But if you want a shot at being secure through old age—and having some extra cash for things you want—the numbers suggest that 20 percent is the number you’ll want to reach or exceed.
    Read more at: https://www.moneyunder30.com/percentage-of-income-should-you-save-every-month
     
  44. BLADEMDA

    BLADEMDA ASA Member
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    A new grad should try to save 10% of his/her income after taxes until all debt is paid off. Let's say after tax net income is $250K that means $25K per year combined with a max 401K of $18K. Let's hope the employer kicks in a little and the new grad has a back door Roth IRA. That's pretty good.

    Once the debt is paid off the grad can increase after tax savings to 15 or even 20% assuring him or her a nice nest egg by age 60.
     
  45. BLADEMDA

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    What's Your Number?
     
  46. GravelRider

    GravelRider SDN Lifetime Donor
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    I wonder if the ratio might be the opposite for new grads. Many new grads are employed positions with no match, so tax deferred savings is limited. I think many new grads should plan to have the majority of their savings in a taxable account. 18k in a 401k and 5.5k in a backdoor Roth is nowhere close to enough savings considering the debt and late start.
     
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  47. Veil

    Veil EM Attending
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    I realize this can happen to anyone anywhere, but it IS Illinois, after all.
     
  48. BLADEMDA

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    1. $18K per year in a 401K
    2. Employer contribution of $5-$10K per year
    3. Back door Roth IRA $5500
    4. After Tax Savings in a Taxable account like TD Ameritrade, Schwab, Fidelity, E-trade, etc.: $25,000

    Total: $54K per year.

    I used 30 years of savings at $54K per year with an average return of 5.5%: $4 million

    Compound Interest Calculator | Investor.gov
     
  49. BLADEMDA

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  50. BLADEMDA

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  51. BLADEMDA

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  52. BLADEMDA

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    Conclusion
    A particularly brutal market downturn in early retirement can devastate your portfolio and threaten your freedom. However, there are certainly ways to mitigate the risk. I recommend that you target a 3% withdrawal rate, maintain reasonable but not excessive equity exposure (60-80%), consider a several year cash cushion, pursue a low-stress side gig in retirement, and cut spending in a market downturn. If you can do those things, you will have a very high likelihood of maintaining your freedom in retirement.

    Remember, It’s Not About the Money; It’s About the Freedom


    Don't Lose Your Freedom: Mitigating Sequence of Returns Risk - Live Free MD
     
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