QofQuimica
Seriously, dude, I think you're overreacting....
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I retired the first time at age 28. I'd saved a fortune in the computer industry in the 1990s, and basically had more money than I was willing to spend. When I left, I had a pretty clear plan as to what I was going to do next, and I think that was important.
It's easy to putter away your life with projects big and small, but without a big project it is easy to lose direction and purpose in life. Work is a source of sociability as well as income, so make sure you have strong social ties to a spouse, family, long term friends, or whatever connections are that keep you going.
I had a successful retirement for about 10 years, but then thing started to fall apart... I finished my big projects, lost my sense of direction and purpose in life, and was losing my social connections too. My pursuit of medicine is in part a solution to these problems; it's a social job, a big project, and its direction is in line with some projects I'd done while retired.
Your question is open ended - did you want to chat about financials? Health insurance? Psychological issues? Awkwardness of being retired when your peers aren't? Giving notice to the boss? What?
As for the actual "preparing for and transitioning to" early retirement, it was smooth and seamless. I was already concentrating mostly on stuff unrelated to my job, and one day I just stopped showing up for work. It was anticlimactic, I guess, but then again I was already focused on my next big thing and my old job was just in my way.
It's easy to putter away your life with projects big and small, but without a big project it is easy to lose direction and purpose in life. Work is a source of sociability as well as income, so make sure you have strong social ties to a spouse, family, long term friends, or whatever connections are that keep you going.
I had a successful retirement for about 10 years, but then thing started to fall apart... I finished my big projects, lost my sense of direction and purpose in life, and was losing my social connections too. My pursuit of medicine is in part a solution to these problems; it's a social job, a big project, and its direction is in line with some projects I'd done while retired.
Your question is open ended - did you want to chat about financials? Health insurance? Psychological issues? Awkwardness of being retired when your peers aren't? Giving notice to the boss? What?
As for the actual "preparing for and transitioning to" early retirement, it was smooth and seamless. I was already concentrating mostly on stuff unrelated to my job, and one day I just stopped showing up for work. It was anticlimactic, I guess, but then again I was already focused on my next big thing and my old job was just in my way.
QofQuimica
Seriously, dude, I think you're overreacting....
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Lifetime Donor
15+ Year Member
Any and all of the above. It's open-ended on purpose. Though I was specifically thinking about logistical things like financials and insurance.
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Logistically, try to make your money as automated as possible so that you don't have to think about it. Ideally, you'll have a checking account that just kind of refills itself every couple of weeks or month and you'll not give it much thought. Kind of like having a job.
The oft-repeated advice in here to follow White Coat Investor and boggle heads is legitimate. Go find yourself a Vanguard fund that meets your investment goals over the course of your lifetime (I suggest looking at their Target Retirement series of funds). You choose Vanguard not because they rise faster than anybody else. They all on average will rise at the rate of the stock market. Rather you choose Vanguard because they fall the slowest, because they have the lowest fees. Control what you can. Reinvest the dividends and interest from this fund. Put 95% of your liquid net worth in here.
Open a second account, a boring money market account we'll call Cash, and put 5% of your liquid assets in here. Arrange automatic transfers from the Cash account into your Checking account, the account that you live from. Over the course of 3 months, the Cash account shall dwindle from 5% of your assets (1.25 years of income) to 4% of your liquid assets (1 year of income). Arrange for the Vanguard fund to automatically, every 3 months, sell 1% of its assets and put the proceeds into your Cash account. *Poof*, every three months the Cash account replenishes itself, bringing it back up to 5% of your liquid assets.
Why does this method work so well? First, your assets should be distributed among stocks, bonds, and about 5% cash. The Vanguard fund-of-funds often don't carry any cash, so this forces you to keep an appropriate cash cushion. Second, this method follows the "4% rule", meaning you can live off of 4% of your assets in perpetuity; in the long run you will get small raises every year and basically be able to maintain your current lifestyle forever. Third, you should always have 3-6 months of income on hand in cash-like instruments, this plan gives you about a year's worth.
Why not just sell 1% of assets quarterly and put them directly into your checking account? Because your quarterly income can take some huge swings when the market rises or drops temporarily. By maintaining this Cash account with a running average of the last 5 quarters and basing your income on that, any sudden rises or drops are smoothed out, and you don't have to suddenly move to a cheaper apartment because the market crashed for couple months.
The oft-repeated advice in here to follow White Coat Investor and boggle heads is legitimate. Go find yourself a Vanguard fund that meets your investment goals over the course of your lifetime (I suggest looking at their Target Retirement series of funds). You choose Vanguard not because they rise faster than anybody else. They all on average will rise at the rate of the stock market. Rather you choose Vanguard because they fall the slowest, because they have the lowest fees. Control what you can. Reinvest the dividends and interest from this fund. Put 95% of your liquid net worth in here.
Open a second account, a boring money market account we'll call Cash, and put 5% of your liquid assets in here. Arrange automatic transfers from the Cash account into your Checking account, the account that you live from. Over the course of 3 months, the Cash account shall dwindle from 5% of your assets (1.25 years of income) to 4% of your liquid assets (1 year of income). Arrange for the Vanguard fund to automatically, every 3 months, sell 1% of its assets and put the proceeds into your Cash account. *Poof*, every three months the Cash account replenishes itself, bringing it back up to 5% of your liquid assets.
Why does this method work so well? First, your assets should be distributed among stocks, bonds, and about 5% cash. The Vanguard fund-of-funds often don't carry any cash, so this forces you to keep an appropriate cash cushion. Second, this method follows the "4% rule", meaning you can live off of 4% of your assets in perpetuity; in the long run you will get small raises every year and basically be able to maintain your current lifestyle forever. Third, you should always have 3-6 months of income on hand in cash-like instruments, this plan gives you about a year's worth.
Why not just sell 1% of assets quarterly and put them directly into your checking account? Because your quarterly income can take some huge swings when the market rises or drops temporarily. By maintaining this Cash account with a running average of the last 5 quarters and basing your income on that, any sudden rises or drops are smoothed out, and you don't have to suddenly move to a cheaper apartment because the market crashed for couple months.
I feel less qualified to comment on health insurance matters, because the market is so different today.
Back when I retired early, I lived in one of the states that had no individual health insurance market. There was literally no individual health insurance sold at any price. So out of necessity I went without. I was young and I was doing a lot of international travel, so I could get my health needs met in foreign countries where the labor and drugs are much cheaper. Both were of questionable quality too, not gonna lie.
Since you are in your 40s and individual insurance is now available in all 50 states again, I don't recommend flying blind like I did.
Back when I retired early, I lived in one of the states that had no individual health insurance market. There was literally no individual health insurance sold at any price. So out of necessity I went without. I was young and I was doing a lot of international travel, so I could get my health needs met in foreign countries where the labor and drugs are much cheaper. Both were of questionable quality too, not gonna lie.
Since you are in your 40s and individual insurance is now available in all 50 states again, I don't recommend flying blind like I did.
QofQuimica
Seriously, dude, I think you're overreacting....
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Thanks for the advice about the Cash account. I don't think I've seen that particular suggestion before, but it's genius, and certainly better than my current setup.
I am not planning to go without health insurance. I did that for a while in my 20s as well, and I agree that as foolish as it was then, it would be even more foolish to do it now.
I am not planning to go without health insurance. I did that for a while in my 20s as well, and I agree that as foolish as it was then, it would be even more foolish to do it now.
I will be retiring at 55-56, which is definitely early considering I did a regular length undergrad, a good chunk of a PhD and a traditional MD with 5 years or so of post graduate residency+fellowship and paid off around $150,000 in student loans, bought 2 luxury cars outright and have nearly paid off my primary residence (value over $900,000). And I will have around $200,000 in each of my kids 529Bs. This is assuming an average 6-7% rate of market return, which I guess you cant always count on (although my kids 529Bs are averaging 17% annualized returns at this point!).
Im putting roughly $120,000 per year into a combination of 401K and Profit Sharing programs as well as having another pension type plan (around $50,000/year) and buying around 1 rental property per year (hopefully, so far so good). My income is obviously quite generous.
I have a number of contingencies in place as I feel medicine will fall apart over the next 15-20 years but I think if I play my cards right, I will have around $250,000-400,000/yr in today's dollars with little to no expenses and doing essentially nothing (which is absolutely worst case, I do plan on keep my toes in the game until around 65).
THE KEY for early retirement is cost control. If you cant control costs, which most physicians and healthcare workers cant, you are boned outright. Better plan for "Death In Job" like most Americans.
Physicians are the worst professional group by far in terms of controlling costs and living frugally. The delayed gratification of all the training, the long crappy hours, poor work conditions etc take too heavy of an emotional toll and often we end up being stimulus and gratification ****** for the remainder of our lives.
I know CT Surgeons and Orthopods who are so buried in debt they haven't funded a 401K in years. They roll from party to party, Porsche lease to Maserati, vacation home in Tahoe to beach home in Santa Barbara, meanwhile their net worth is negative.
If you absolutely have to keep your toes in the water, there are a TON of part time, benefited positions you can land where you get healthcare etc taken care of. Look at PT positions abroad as well. I plan to keep my toes in the game by doing locums type gigs all over the world once my kids in are in college.
This is something you need to start planning at 35 and not 45 though. Even with a monster income, you cannot overcome the lack of compounding passive income starting so late.
I would HIGHLY recommend the book "The Millionaire Mind" to psychologically prepare you to do what you need to do to reach comfortable early retirement. That is on my very short must read list.
Im putting roughly $120,000 per year into a combination of 401K and Profit Sharing programs as well as having another pension type plan (around $50,000/year) and buying around 1 rental property per year (hopefully, so far so good). My income is obviously quite generous.
I have a number of contingencies in place as I feel medicine will fall apart over the next 15-20 years but I think if I play my cards right, I will have around $250,000-400,000/yr in today's dollars with little to no expenses and doing essentially nothing (which is absolutely worst case, I do plan on keep my toes in the game until around 65).
THE KEY for early retirement is cost control. If you cant control costs, which most physicians and healthcare workers cant, you are boned outright. Better plan for "Death In Job" like most Americans.
Physicians are the worst professional group by far in terms of controlling costs and living frugally. The delayed gratification of all the training, the long crappy hours, poor work conditions etc take too heavy of an emotional toll and often we end up being stimulus and gratification ****** for the remainder of our lives.
I know CT Surgeons and Orthopods who are so buried in debt they haven't funded a 401K in years. They roll from party to party, Porsche lease to Maserati, vacation home in Tahoe to beach home in Santa Barbara, meanwhile their net worth is negative.
If you absolutely have to keep your toes in the water, there are a TON of part time, benefited positions you can land where you get healthcare etc taken care of. Look at PT positions abroad as well. I plan to keep my toes in the game by doing locums type gigs all over the world once my kids in are in college.
This is something you need to start planning at 35 and not 45 though. Even with a monster income, you cannot overcome the lack of compounding passive income starting so late.
I would HIGHLY recommend the book "The Millionaire Mind" to psychologically prepare you to do what you need to do to reach comfortable early retirement. That is on my very short must read list.
QofQuimica
Seriously, dude, I think you're overreacting....
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I agree with you completely regarding cost control, @LADoc00. Fortunately, I've never had an issue with conspicuous consumption. Because of my good "defense," I'll still be able to afford to retire at age 45 even though I didn't start making an attending salary until age 39. 🙂
Working part time is something I'd consider doing. I've considered working abroad as well, even retiring abroad (most likely to somewhere in Latin America). However, I don't think I'd want to move out of the country as long as my folks are still alive since they're elderly, and it would make spending time with them difficult. I've also thought about doing a fellowship (which would obviously entail a pay cut) and then working part time teaching or doing research in my chosen field. I may still do that. 45 isn't too old to do a fellowship, and I won't care at that point about the pay cut. Or maybe I'll just volunteer my time.
Out of curiosity, what are you investing your kids' 529s in that is averaging 17% return?
Working part time is something I'd consider doing. I've considered working abroad as well, even retiring abroad (most likely to somewhere in Latin America). However, I don't think I'd want to move out of the country as long as my folks are still alive since they're elderly, and it would make spending time with them difficult. I've also thought about doing a fellowship (which would obviously entail a pay cut) and then working part time teaching or doing research in my chosen field. I may still do that. 45 isn't too old to do a fellowship, and I won't care at that point about the pay cut. Or maybe I'll just volunteer my time.
Out of curiosity, what are you investing your kids' 529s in that is averaging 17% return?
If you are retiring after 6 years of actually working, then there is much more to story here like a massive inheritance. Good for you.
There is no job you can retire from after 6 years save from a start up company that goes public.
Inherited money is awesome although I would strongly question the wisdom of pursuing medicine/research (you appear to be an MD/PhD?) if your clinical lifetime experience will be a mere 6 years. But I don't know your whole story so whatever. Perhaps this inheritance was unexpected, which is all the better.
I love the concept of inherited wealth which works for you into perpetuity, something like rental income or dividends etc. It frees you up to really explore, which I miss as Im basically a "grinder". Being a grinder takes a toll on your soul though, you become bitter and cynical over the years...would have been much better with 8 figures in the bank for me.
Good luck.
QofQuimica
Seriously, dude, I think you're overreacting....
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Sure there is. You just have to have a high enough savings rate and a low enough COL. Never mind "The Millionaire Mind"; are you familiar with the MMM blog? He takes things to a bit more of an extreme than most people would be able/willing to do, but it gives you a sense of what's possible if you're really serious about cutting expenses and retiring early. I spend quite a bit more money per year than he does (more like $30,000/yr and I don't have any dependents). However, my attending salary is also significantly higher than his salary was when he was still working, so I can still maintain a higher absolute savings rate than he did even with all of my "frivolous" spending. [If you're interested, MMM supports a family of three (himself, his wife, and one child) on ~$24,000/yr.]
You didn't tell me what your 529 investments were. Even though I don't have any kids of my own, I do have a niece whose college I'm paying for, so it's not an entirely academic question to me. Have bought her a prepaid tuition plan that will pay for her to attend any of our state universities here in FL, but I'm still thinking of doing a 529 (though Utah) to fund room and board/other education expenses for her.
Life doesn't have to be that way dude. Like QQ mentioned, early retirement types save considerable amounts of money, then live off of either the interest or sustainable income streams that are derived from that saved money (such as properties). If you are a physician that makes 300k a year in, say, Texas, that equates to $217,987 after taxes, assuming no deductions aside from the two standard ones. Spend $27,987 of that a year, and you've got $190,000 left to invest. The first thing you do is pay down your home- get something reasonably priced, and you can knock it out in 1-2 years. After that, just bank it all. At a relatively conservative rate of interest (7%), you would have $1,454,233.39 in 6 years. At a steady withdrawal rate (4%) that money will allow you to live on $58,169.33 a year that will automatically adjust for inflation, assuming your relatively conservative portfolio continues to adjust itself for inflation. Better still, this money will be considered capital gains, so you will only pay 15% tax on it.
Want to live better in retirement? Work a couple more years. Working for 9 years should net you enough banked cash to have a near-six figure income in retirement, should you so choose, as you'll now have $2,435,073.85 in the bank, equating to $97,402.954/yr at a sustainable 4% draw. Want to live better before retirement? Work more hours or postpone retirement by a couple of years. If you live off of $47,987/yr you'll be investing 170k/yr. This reduces your 6 year savings to $1,301,122.35, which nets you an inflation adjusted $52,044.894/year to live off of at a sustainable draw. At 10 years, it nets you $2,513,093.60, or $100,523.74 at a sustainable draw. Keep in mind that all of these incomes will be taxed at a mere 15%, so you're making $7,120.43/mo post-tax for sitting on your ass at the ten year mark, and that's if you suck at selling your capital losses at the right time, which can often negate your tax burden entirely.
Personally, I have a similar plan to this, but want to pay down my debt as a primary goal rather than buying a house, and use my money to purchase some rental property with an 8-9% return that I can use as a residence and investment.
If you are pulling down 300 and are able live off 27K then you have reached a zen like state even Tibetan monks would be astonished at.
Do I think its possible? Yes. Do I think anyone on this website has the discipline to do that?. No....but the fantasy is grand.
why not just work super part time then? cut back to 1/2 time and spend 2 weeks a month chillin.
Do I think its possible? Yes. Do I think anyone on this website has the discipline to do that?. No....but the fantasy is grand.
why not just work super part time then? cut back to 1/2 time and spend 2 weeks a month chillin.
Agreed. Too hard. 27k/year = <2.6k/month. My house is $1200/month which is not bad. Malpractice is about $900/month. Gas is about 500/month for my family. I'm already out. 🙂
QofQuimica
Seriously, dude, I think you're overreacting....
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I don't make $300,000, but I spend about $2500/month (that's $30,000/yr), not counting retirement savings and other large investment type purchases like the FL prepaid program I bought for my niece. Rent is $750. Insurances (including disability, which I'll obviously stop paying once I'm retired) is another ~$500. Utilities/phone is another couple hundred. That still leaves me $1000/month to buy food and otherwise spend as I like, including approximately biweekly road trips to visit friends or family, eating out whenever I feel like it, buying new running shoes, etc. I don't pay my own malpractice (work for the state), and I live a mile away from the hospital so maybe spend $20/mo on gas. If I were MMM level of frugal, I wouldn't drive to work at all since I could easily walk or bike there if I chose. But I prefer not to show up to work all hot and sweaty, and I also don't want to walk or bike at night for safety reasons.
Overall, I think I'm a pretty frugal person, especially for a doc. But like I said, that dude makes me look like a total spendthrift. However, I would feel like I was depriving myself at his level of spending, while I don't feel that way at my current level of spending.
Overall, I think I'm a pretty frugal person, especially for a doc. But like I said, that dude makes me look like a total spendthrift. However, I would feel like I was depriving myself at his level of spending, while I don't feel that way at my current level of spending.
I don't have a target retirement date in mind, but I am accumulating net worth as rapidly as possible so that I could say screw it and retire whenever I no longer enjoy my job. I am married and our spending hasn't greatly increased since finishing residency (aside from retirement savings and various insurances). We have a few things I consider luxuries (like a yard guy and a housekeeper that comes twice a month) that I could cut out if I needed to, but our mandatory spending is pretty minimal (3500/mth would take care of mortgage and food plus things we are still on contract for like phone and direct tv, but we also have a rental property that brings in 1400/month and could bring in more if I wasn't renting it out to someone I know). I do want us to be able to take trips (not ridiculously priced, but frequent), and not have to limit ourselves so I will probably hold out until a bigger number than strictly necessary as long as I like what I am doing enough. I am basically working part time (at least according to my malpractice insurance) and have plenty of free time, but since it is mostly call I figure at some point I am going to get tired of it unless my elective practice takes off and I can take less call (would need at least one more doc in the call pool and the other guys are getting on in years so that could be an issue). The other thing that helps is that we could live on just my husband's salary alone but right now he is taking a well deserved break from working.
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That was how I did it. Expenses $30K, income 6+ figures.
It helps to have broke friends, so you aren't struggling to keep up with their toys. It helps if you are single. It helps if you have always lived this way, e.g. continue to live like a student vs. try to step down to living like a student. It helps if you maintain a checking account for living out of, and give yourself a set allowance while automatically saving everything else. If you never see the money, you aren't tempted to spend it.
I didn't think of it as an ascetic lifestyle. I ate out. My small cars were less than 5 years old. I joined a skiing club and a sailing club. But it was definitely a "just graduated, first job, student attitudes" kind of lifestyle.
Sazerac,
Come back here and report once you are out of med school/residency for awhile.
I assume once you are working for a few years, expenses will come up to far exceed your 30K. Unless you are planning to go life long hermit, no wife/GF, no kids, no house etc.
Just don't become a serial killer on this pursuit.
Come back here and report once you are out of med school/residency for awhile.
I assume once you are working for a few years, expenses will come up to far exceed your 30K. Unless you are planning to go life long hermit, no wife/GF, no kids, no house etc.
Just don't become a serial killer on this pursuit.
QofQuimica
Seriously, dude, I think you're overreacting....
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He's a nontrad and already financially independent beyond what most of us will ever dream of achieving. I don't think we have to worry about him being a serial killer because of his "asceticism". 🙂
But we digress. I'm not really interested in hearing how what I want to do can't be done, because clearly it *can* be, especially if one is willing to forgo a typical upper middle class spending lifestyle and seriously and literally continue to live at a resident's level. I'm doing it myself. The question is about managing the logistics once one reaches the point of financial independence, since it is true that most people with a six figure income don't CHOOSE to save most of it. And having been in the saving mode for the past 40 years of my life, it's gonna feel really really weird to stop.
I don't know how you guys are doing this. I've got about $5500 a year in disability insurance, about $1500 a year in life insurance, etc. I'm not sure how one can live on such a low amount and still have adequate insurance. But, I guess if you can achieve financial independence in 6 years, maybe you're willing to forgo disability insurance.
If you are retired, you are not working. There is no working income to insure with disability insurance.
Life insurance, again that insures your future working income for your dependents in case you die. If your income is not coming from work, what is there to insure? Even if I die tomorrow, my income machine lives on without me. My spouse and children will have more money, I suppose, since there will be one less mouth to feed.
Property insurance, health insurance, car insurance, yes all these exist in retirement. But it isn't necessary to insure wage income if there is no wage income to lose.
Life insurance, again that insures your future working income for your dependents in case you die. If your income is not coming from work, what is there to insure? Even if I die tomorrow, my income machine lives on without me. My spouse and children will have more money, I suppose, since there will be one less mouth to feed.
Property insurance, health insurance, car insurance, yes all these exist in retirement. But it isn't necessary to insure wage income if there is no wage income to lose.
Well, I have 10 yr level term life insurance for 250K (the lowest that qualified for multi policy discount, don't necessarily need it but this way my husband can pay off the mortgage and live off insurance alone for more than enough time to grieve-he can easily support himself on his own income when he works and there are no kids) and 6K/month disability insurance with a 90 day wait (I have more than 6 mths of expenses easily accessible so I don't mind the longer wait which drops the price, and 6K is enough to cover all truly necessary expenses-not so much the luxuries or frequent travel- and still put some away for retirement even if my husband doesn't work at all, which I can't really see happening since I wouldn't want to be kept alive if I am not able to do self care). Then I have a dumb accidental death and dismemberment policy that I only got because for the $26 yearly premium I get a discount on the other premiums that is a lot more than that (not sure how that works). The disability is own occupation, specialty specific. Even with my history described previously in this thread my total premium for all three policies is about $800 a year. For that money I won't be as quick to cancel once I have about enough to retire but am still working (although I will eventually get rid of them).
QofQuimica
Seriously, dude, I think you're overreacting....
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No, I have disability insurance (both own-occupation individual disability that would pay $5000/mo costing me ~$330/mo, and group disability as a benefit from the university that employs me). I would like to stop paying for it though. Even at my rate I feel like it's exorbitant. Maybe yours is protecting a lot higher of an income than mine is?
I do not have life insurance since I have no dependents.
Even at your higher insurance rates, you're only talking about ~$3000 more per year for your disability/life insurance than what I'm spending per year on my disability insurance. That still doesn't translate into needing to live on a six figure income. What are you spending on things like housing, cars, state income taxes, vacations, student loans, etc.? I have no state income tax and no student loans, which helps tremendously in keeping expenses down. COL is also much cheaper here in FL than it is in many other states. I already posted my monthly budget above.
My policy is about $10000 per month benefit, own occupation, etc....I guess my point is that I'm not sure how the average physician is going to be able to live off $30-$50k per year and sock the rest into savings while building towards retirement. With two kids and a wife who doesn't work outside of the home, I find that my monthly expenses are a bit higher. I don't think I live all that extravagantly - $200k house, one car paid off, one car with an $8k loan. Maybe the vacations are my big expense (1-2 weeks on a florida beach during winter/spring and 1 week on a lake in the summer). But, it's going to be hard to cut those back...
Anyway, I appreciate everyone's advice. I will need to look more closely at to what my actual savings rate is.
Anyway, I appreciate everyone's advice. I will need to look more closely at to what my actual savings rate is.
Kids throw things off because not only do you spend money on them now but you are also probably trying to save money for their schooling later (although your retirement planning should take priority I think). Can a family of 4 live on 50k per year? Absolutely, that is double the poverty level (which is based on gross income i think). Actually one of my fellow residents had a family that size and were doing ok on just his resident salary (maybe family was helping out though). Wouldn't be a nice lifestyle everywhere but doable (unless you have a lot of debt). You have to balance lifestyle now with lifestyle later and decide where your priorities lie. It isn't always that easy to do but it is that simple. Taking a look at expenses and making sure things are justified based on your priorities is key. It may be that you value your current level of spending enough that you are willing to delay financial independence or perhaps you want to look into ways to increase income (perhaps your wife can find a way to earn money even if she still wants to be a stay at home mom, perhaps you can find addl work to do or get a higher paying job). Just don't decide not to do anything. Have a plan that respects your needs and wants.
Not everyone has to want early retirement enough to live a very frugal life. But you can't just wish for financial independence and not be willing to look at where you cam make acceptable sacrifices.
Where do you recommend keeping the 95%? Can you give some examples of mutual funds that can keep you earning (and drawing) 4% annually?
QofQuimica
Seriously, dude, I think you're overreacting....
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You might try keeping track of what you and your wife are spending your money on for a few months. Seriously, write down every dollar you spend and what you spend it on for the next 2-3 months. When I did this, it was pretty eye-opening. And again, I strongly recommend reading the MMM blog (linked in post #10). Not that everything he recommends to save money is necessarily going to be something you want to adopt, but again, it does make you re-evaluate whether you are really spending your time and money the way you want to be. In particular, I think his advice to live close to your job is hugely helpful in minimizing work stress/unhappiness (not to mention expenses) due to long commutes.
I think we are doing fine. As for my wife to start working, it seems kind of pointless. We are in the top tier income tax bracket. She would essentially be working and half of her earnings would go towards taxes. Sure, she could sock money away into 401k and she would build up her social security earnings, but I'm not sure how worth it would be. We would have to get child care, etc.
I'm about a 10 mile drive from the hospital, but I do have to do outreach one day per week which is about a 30 mile drive away. There's no way I'm biking that. I kind of have to live where I do in order to get my kids in the school district we want.
I do know what my big frivolous expense is - dining out. We spend a ridiculous amount of money on take out. Anyway, I'm pretty sure I'm not going to be able to retire in 10 years. My hope is that in 20 years, I'll reach financial independence.
I'm about a 10 mile drive from the hospital, but I do have to do outreach one day per week which is about a 30 mile drive away. There's no way I'm biking that. I kind of have to live where I do in order to get my kids in the school district we want.
I do know what my big frivolous expense is - dining out. We spend a ridiculous amount of money on take out. Anyway, I'm pretty sure I'm not going to be able to retire in 10 years. My hope is that in 20 years, I'll reach financial independence.
I think disability insurance is a scam. My premium is crazy high as well (close to 5-6k/year) and Im thinking of dumping the turd. That represents over $320,000 in lost capital and interest at 8% annual return.
All you "live by the absolute minimal seat of your pants" types cant possibly be buying that crap, are you?
Who have you known that have collected on pro. disability? I havent met one in all my years yet.
All you "live by the absolute minimal seat of your pants" types cant possibly be buying that crap, are you?
Who have you known that have collected on pro. disability? I havent met one in all my years yet.
Well, I already mentioned the Vanguard Target Retirement funds. In particular, I threw all my liquid assets into VTTHX. It's target retirement is 2030 or 2035, I forget.
There isn't anything about this fund that generates spectacular high yields or explosive returns. It just sets an allocation of domestic and international stocks and bonds. It rebalances as necessary. It adjusts the allocation over time to gradually own more bonds and fewer stocks as I age and my own risk tolerance goes down. Basically it does all the work that I would have done by owning and managing multiple mutual funds directly. I've done that before - it gets boring and tiresome after a while to manage them by hand.
Go find yourself a fund company that has low fees. It's probably going to be Vanguard.
Then go find an asset allocation that is appropriate for you, over time. It will probably be a Vanguard Lifestyle Fund (fixed allocations) or a Vanguard Target Retirement Fund (allocations that get more conservative over time). Your family situation and your age will determine your risk tolerance.
Put your assets there, and withdraw 1% quarterly. It's really that simple. You aren't going to lose your money to fees. You will follow the generally upward-trending markets. And best of all you will have time to focus on more important stuff in life than the dry dry subject of personal finances.
I wouldn't pay that much for disability insurance. How are you guys finding such expensive policies (or is it just that you don't have a long enough waiting period or are covering really high income)? I am comfortable with the coverage i have at the price i am paying. I had to have a rotator cuff repair last year and could not operate at all for a few months, then for a few months could only operate because i had residents to do most of the work. I was a salaried employee at the time and managed to use my sick days and show up enough that i just got paid the whole time, but if i was doing my current job i would have had to take probably 6 months of no call if not more (the bulk of my income is from call) and then work around my 2-3 days a week of pt i was doing for months afterward. That was easily a situation that my insurance should have covered.
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QofQuimica
Seriously, dude, I think you're overreacting....
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Lifetime Donor
15+ Year Member
Yes, as I said, I'm buying it. Though I agree with you that it's a "turd." (Feel free to insert different four letter word here.) I don't know anyone who has collected it either, and again, I too look forward to being able to stop paying it.
I know of one doctor personally who is taking disability. I have heard of 3 other doctors who have used them as well.
I'm okay spending this kind of money on disability insurance. I have a good paying job and I want to protect that income stream. The premiums are what they are. I am either okay taking on the risk that I won't get hurt, or pay the money to be protected. With a wife and kids to take care of, the expense is worth it to me to safeguard our standard of living.
I'm okay spending this kind of money on disability insurance. I have a good paying job and I want to protect that income stream. The premiums are what they are. I am either okay taking on the risk that I won't get hurt, or pay the money to be protected. With a wife and kids to take care of, the expense is worth it to me to safeguard our standard of living.
I thought I was saving a lot. You guys make me look like I'm hemorrhaging money. I'm saving 20-25% of my gross and have no debt other than a 3.5% mortgage. I'm not sure I want to squeeze any harder than that at the moment. The goal is to retire at 62. I may cut back to 80% at some point and could probably target that at ~50 and maybe 60% towards the end. Academic practice makes that easier to pull off. I like what I do, and I don't think I work too hard so I'm not in a big rush to get out.
The only thing that would make me retire sooner would be a large inheritance and/or a dramatic drop in income from a single payer system. It's not clear how my parents will divide their estate and to be honest I don't know how much they have, though my wife will inherit all of her parents assets. Both should be significant. Hopefully that's still a good while off, and of course, you can't count on getting anything. Prolonged chronic illness, mismanagement, etc. could take it all.
Where do y'all plan to retire? No matter what happens we will not stay in my current area. My wife would like to live in an expensive city abroad. I'm not on board with that plan yet. There are some logistics that I haven't looked into. We would also need a second home here as well. Multiple residences are a pain in the ass. I've already played that game.
The only thing that would make me retire sooner would be a large inheritance and/or a dramatic drop in income from a single payer system. It's not clear how my parents will divide their estate and to be honest I don't know how much they have, though my wife will inherit all of her parents assets. Both should be significant. Hopefully that's still a good while off, and of course, you can't count on getting anything. Prolonged chronic illness, mismanagement, etc. could take it all.
Where do y'all plan to retire? No matter what happens we will not stay in my current area. My wife would like to live in an expensive city abroad. I'm not on board with that plan yet. There are some logistics that I haven't looked into. We would also need a second home here as well. Multiple residences are a pain in the ass. I've already played that game.
I thought I was saving a lot as well, until very recently when I learned more than a few people I know are saving around $800,000 AFTER taxes every year...I had a near meltdown as I thought I was way ahead on the curve saving 175-200K/year only to find out I was a rank amateur at this.
My wife actually threatened to bail out when I began a crazy round of cost cutting including turning off cable, phones, growing our own food etc. to lower costs and save more. Im already working around 80hrs/week so more work isn't viable at this point. Our household expenses had reached an astronomical 16000/mo (mortgage, low student loan payments, school for kids, car payment, food, travel, gas, remodeling and other home crap, going out to eat etc) before I blew my lid last year and demanded change Kim Jong Un style. Im in the process of retiring all remaining student loans and car payments in short order although the interest on those is either 0% or 2.25%.
Ive initiated a complex multi-business 401K+profit sharing plan+defined benefit system to get more than 200ish away pre-tax, but I have no clue how guys are getting retirement balances of 3-4million already in their early 40s...when asked they tell me they are merely thrifty savers. But the math isn't making sense for me. I will hopefully be saving around 400 next year, but it will be a titanic struggle with the family to do so.
Regardless, when the kids are gone, Im going full on monk-mode. I plan to either establish a residence in a foreign country like Panama, Costa Rica or Belize or move to a low tax state like NV. Costs will be cut to the bone.
My wife actually threatened to bail out when I began a crazy round of cost cutting including turning off cable, phones, growing our own food etc. to lower costs and save more. Im already working around 80hrs/week so more work isn't viable at this point. Our household expenses had reached an astronomical 16000/mo (mortgage, low student loan payments, school for kids, car payment, food, travel, gas, remodeling and other home crap, going out to eat etc) before I blew my lid last year and demanded change Kim Jong Un style. Im in the process of retiring all remaining student loans and car payments in short order although the interest on those is either 0% or 2.25%.
Ive initiated a complex multi-business 401K+profit sharing plan+defined benefit system to get more than 200ish away pre-tax, but I have no clue how guys are getting retirement balances of 3-4million already in their early 40s...when asked they tell me they are merely thrifty savers. But the math isn't making sense for me. I will hopefully be saving around 400 next year, but it will be a titanic struggle with the family to do so.
Regardless, when the kids are gone, Im going full on monk-mode. I plan to either establish a residence in a foreign country like Panama, Costa Rica or Belize or move to a low tax state like NV. Costs will be cut to the bone.
I would love to know how you went about setting this up?
I'm starting to look into personal retirement plans like SEP-IRA, personal 401k's, and defined benefit plans in anticipation of next year.
What resource did you use to learn about these options?
This is a nice representation on how easily you can fall into spending more when you earn more. There is no way i could save 800k a yr because i don't even earn close to 800k a yr. But 16k a month is an enormous amt that cutting cable and stuff like that isn't likely to touch. I'm guessing it is either a really big mortgage or really expensive school that is driving a big portion and decreasing those things is going to be more difficult especially without family buy in. Instead of relying on a future about face with spending it would probably be better to sit down with your wife (and kids if appropriate) to discuss goals and priorities to reduce spending now.
The whole point of financial independence is to have a consistent, inflation adjusted income that is guaranteed to passively come your way. You don't need disability insurance because you no longer need to work for your income, it passively accrues without effort.
16k/mo as a baseline spending level is insane. Your saving rate is fine, certainly, but my god, dat spending...
I'm a (non-trad) first year medical student so I have no idea of what it's like to earn more than 40k. Before med school, I, with a wife and a toddler, lived comfortably on 3k a month, and that's in SoCal.
I need someone to explain to me why on this site the posts I read make me feel that if I don't hoard a six-figure amount per year into retirement savings, I would be starving. I can't imagine needing more than 50k/year when I'm retired, the debt and mortgage are paid off, and the kids have left the nest.
I need someone to explain to me why on this site the posts I read make me feel that if I don't hoard a six-figure amount per year into retirement savings, I would be starving. I can't imagine needing more than 50k/year when I'm retired, the debt and mortgage are paid off, and the kids have left the nest.
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It is because many (maybe most?) people allow their spending to follow their income and become adjusted to that level. Add in the fact that the people posting in this thread want to achieve the kind of financial status that would allow us to maintain a desired lifestyle level indefinitely even if we were to walk away from working many years before normal retirement age. The more expensive that chosen lifestyle is, or the earlier you wish to reach that status, the more you will have to put away. Of course one big benefit of putting a lot away if that you don't have that money around to get used to spending.
OK, I see your point. Thank you!
QofQuimica
Seriously, dude, I think you're overreacting....
Moderator Emeritus
Lifetime Donor
15+ Year Member
This.
Rather than thinking about absolute amounts saved, which will obviously vary based on both lifestyle and income (I don't earn anywhere near $800k per year either), maybe it's better to look at it in terms of percentage of income saved. Including my employer match, I'm saving around 2/3 of my gross income. That is how I'll be able to retire in six years. If I did earn $800,000/year, I'd be able to retire in two years at that same savings rate. (Though my taxes would also be much higher, and I probably would have a somewhat lower savings rate for that reason.)
Now you can consciously avoid falling into the same trap.
I understand this. I'm currently in the saving/accumulation phase. Once I reach financial independence, I will probably drop the disability income. But, until that point is reached, I'm going to keep my salary well insured.
One thing to think of when deciding how much income to insure with disability insurance is thst you will need to provide for your retirement but not early retirement (because if you remain diasabled you get money until age 65). So the portion of income that goes towards reaching the number needed for retirment will be needed, but the extra you are putting away to be independent earlier than retirement will not be. If you already have enough for comfortable retirement starting at 65 then you can get away with a smaller policy (which will cost less). This makes a bigger difference for those of us living on small portions of our income and saving the rest.
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I hope the following numbers will provide me with early retirement with a shift towards increasing savings once debt is paid down.
14% Savings rate (retirement, 529, EF)
23% of gross going towards additional principal on debt
37% of my gross going to debt + savings
I didn't think those numbers were too bad until I started reading this thread...
14% Savings rate (retirement, 529, EF)
23% of gross going towards additional principal on debt
37% of my gross going to debt + savings
I didn't think those numbers were too bad until I started reading this thread...
LADoc00,
I like your literary references much better than your financial insight. Perhaps you should be spending more time in the hallowed halls of finance rather than the hospital basement? An after tax and inflation real return of 8% is almost impossible.
I have lived on around 30k per year making 400-900k per year (obviously income trending downward). It is a herculean feat. 99% cannot do it. Getting rich is about doing what others don't want to do.
Interesting thread. One thing I didn't see mentioned is that retiring early (especially very early) isn't necessarily worth it. There are a lot of downsides to retiring early.
http://whitecoatinvestor.com/14-reasons-why-you-shouldn’t-retire-early/
Personally, I'm not willing to save 2/3 of my income when the alternative is to go to work a few days a month for a few more years and only have to save half that. Spending is fun too.
http://whitecoatinvestor.com/14-reasons-why-you-shouldn’t-retire-early/
Personally, I'm not willing to save 2/3 of my income when the alternative is to go to work a few days a month for a few more years and only have to save half that. Spending is fun too.
I worry about the person only saving 5% of their 200k income getting used to the amount of spending that means suddenly "only" having 100k a yr to live on, especially if life stuff happens and that 100k becomes smaller. I have seen plenty of older docs still working, not because they love the job so much, but because they need the income to pay the bills. Meanwhile the doc saving half their 200k income may be perfectly content with what they do and do not spend their money on, and since they may have paid off their sensible house and cars by the time they retire will be able to afford those added costs you talk about.
I'm with you about not working a job you hate for ridiculous hours just so you can retire early, but I for one enjoy my job which averages out to part time hours (at least it does for my malpractice insurance purposes). So then it just comes down to the little and big decisions that determine my savings rate (like should I stay in my house that I have had since residency or get a mcmansion, do I need to stay at the super fancy place to have a nice vacation, or how long should I keep my current furniture). I don't have a monthly or yearly budget, it just works out that we don't spend much of what is brought in so then it goes into savings by default. Of course a huge help is the fact we have no children, which can be a big drain on money for a variety of reasons.
