How much do you save/invest every year?

[eyeeye_captain]

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Over $100M unicorn examples gave me a nice morning chuckle.

Washington though is an interesting example. Looks like Seattle is one of the most expensive places in the country to live, up there with Boston and San Diego. There’s no state income tax but apparently sales tax drives the boat. Google says the property taxes are comparable to Florida, which is half of Texas.

You could live somewhere like Spokane, a decent mid-size metro close to nature stuff, or Vancouver, across the river from Portland. Both appear to be about the national median for COL. If you kept your spending down, you’d be in pretty good shape pretty fast. A median state income tax blows away what I would hand to Washington (state) every year.

 

[emergentmd]

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.

I know it keeps increasing but to assume what future governments will do in the future is a risk I am not willing to take when there are easy ways to mitigate this risk now.

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.

Not a troll post at all. You are making the wrong assumption that giving generational wealth to your kids precludes teaching them work ethics and moral values which we work just as hard on. IMO being present and seeing good examples is the most imp ingredient for well adjusted kids. You have the Warren Buffet mentality, which is fine. I just do not have this take on money and inheritance.

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.

In 2020, this very well is true. In 2050 this will not be true. Time is the most important aspect of wealth growth. No matter what, nothing is better than time. A 40 year old doc with 3M in their brokerage account (I know many) leaving it in the S&P at the age of 80 without any further contributions and historic 10% return would have 135M. Same doc with $1M, 45M. What you find pointless today is reality in 40 years.

 

[Mman]

What you find pointless today is reality in 40 years.

I find failing to acknowledge inflation when calculating returns to be pointless today and in 40 years. Nobody is getting a real (after inflation) return of 10% for the next 40 years. Just throwing out numbers that aren't based in reality and then compounding them for decades leads you to be massively off in the math department.

 

[emergentmd]

I find failing to acknowledge inflation when calculating returns to be pointless today and in 40 years. Nobody is getting a real (after inflation) return of 10% for the next 40 years. Just throwing out numbers that aren't based in reality and then compounding them for decades leads you to be massively off in the math department.

The discussion of inflation is not relevant to this discussion. It started with the estate tax limit and IMO high earners need to think about this before it is too late to avoid the estate limit and plan. Do what you want but 30M is not as large as it seems in 30-40 yrs when we hit the avg life expectancy. But to say this is not reality in 30-40 yrs is just not correct.

Look at the estate limit in 30 yrs ago when it was under $1M. I am sure many were thinking $1M is an unattainable number when they were 40 but not when they are 80. Yeah, ,the estate limit very well will increase and be $100M in 40 years.

My point is when you are still young, think about estate tax and how you can mitigate paying this now rather than later when it may be too late. But if you don't care to think about this and think it is fantasy land, then that is your choice. My choice, along with my estate attorney, think this is something I should be thinking about now.

 

[thumbz]

Are there any statistics out there about docs at end of life and their networths? I have nothing to cite other than "what I've heard over and over" which is some horrifying statistic like half of all docs have less than $1 million between cash/401k at age 65. Typically through a lifetime of poor choices, with multiple divorces being a key factor.

If a 9 figure networth at death is achievable for the "average" doc, do they exist right now? Is the oldest hospitalist in my group (72) sitting on a networth of $45 mil?

Don't read this post as incendiary - I quite literally suspect these docs do exist, only as the exception, not the rule. Wondering if any of you have come across any statistics?

@emergentmd - why do you stick to $19k for the gift? My understanding is that if you go over that, the only change is that you need to file paperwork with the IRS that it applies to their $15 million lifetime max. From a planning perspective - doesn't it make more sense to give them $10 million today to let it compound in their names to avoid the inheritance tax on your compounded gains entirely?

 

[Mman]

My point is when you are still young, think about estate tax and how you can mitigate paying this now rather than later when it may be too late. But if you don't care to think about this and think it is fantasy land, then that is your choice.

My choice is to retire early and spend the money. I'm not dying with $100M in the bank at age 80, although I could quite easily do so if I didn't spend it.

 

[dpmd]

My choice is to retire early and spend the money. I'm not dying with $100M in the bank at age 80, although I could quite easily do so if I didn't spend it.

Retire early, spend the money, and support nonprofit organizations i like.

 

[emergentmd]

Are there any statistics out there about docs at end of life and their networths? I have nothing to cite other than "what I've heard over and over" which is some horrifying statistic like half of all docs have less than $1 million between cash/401k at age 65. Typically through a lifetime of poor choices, with multiple divorces being a key factor.

If a 9 figure networth at death is achievable for the "average" doc, do they exist right now? Is the oldest hospitalist in my group (72) sitting on a networth of $45 mil?

Don't read this post as incendiary - I quite literally suspect these docs do exist, only as the exception, not the rule. Wondering if any of you have come across any statistics?

@emergentmd - why do you stick to $19k for the gift? My understanding is that if you go over that, the only change is that you need to file paperwork with the IRS that it applies to their $15 million lifetime max. From a planning perspective - doesn't it make more sense to give them $10 million today to let it compound in their names to avoid the inheritance tax on your compounded gains entirely?

I think it is hard to use docs of 30 yrs ago who are 70 now as a good marker. People just did not think about retirement, savings, IRAs, CBP, etc 30-40 yrs ago. This has changed and I know many docs who are in their late 30's/early 40's with 3+M in their IRA. A lot of this has to do with the recent market appreciation especially if you are tech heavy.

Concerning the gift, yes you can give over 19K but have to count it towards your lifetime. This is essentially what a trust does but you have more say in how the money flows/legal protection, etc. If you give someone $10M today, you essentially can not put any guardrails.

Within the next 5 years, I plan on putting $2-3 M in each of our kids irrevocable trusts primarily with stocks which has a greater likelihood of appreciation. With the Trusts, I can put guardrails such as when they can access it and who can access it. Two Scenario,

1. Gift Kid A with $3M today into a brokerage account. Kid A can squander it, buy drugs, or whatever. Let's assume Kid A is morally fit and has $10M at 30 then gets married. I have now burdened Kid A with Prenup discussions. Let's assume Kid A does not get a Prenup, she keeps her 10M but in 20 years of marriage grows to $30M. They Divorce, now Cheating Son in Law walks away with 50% of gains or $10M.

2. Do A irrevocable trust for $3M today for Kid A. I set rules that only Kid A can own trust and if Kid A dies, only her immediate heirs (kids) can own the trust. I also set rules that she can only access 10% each year starting when she is 30. Same marriage, same divorce, same $30M. Son in law get nothing in the trust.

Once you get to 5M net worth, talk to estate attorney, you will thank me for it. I have stories of friends whose parents just did a Will. Wills still go through probate and he is going to spend the next 2yrs of his life getting his father's estate through probate in multiple different states. If his dad did a trust, he would have saved his kid a lot of headaches.

 

[Mman]

Once you get to 5M net worth, talk to estate attorney, you will thank me for it.

people should talk to an attorney when they get married and update with each new kid born. You don't need $5M in net worth to start thinking about powers of attorney and wills and trusts.

 

[mmmcdowe]

On the topic of trusts, I am interested in setting up trusts where the principle cannot be cashed out and ideally there would also be some inflation adjustment as well to keep it growing. My goal is not to for them to live off the money, though there might be enough that they could, but for it to be a safety net there to cover things like educational costs, emergencies, heath care issues, etc. Maybe a car at 18. My fear is even after reading the terms of the trust written by an estate lawyer that, ultimately, the co-trustee might find or make a loophole when I kick the bucket, but then again I look at charitable trusts like the Hershey Company Trust and it seems like perhaps they are in fact pretty airtight?

 

[Mman]

On the topic of trusts, I am interested in setting up trusts where the principle cannot be cashed out and ideally there would also be some inflation adjustment as well to keep it growing. My goal is not to for them to live off the money, though there might be enough that they could, but for it to be a safety net there to cover things like educational costs, emergencies, heath care issues, etc. Maybe a car at 18.

The trust we set up for our kids pays for their educational and health and whatever expenses. Once they turn 18 it gradually gives them more and more access to it until they are age 30. The hope is by the time they are 30 their brains are developed enough to make intelligent use of the funds. Didn't really want to have them potentially get a windfall at age 18 and blow through it.

 

[Nocturnist]

The trust we set up for our kids pays for their educational and health and whatever expenses. Once they turn 18 it gradually gives them more and more access to it until they are age 30. The hope is by the time they are 30 their brains are developed enough to make intelligent use of the funds. Didn't really want to have them potentially get a windfall at age 18 and blow through it.

My college ex whose an only child had a trust fund. Family had upwards of 100M, that's pretty much how they set up their trust fund. College paid for, gradual access from 25 onward. If there were any special expenses like house purchase, they had to petition the trustees for approval.
I think the spirit of the trust is to be pretty airtight but also some human element and flexibility for when life happens. The ex turned out just fine- ended up getting a masters in education, teaching for a living, and having a family. While no trust is perfect, I'm not aware of a better alternative.

 

[Mman]

My college ex whose an only child had a trust fund. Family had upwards of 100M, that's pretty much how they set up their trust fund. College paid for, gradual access from 25 onward. If there were any special expenses like house purchase, they had to petition the trustees for approval.
I think the spirit of the trust is to be pretty airtight but also some human element and flexibility for when life happens. The ex turned out just fine- ended up getting a masters in education, teaching for a living, and having a family. While no trust is perfect, I'm not aware of a better alternative.

Correct, you can't really not give them full access to it until they are like 65 or whatever, that would be cruel and they would spend their life resenting you. But you also can't just hand over a large sum of money to them at a young age as that is just asking for problems.

 

[Splenda88]

My college ex whose an only child had a trust fund. Family had upwards of 100M, that's pretty much how they set up their trust fund. College paid for, gradual access from 25 onward. If there were any special expenses like house purchase, they had to petition the trustees for approval.
I think the spirit of the trust is to be pretty airtight but also some human element and flexibility for when life happens. The ex turned out just fine- ended up getting a masters in education, teaching for a living, and having a family. While no trust is perfect, I'm not aware of a better alternative.

And you did not marry her/him! Are you insane? Lol

 

[eyeeye_captain]

And you did not marry her/him! Are you insane? Lol

Dated one who wasn’t on that level but was set for life. Got the news that one of my favorite family members had suddenly passed in a bad way while I was at their place. In tears. The response was “well I guess you can go home then.” Zero empathy. Figured a sociopath wasn’t worth the dough, broke up as soon as I got home.

Pre-nup would likely be an issue as well.

 

[Splenda88]

Dated one who wasn’t on that level but was set for life. Got the news that one of my favorite family members had suddenly passed in a bad way while I was at their place. In tears. The response was “well I guess you can go home then.” Zero empathy. Figured a sociopath wasn’t worth the dough, broke up as soon as I got home.

Pre-nup would likely be an issue as well.

I know it might not worth it sometimes. I was being tongue-in-cheek.

 

[Nocturnist]

And you did not marry her/him! Are you insane? Lol

Ha, after dating for 6 years we were pretty close to it but it just wasnt the one. Besides, after their parents messy divorce, that would have been the world's most airtight prenup. Primary home was a 5 story brownstone in the west village with a yard, just to give you an idea. Prob worth around 15M today. Pretty fun times spending every other weekend there, but almost 20 years later i can't say I have any regrets. I can also say it's alot more satisfying making my own fortune than marrying into it.

 

[emergentmd]

And you did not marry her/him! Are you insane? Lol

I know this was in jest, but that is the point of a trust. My kids Marry someone, that someone does not get any ownership of the trusts. Now if my kid gives them $$$, I can not do anything about this.

Trust can be structured anyways you want and it is almost limitless. The big problem is the trustee can do literally do what they want unless someone takes them to court. This is the quandary that we have.

The more people with a say in the trust, the less chance it can be executed against my wishes. But the more people with a say, means that it becomes more complicated for my kids to make decisions.

 

[emergentmd]

Dated one who wasn’t on that level but was set for life. Got the news that one of my favorite family members had suddenly passed in a bad way while I was at their place. In tears. The response was “well I guess you can go home then.” Zero empathy. Figured a sociopath wasn’t worth the dough, broke up as soon as I got home.

Pre-nup would likely be an issue as well.

Money is lost after about 3 generations. This kind of person will never be able to keep wealth. The best way to keep wealth and make sure the money is generational is to teach your kids values, raise them ethically with empathy/generosity.

Do this and money will last more than 3 generations.

 

[eyeeye_captain]

Money is lost after about 3 generations. This kind of person will never be able to keep wealth. The best way to keep wealth and make sure the money is generational is to teach your kids values, raise them ethically with empathy/generosity.

Do this and money will last more than 3 generations.

Agreed. It’s also a reason to make sure you wind up with someone who shares your values so in theory it’s one marriage forever. I had a lot in common with that ex, but that was a hard stop automatic goodbye.

It’s also nice to partner up with someone who doesn’t love spending money. Even if there’s not much coming in, there’s not much going out. That ex would’ve probably had us broke in 2 generations.

 

[emergentmd]

Agreed. It’s also a reason to make sure you wind up with someone who shares your values so in theory it’s one marriage forever. I had a lot in common with that ex, but that was a hard stop automatic goodbye.

It’s also nice to partner up with someone who doesn’t love spending money. Even if there’s not much coming in, there’s not much going out. That ex would’ve probably had us broke in 2 generations

So True. The most important decision in anyone's life if they choose marriage is who they marry. If you can find a genuinely nice/caring/supportive/empathetic person this is worth way more than looks. Even the 9+ where looks fades, wrinkles creeps, skin sags. But a good person only gets better. Most of my success is due to my wife, always supportive no matter what I do who genuinely trust that I have the family's best interest as the main priority.

I have many stories but one of my in law's ex refused to let him jump into an investment opportunity that would have made him 10+M with little risk.

My wife is on the opposite end. Taking on more family responsibilities so I can take more risks. All singles need to choose wisely and look beyond physical appearance. I am no saint who do not care about looks. I was just lucky to hit the jackpot on both looks and personality.

 

[Nocturnist]

To date still the most accurate chart ever created

 

[thumbz]

Switching gears on the convo a little - give me your advice on my situation.

I'm going to go forward with building a house this year. Budget is $1.3 million. My current financial situation:

Taxable brokerage: $450k
Home equity: $180k (worst case - this is my realtors 24 hours on the market number)
2026 "surplus income": $200k (projected) - so at the end of 2026 after all my usual expenses this will be my left over.

So here's my dilemma. I want to end up with a $750k mortgage for tax purposes. My loan requires 25% down, which is $300k. So do I:

Take out a $1.0 mil mortgage, pay the $300k down with my surplus income and home equity and leave the $450k invested (and add $80k to it)?
Take out a $750k mortgage, and dip $170k into my taxable brokerage to do it?

My rate is going to be 5.5% - so with the mortgage interest deduction my effective rate will be like 3.25%, so I really have no care to go under $750k. However, with average SPY returns annualized over the 15 year horizon of the mortgage, it makes more sense financially to take the whole $1.0 mil on and leave the extra invested. I know this, but then there's the cognitive aspect of a mortgage that large.

So what would you personally do?

 

[Nocturnist]

Switching gears on the convo a little - give me your advice on my situation.

I'm going to go forward with building a house this year. Budget is $1.3 million. My current financial situation:

Taxable brokerage: $450k
Home equity: $180k (worst case - this is my realtors 24 hours on the market number)
2026 "surplus income": $200k (projected) - so at the end of 2026 after all my usual expenses this will be my left over.

So here's my dilemma. I want to end up with a $750k mortgage for tax purposes. My loan requires 25% down, which is $300k. So do I:

Take out a $1.0 mil mortgage, pay the $300k down with my surplus income and home equity and leave the $450k invested (and add $80k to it)?
Take out a $750k mortgage, and dip $170k into my taxable brokerage to do it?

My rate is going to be 5.5% - so with the mortgage interest deduction my effective rate will be like 3.25%, so I really have no care to go under $750k. However, with average SPY returns annualized over the 15 year horizon of the mortgage, it makes more sense financially to take the whole $1.0 mil on and leave the extra invested. I know this, but then there's the cognitive aspect of a mortgage that large.

So what would you personally do?

I would split the two options. Take half from your brokerage and half from your surplus income. That way you don't have any fomo.

 

[Mman]

So what would you personally do?

Personally I wouldn't be building a house that costs 3x your brokerage account and $1.1M more than your current home equity. I'd live more modestly until I could more easily afford it, perhaps waiting another 1-2 years. Honestly waiting 2 years, saving $400K, letting your home equity get a little higher, etc would make it infinitely more affordable.

I realize I can't speak to your personal situation, but those numbers would give me serious pause. We didn't build a house until our brokerage accounts plus home equity were worth more than the total cost of the house we were building. But my wife and I were more of the live like a resident for a few years as an attending approach to spending.