Why are people working so long?

[worthless]

I’m asking a question out of genuine curiosity because something is picking at me.

I finished residency 6 years ago in a lucrative subspecialty. I was at essentially net zero when I got out and now have $3 million NW. I realize that this is largely a product of the amazing bull market we have had, but I’ve ran the numbers and even in the worst bear market environment, I would only be about 1.5 years behind. I also spend a lot of money. About 7k a month total not including mortgage (which is paid off), so it isn’t as if I am a penny-pincher.

I have discussed my situation on finance forums and they say that I can comfortably retire now. Using the 3.5% SWR, I can replace my spending and my house is already paid off.

I have a partner who is in her 60s and clearly hates her job. I see other people trying desperately to work at that age and older. It would be one thing if I felt like they really enjoyed what they did, but it is abundantly obvious they are just trying to make more money. They are doing very routine cases and just seem miserable and try to leave as early as they can.

So my question is pretty simple and obviously speculation, but...what is their situation?

I have to assume they either got financially behind somehow (how??) or just can’t do basic math. Basically, I don’t think I could spend the kind of money I make. Add a vacation home and a boat, college education for multiple kids, and I’m still doing OK. Yes it puts me another 2 years behind, but no matter what I can step away in my early 40s.

If you know examples of people in this situation, kindly share. Thank you!

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[Chemist0157]

1. More money does not equal happiness or satisfaction. People want more and get more but don't stop wanting more.

2. Some people might be in worse financial shape than they should be.

3. Maybe they still would rather be working even with its frustrations than not working. I know people who keep working even though financially they should not have a need. They want to.

 

[CopperStripes]

I've gotten the sense that many high-earning physicians spend a ton of money. Big fancy homes and associated services (house cleaning, landscaping, etc), private school and/or nannies for their kids, frequent meals at nice restaurants, vacations, etc. This can really eat into the amount they save. This obviously isn't the only explanation to your question, but I do think it's a major factor for a lot of doctors. My guess is that you're much more frugal than others.

 

[Mman]

I know physicians (multiple including a relative) that support their children into their 30s and 40s.

Like buy them houses, send grandkids to private school, etc. That is the opposite of FIRE. It's work til your dead so your children have to work as little as possible.

 

[doctalaughs]

I’m asking a question out of genuine curiosity because something is picking at me.

I finished residency 6 years ago in a lucrative subspecialty. I was at essentially net zero when I got out and now have $3 million NW. I realize that this is largely a product of the amazing bull market we have had, but I’ve ran the numbers and even in the worst bear market environment, I would only be about 1.5 years behind. I also spend a lot of money. About 7k a month total not including mortgage (which is paid off), so it isn’t as if I am a penny-pincher.

I have discussed my situation on finance forums and they say that I can comfortably retire now. Using the 3.5% SWR, I can replace my spending and my house is already paid off.

I have a partner who is in her 60s and clearly hates her job. I see other people trying desperately to work at that age and older. It would be one thing if I felt like they really enjoyed what they did, but it is abundantly obvious they are just trying to make more money. They are doing very routine cases and just seem miserable and try to leave as early as they can.

So my question is pretty simple and obviously speculation, but...what is their situation?

I have to assume they either got financially behind somehow (how??) or just can’t do basic math. Basically, I don’t think I could spend the kind of money I make. Add a vacation home and a boat, college education for multiple kids, and I’m still doing OK. Yes it puts me another 2 years behind, but no matter what I can step away in my early 40s.

If you know examples of people in this situation, kindly share. Thank you!

You should realize that you hit the jackpot in a triple way that most physicians can’t do:

1) graduate residency with “net zero” debt - definitely in the minority; many graduate with mid 6-figure debt through little choice of their own

2) high paying specialty

3) you must live in a relatively low-cost area possibly with no school-age kids (for 7k/mo- how much was your mortgage and how did you pay it off)? If you don’t have kids what do you think your monthly spend will be when they are age 6-25 or so? Do you vacation?

Many physicians have 1 or 2 of the points going for them above, not many have all 3.

Also I agree many are not good with savings and their money in general.

 

[Neopolymath]

What's your annual income?

I know many high earners in various fields that live paycheck to paycheck. Some by choice/outlook on life and some due to poor self-control and ignorance.

It all depends on number of wives, homes, kids, hobbies and what age you started at. Not everyone graduates residency at an early age for that compound interest to work its magic. Not everyone has no debt at end of residency. So many variables here.

Good for you.

 

[Saddleshoes]

Divorce.
Initialed Kids.
Bad Investments.
Legal Entanglements.
Life!!!!!!!


Money does not solve your problems it only makes your problems more expensive!

 

[worthless]

You should realize that you hit the jackpot in a triple way that most physicians can’t do:

1) graduate residency with “net zero” debt - definitely in the minority; many graduate with mid 6-figure debt through little choice of their own

2) high paying specialty

3) you must live in a relatively low-cost area possibly with no school-age kids (for 7k/mo- how much was your mortgage and how did you pay it off)? If you don’t have kids what do you think your monthly spend will be when they are age 6-25 or so? Do you vacation?

Many physicians have 1 or 2 of the points going for them above, not many have all 3.

Also I agree many are not good with savings and their money in general.

That makes sense in a lot of ways and I could see adding 5 or even 10 years to account for those things, but not 25.

My former wife and I had about $300k student loan debt which we paid off right away mostly just to get Sallie Mae out of our lives.

Yes it is a relatively low cost area and yes we have no kids. My house was about 400k. I paid off my mortgage after the divorce from savings just so I wouldn’t have to refinance into some horrible rate (compared to what I had). Before that, the mortgage was about 2400 on a 15 year.

 

[worthless]

What's your annual income?

I know many high earners in various fields that live paycheck to paycheck. Some by choice/outlook on life and some due to poor self-control and ignorance.

It all depends on number of wives, homes, kids, hobbies and what age you started at. Not everyone graduates residency at an early age for that compound interest to work its magic. Not everyone has no debt at end of residency. So many variables here.

Good for you.

Average has been in the 750 range

One wife (and divorce). Several investment homes. No kids. Hobbies are working out, traveling, and eating out.

 

[Mman]

My house was about 400k. I paid off my mortgage after the divorce from savings just so I wouldn’t have to refinance into some horrible rate (compared to what I had). Before that, the mortgage was about 2400 on a 15 year.

Why would you have had to refinance into some horrible rate? The nice thing about a fixed rate mortgage is you never have to refinance to a higher rate, but only have the option to refinance to a lower one if available.

Did you use some ARM that was adjusting at a bad time?

 

[worthless]

Why would you have had to refinance into some horrible rate? The nice thing about a fixed rate mortgage is you never have to refinance to a higher rate, but only have the option to refinance to a lower one if available.

Did you use some ARM that was adjusting at a bad time?

Good question....it’s because I had just recently bought a 2nd home as a primary residence, so the first home was then considered an investment property and the terms of refinance were very different. I couldn’t bring myself to pay a bunch of fees just to double my rate so I just paid it off.

 

[doctalaughs]

That makes sense in a lot of ways and I could see adding 5 or even 10 years to account for those things, but not 25.

My former wife and I had about $300k student loan debt which we paid off right away mostly just to get Sallie Mae out of our lives.

Yes it is a relatively low cost area and yes we have no kids. My house was about 400k. I paid off my mortgage after the divorce from savings just so I wouldn’t have to refinance into some horrible rate (compared to what I had). Before that, the mortgage was about 2400 on a 15 year.

Average has been in the 750 range

One wife (and divorce). Several investment homes. No kids. Hobbies are working out, traveling, and eating out.

I would say you have on the higher side for income (even among specialists) and on the extreme low side for expenses (main factors being very low cost of living area and BIG factor being no kids). The spread between these factors make it so that you can save an incredible amount per year.

Essentially you are living the lifestyle of someone making 200k/yr and saving the rest. Good for you.

Many docs make 300k and live the same lifestyle as you. But that means it would take them 25 years to reach the same savings it would take you in 5. On the other hand, they don’t want to live on the brink of poverty (say 30k) and still take 10 years to save what you did in 5.

Essentially the higher your salary the easier it is to get to FIRE quickly (and it’s not linear).

 

[worthless]

I would say you have on the higher side for income (even among specialists) and on the extreme low side for expenses (main factors being very low cost of living area and BIG factor being no kids). The spread between these factors make it so that you can save an incredible amount per year.

Essentially you are living the lifestyle of someone making 200k/yr and saving the rest. Good for you.

Many docs make 300k and live the same lifestyle as you. But that means it would take them 25 years to reach the same savings it would take you in 5. On the other hand, they don’t want to live on the brink of poverty (say 30k) and still take 10 years to save what you did in 5.

Essentially the higher your salary the easier it is to get to FIRE quickly (and it’s not linear).

My partners make the same that I do. That’s what has me stumped

 

[VA Hopeful Dr]

My partners make the same that I do. That’s what has me stumped

It shouldn't. You've been given multiple reasons why they might still be working. The first 2 responses pretty much nailed ti.

 

[HemeOncHopeful19]

What field are you in? Is it possible your partners were not making the same money you are when they were your age?

They also could have lost plenty of money in the dot com bust, or 2008 etc. Everyone thinks they're a genius with their money until it's 20 years later and we are looking back in hindsight, imo.

 

[worthless]

What field are you in? Is it possible your partners were not making the same money you are when they were your age?

They also could have lost plenty of money in the dot com bust, or 2008 etc. Everyone thinks they're a genius with their money until it's 20 years later and we are looking back in hindsight, imo.

Same as you, I'm guessing. They've been doing well for a good 20 years, but I'm not sure about before then.

Fortunately, I'm not over-leveraged in the market. Most of my money is in real estate. But if that takes a big hit, it could really sting.

 

[doctalaughs]

My partners make the same that I do. That’s what has me stumped

So they spend too much and save too little. It’s not hard to be irresponsible with money, no matter what you make.

Also if they are spending more extravagantly than you, they probably are aiming for a higher net worth to consider themselves financially independent. It’s all relative - a guy who makes 2M /yr and spends 1 M /yr could say it would take him 25 years making that much to feel like he could retire.

I personally wouldn’t feel close at all to financially independence with your net worth because I spend a lot more. Others would.

Not really sure what “stumps” you?

 

[worthless]

So they spend too much and save too little. It’s not hard to be irresponsible with money, no matter what you make.

Also if they are spending more extravagantly than you, they probably are aiming for a higher net worth to consider themselves financially independent. It’s all relative - a guy who makes 2M /yr and spends 1 M /yr could say it would take him 25 years making that much to feel like he could retire.

I personally wouldn’t feel close at all to financially independence with your net worth because I spend a lot more. Others would.

Not really sure what “stumps” you?

Well actually that helps but is still fairly qualitative. Mostly I’m curious about real world examples of how spending can get so out of control at these salaries that another 25 years of work is needed. How is that theoretical person making 2M spending 1M? On what? What are the big things that lead to this? For instance, you can’t tell me they are eating out enough to burn up 1 million a year.

Supporting children and even grandchildren into middle age, or some other kind of entourage - that I can see. A divorce late in the game also is huge. Outside of that, where is the money going? What do extravagant vacations cost? What kind of sh*** investments? What pitfills have people hit? What are some real-world examples?

@doctalaughs: How much do you feel you need to retire?

 

[Alley0911]

I’m curious if you could please tell us your specialty and your partners because salaries online are always so vague and as a future doctor I would honestly love to know. I appreciate this post, and like you I find it mind boggling that physicians I personally know make 500,000 and they seem to do well. Yet on this message board responses are often about struggling physicians and don’t go into this profession for the money.

 

[worthless]

I’m curious if you could please tell us your specialty and your partners because salaries online are always so vague and as a future doctor I would honestly love to know. I appreciate this post, and like you I find it mind boggling that physicians I personally know make 500,000 and they seem to do well. Yet on this message board responses are often about struggling physicians and don’t go into this profession for the money.

Sure - it's Hem/Onc and same for my 2 partners. Make around 750 a year each. I would agree that doing this solely for the money would SUCK, but the money is certainly a nice perk.

 

[HemeOncHopeful19]

Sure - it's Hem/Onc and same for my 2 partners. Make around 750 a year each. I would agree that doing this solely for the money would SUCK, but the money is certainly a nice perk.

When you retire early and need a replacement please do PM me.

In all seriousness, I think living in a $400k house instead of $800k+ and having no children makes a big difference. In my (limited) experience a LOT of doctors support their kids well into their 20s-30s, especially if said kids end up in medicine too (instead of taking out student loans for example). Then if their kids didn't end up financially successful they help support the grandkids. People buy a big house but who is going to clean it when you are working full time (so pay for a housekeeper, lawn maintenance, pool maintenance) and who picks up your kids from school (so pay a nanny). They also join the local tennis club (because that's what rich people are supposed to do right?), drive expensive cars, Rolex watch, high price designer clothes because why not, etc.

Also it isn't like 30 years ago everyone was saying "oh hey just invest in a low cost three fund portfolio and play the long game" remember that the internet was brand new and slow so everyone was getting their investment advice from paid shills in TV/Radio/Magazines (although perhaps they are now getting it from paid shills on the internet, who knows).

 

[doctalaughs]

Well actually that helps but is still fairly qualitative. Mostly I’m curious about real world examples of how spending can get so out of control at these salaries that another 25 years of work is needed. How is that theoretical person making 2M spending 1M? On what? What are the big things that lead to this? For instance, you can’t tell me they are eating out enough to burn up 1 million a year.

Supporting children and even grandchildren into middle age, or some other kind of entourage - that I can see. A divorce late in the game also is huge. Outside of that, where is the money going? What do extravagant vacations cost? What kind of sh*** investments? What pitfills have people hit? What are some real-world examples?

@doctalaughs: How much do you feel you need to retire?

10 M outside of primary residence and 529s/ education funds to “retire” and be financially independent but probably still work minimally at that point for fun. I’m a bit later career than you - but have no intentions to hit that # later than low 50s. However, I don’t see a reason to hit a specific number earlier by spending less - since I don’t really want to retire now.

Also, there are not really any 400k houses where I live (and I don’t live in NY, San Fran or LA). Many places, 800k is barely going to get you in a nice neighborhood so not “extreme” by any stretch. Spending habits vary - so I’m not saying my way is better or anything - but don’t assume every doc who spends 3 times what you do (which I do) is living in 3 mansions and blowing it all on cocaine and hookers.

 

[Alley0911]

Sure - it's Hem/Onc and same for my 2 partners. Make around 750 a year each. I would agree that doing this solely for the money would SUCK, but the money is certainly a nice perk.

Niiiiiiiiiice! How long did it take to reach that salary?

 

[worthless]

Niiiiiiiiiice! How long did it take to reach that salary?

A couple years out of fellowship

 

[Splenda88]

American-born physicians (emphasis on American-born) seem to be notoriously bad with money. Two of my co-residents already purchased house (new constructions) before even graduating residency. They both will make ~ 300k as hospitalists... However, one of them did not go crazy as he bought something that is less than what he will make per year.

a 2000 sqft home in Western Europe is a big home. Here a 2000 sqft home is for families in the lower middle class. It's amazing to hear my co-residents talking about buying 2500+ sqft homes as STARTER homes.


End of rant/

 

[emergentmd]

If I did not have kids, I would have cut back to 40 hrs a month just to stay sane and retired within 10 yrs. 7K/mo spending for most docs are low. I guess if I didn't have kids, I would spend about 7K but having kids in private school, club sports, traveling raises that 7K/mo easily into 20K/mo for me.

I make more than you now but plan just to cut back and never retire. What am I going to do? There just is not enough hobbies to keep me busy.

 

[worthless]

American-born physicians (emphasis on American-born) seem to be notoriously bad with money. Two of my co-residents already purchased house (new constructions) before even graduating residency. They both will make ~ 300k as hospitalists... However, one of them did not go crazy as he bought something that is less than what he will make per year.

a 2000 sqft home in Western Europe is a big home. Here a 2000 sqft home is for families in the lower middle class. It's amazing to hear my co-residents talking about buying 2500+ sqft homes as STARTER homes.


End of rant/

It’s actually not as bad of a deal as you might think: houses generally appreciate and the interest on the mortgage you can write off no matter how high your salary. It’s like investing in the market, but having a tax benefit to boot

 

[wamcp]

That makes sense in a lot of ways and I could see adding 5 or even 10 years to account for those things, but not 25.

My former wife and I had about $300k student loan debt which we paid off right away mostly just to get Sallie Mae out of our lives.

Yes it is a relatively low cost area and yes we have no kids. My house was about 400k. I paid off my mortgage after the divorce from savings just so I wouldn’t have to refinance into some horrible rate (compared to what I had). Before that, the mortgage was about 2400 on a 15 year.

So no kids?

It’s really easy to burn cash with kids. Good daycare or nanny costs money (have a colleague who pays 70k a year to a nanny for a 30hr/week schedule because of the odd/evening hours needs, and that’s aftertax money, and has to cut a check to the gov for payroll taxes too).

Your spouse may also choose part time or quit entirely to raise them = loss of income (and now you are suddenly saving for retirement for two with just one income).

Private schools, personal tutors, summer classes, paying for college and graduate schools, bigger house plus bigger and multiple cars needed for convenience, expensive sports or hobbies for them, vacations become more expensive, basically spending “in competition” to keep up with other parents.

Got three kids? Multiply the above by three.

oh and if you are a good parent, you generally want to spend time with your kids..which means you may personally choose to not moonlight or see fewer patients at your clinic or whatever = loss of potential income


Now add all the spending and income loss of the above with your typical desired luxury lifestyle and what do you really have left going towards retirement investing?

Not to mention if you end up buying your kids homes or whatever in the future, you’ll be saving up for that too

 

[wamcp]

American-born physicians (emphasis on American-born) seem to be notoriously bad with money. Two of my co-residents already purchased house (new constructions) before even graduating residency. They both will make ~ 300k as hospitalists... However, one of them did not go crazy as he bought something that is less than what he will make per year.

a 2000 sqft home in Western Europe is a big home. Here a 2000 sqft home is for families in the lower middle class. It's amazing to hear my co-residents talking about buying 2500+ sqft homes as STARTER homes.


End of rant/

I've got two kids and own a 'starter' 3000 sqft home and I feel it's only 'adequate'...

 

[Splenda88]

I've got two kids and own a 'starter' 3000 sqft home and I feel it's only 'adequate'...

That is more than 'adequate'. That is big for a family of 4.

 

[Mad Jack]

Well actually that helps but is still fairly qualitative. Mostly I’m curious about real world examples of how spending can get so out of control at these salaries that another 25 years of work is needed. How is that theoretical person making 2M spending 1M? On what? What are the big things that lead to this? For instance, you can’t tell me they are eating out enough to burn up 1 million a year.

Supporting children and even grandchildren into middle age, or some other kind of entourage - that I can see. A divorce late in the game also is huge. Outside of that, where is the money going? What do extravagant vacations cost? What kind of sh*** investments? What pitfills have people hit? What are some real-world examples?

@doctalaughs: How much do you feel you need to retire?

Extravogant housing (the sky is the limit here), ultra-luxury vacations (some places will cost 10-20k per night for a stay), exotic cars, private school for the kids (each kid can run 50k/year from age 6 to age 18 at some exclusive schools), yachts (even a cheap decent used yacht will be well into the six figures), country club memberships for the old guard, etc etc.

You can easily spend ungodly amounts of money on things if you so choose. There's always another tier of consumerism, and you, me, and everyone we know will never crack into what the lifestyle of someone with a nine figure or a billion dollar net worth is like. The disparity in the way we live from the ultra wealthy may as well be the same disparity between us and someone living in a small village in Ethiopia. If you try to live like them, you'll be broke in literally days.

 

[Mad Jack]

That is more than 'adequate'. That is big for a family of 4.

It is larger than the average home literally anywhere in the entire world

 

[Mad Jack]

It’s actually not as bad of a deal as you might think: houses generally appreciate and the interest on the mortgage you can write off no matter how high your salary. It’s like investing in the market, but having a tax benefit to boot

They also can't be lost through litigation or bankruptcy in some states, which can allow them to be a safe store for capital in the event of a massive payout

 

[doctalaughs]

Extravogant housing (the sky is the limit here), ultra-luxury vacations (some places will cost 10-20k per night for a stay), exotic cars, private school for the kids (each kid can run 50k/year from age 6 to age 18 at some exclusive schools), yachts (even a cheap decent used yacht will be well into the six figures), country club memberships for the old guard, etc etc.

You can easily spend ungodly amounts of money on things if you so choose. There's always another tier of consumerism, and you, me, and everyone we know will never crack into what the lifestyle of someone with a nine figure or a billion dollar net worth is like. The disparity in the way we live from the ultra wealthy may as well be the same disparity between us and someone living in a small village in Ethiopia. If you try to live like them, you'll be broke in literally days.

I know someone who made in his 30s probabaly between 50M-70M on a startup (within like 1-2 years) and thought he was one of these ultra-wealthy individuals. Bought the 25k sq foot mansion, fleet of cars, vacation houses, (small) yacht etc. then the 2008 housing crisis came and turns out he was over-leveraged.... now he’s broke.

There’s no limit to stupid and not hard to blow through any amount of money.

Also although real estate is generally a good/safe investment don’t assume that 2008 can’t ever happen again (if you are over leveraged in real estate it can wipe you out).

 

[Slack3r]

I know someone who made in his 30s probabaly between 50M-70M on a startup (within like 1-2 years) and thought he was one of these ultra-wealthy individuals. Bought the 25k sq foot mansion, fleet of cars, vacation houses, (small) yacht etc. then the 2008 housing crisis came and turns out he was over-leveraged.... now he’s broke.

There’s no limit to stupid and not hard to blow through any amount of money.

Also although real estate is generally a good/safe investment don’t assume that 2008 can’t ever happen again (if you are over leveraged in real estate it can wipe you out).

A big housing crash like 08 may happen again, but if you managed to hold onto the property it’s likely worth more now than it ever was before.

 

[Splenda88]

A big housing crash like 08 may happen again, but if you managed to hold onto the property it’s likely worth more now than it ever was before.

Can't wait for the next crash, but it won't be anything close to 2008. Condos (2BR/1BA) were selling for < 15k in south FL in 2009-2011.

 

[Postictal Raiden]

Can't wait for the next crash, but it won't be anything close to 2008. Condos (2BR/1BA) were selling for < 15k in south FL in 2009-2011.

I'm praying for a crash. I still have 1 more year in residency and another year in fellowship. By that time, hopefully, all of these governmental handouts will have expired and people will need to get back to work pay their own bills. I anticipate a big chunk of people to fail at life and, sadly, lose their homes to collections.

 

[Dusn]

It’s actually not as bad of a deal as you might think: houses generally appreciate and the interest on the mortgage you can write off no matter how high your salary. It’s like investing in the market, but having a tax benefit to boot

the ability to deduct the interest on your primary home largely ended with the tax changes in 2017.

 

[HemeOncHopeful19]

I'm praying for a crash. I still have 1 more year in residency and another year in fellowship. By that time, hopefully, all of these governmental handouts will have expired and people will need to get back to work pay their own bills. I anticipate a big chunk of people to fail at life and, sadly, lose their homes to collections.

I don't see government letting people fail at life again like in 2008. Surely they learned their lesson and will just your and my taxes to cover the bill, which will funnel it all to the big banks who own the loans anyway. Most people in congress seem to have a close relative that works in an "investment firm", and that way they avoid another Occupy Wall Street fiasco where the homeless weirdos actually move into their yard.

 

[hallowmann]

Kids cost a ridiculous amount. I honestly think that is one of the biggest things you're missing from this. Even as a couple, we could live comfortably on half of what we're barely scraping by with now.

It is larger than the average home literally anywhere in the entire world

I've got more kids and <2k sqft. Its too big. I've accumulated too much stuff, and need to get rid of it all before I move after training. Kids stuff just seems to explode.

A big housing crash like 08 may happen again, but if you managed to hold onto the property it’s likely worth more now than it ever was before.

In some markets houses didn't rebound for a decade, and that's a long time to hold on to multiple mortgages. Money in the market would have done much better by now.

I'm praying for a crash. I still have 1 more year in residency and another year in fellowship. By that time, hopefully, all of these governmental handouts will have expired and people will need to get back to work pay their own bills. I anticipate a big chunk of people to fail at life and, sadly, lose their homes to collections.

Me too bro, me too. Housing prices in the area I'm looking have increased by at least $100k compared to the beginning of last year. We might just snag a 1k sq ft apt or condo if it doesn't happen quick enough.

 

[worthless]

the ability to deduct the interest on your primary home largely ended with the tax changes in 2017.

No they just lowered the cap in 2017:

Publication 936 (2023), Home Mortgage Interest Deduction | Internal Revenue Service

www.irs.gov

Home mortgage interest
You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.

 

[Dusn]

No they just lowered the cap in 2017:

Publication 936 (2023), Home Mortgage Interest Deduction | Internal Revenue Service

www.irs.gov

Home mortgage interest
You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.

The tax changes in 2017 lowered the cap on housing interest and also capped SALT and property tax deductions at 10k. Therefore, if you are married filing jointly, then your first 14K of mortgage interest (until you hit your standard deduction of 24K) does not save you anything on taxes, unless you're able to make up that 14K difference with some other itemized deduction. Given the low interest rates which most of us are able to get on our mortgage today (or by refinancing), it would be hard to get much above 14K in interest on the first 750k of a home -- especially after you get passed your first few years of home ownership. So the tax deduction of owning a home is no longer much of a benefit for married filing jointly.

I'd be happy to know I'm wrong but i don't think I am. It's something to keep in mind in the rent vs buy decision.

 

[dpmd]

The tax changes in 2017 lowered the cap on housing interest and also capped SALT and property tax deductions at 10k. Therefore, if you are married filing jointly, then your first 14K of mortgage interest (until you hit your standard deduction of 24K) does not save you anything on taxes, unless you're able to make up that 14K difference with some other itemized deduction. Given the low interest rates which most of us are able to get on our mortgage today (or by refinancing), it would be hard to get much above 14K in interest on the first 750k of a home -- especially after you get passed your first few years of home ownership. So the tax deduction of owning a home is no longer much of a benefit for married filing jointly.

I'd be happy to know I'm wrong but i don't think I am. It's something to keep in mind in the rent vs buy decision.

Maybe if they give a ton to charity then mortgage interest might make it worth itemizing. Otherwise standard deduction wins.

 

[SeniorWrangler]

The biggest expenses for people are houses and kids… being house poor sucks. If I had to give myself advice I’d say “don’t buy into a housing boom, dummy.”

Having a kid who requires a lot of investment but then blossoms is nice though.

Divorce is also super expensive and doesn’t have an upside, and I suspect this keeps a lot of docs working longer than they’d like.

 

[dpmd]

Too many doctors buy expensive houses early and then do stuff like buy vacation homes, expensive boats, take very luxury vacations, do high end remodels to their expensive houses or trade up to better houses, buy fancy cars or lease them repeatedly. It all adds up so that even single childless docs can end up with little net worth. But after all the delayed gratification along the way to getting their MD they convince themselves they deserve it. Sort of like the person who eats healthy all week then consumes so much on the weekend they sabotage their fitness goals. If you make better choices even with kids and divorces they could end up in better financial situations. But it is hard if you don't have a naturally frugal mindset.

 

[Financial Advisor Justin]

You should realize that you hit the jackpot in a triple way that most physicians can’t do:

1) graduate residency with “net zero” debt - definitely in the minority; many graduate with mid 6-figure debt through little choice of their own

2) high paying specialty

3) you must live in a relatively low-cost area possibly with no school-age kids (for 7k/mo- how much was your mortgage and how did you pay it off)? If you don’t have kids what do you think your monthly spend will be when they are age 6-25 or so? Do you vacation?

Many physicians have 1 or 2 of the points going for them above, not many have all 3.

Also I agree many are not good with savings and their money in general.

My experience has found many physicians like to "keep up with the jones". If you can live modestly until you are well established and your student loans are paid off you can for the most part live how you would like. There is a saying "if you do what others won't you can live like other can't"

Let me know if you have questions!!

 

[sallyhasanidea]

Sure - it's Hem/Onc and same for my 2 partners. Make around 750 a year each. I would agree that doing this solely for the money would SUCK, but the money is certainly a nice perk.

What part of the country do you practice? Are you a partner? Was it difficult to get this position? What do you think of the future of heme onc?

 

[OraclePL]

I’m asking a question out of genuine curiosity because something is picking at me.

I finished residency 6 years ago in a lucrative subspecialty. I was at essentially net zero when I got out and now have $3 million NW. I realize that this is largely a product of the amazing bull market we have had, but I’ve ran the numbers and even in the worst bear market environment, I would only be about 1.5 years behind. I also spend a lot of money. About 7k a month total not including mortgage (which is paid off), so it isn’t as if I am a penny-pincher.

I have discussed my situation on finance forums and they say that I can comfortably retire now. Using the 3.5% SWR, I can replace my spending and my house is already paid off.

I have a partner who is in her 60s and clearly hates her job. I see other people trying desperately to work at that age and older. It would be one thing if I felt like they really enjoyed what they did, but it is abundantly obvious they are just trying to make more money. They are doing very routine cases and just seem miserable and try to leave as early as they can.

So my question is pretty simple and obviously speculation, but...what is their situation?

I have to assume they either got financially behind somehow (how??) or just can’t do basic math. Basically, I don’t think I could spend the kind of money I make. Add a vacation home and a boat, college education for multiple kids, and I’m still doing OK. Yes it puts me another 2 years behind, but no matter what I can step away in my early 40s.

If you know examples of people in this situation, kindly share. Thank you!

If you’re willing to share how you achieved that net worth, for example how much you were able to invest a month, that would be very helpful. I thought I was doing well but am nowhere close to the level of your success. Helps me to keep on track with my savings goals. Congrats on the early success

I don’t think the answer to your question is that difficult. Childcare can tack on a few thousand dollars a month. Most doctors will have bigger mortgages, with bigger down payments. If you have children, doctors will save for college which does not count for retirement savings. But I think the main cause is higher fixed expenses. There are many doctors who spend $15,000-$18,000 monthly. You have less expenses (no children) but also possess basic financial common sense, which a lot of people lack. I’ve spoken with colleagues who don’t even realize they’re supposed to be saving for retirement. They have a general sense that they should, but no idea of when they should start or how much they should save. Don’t underestimate how much money a doctor or spouse can blow through, I know residents leasing luxury cars and young attendings taking first class international trips. People who end up on forums like this are self-selected.

But yes I agree that on that kind of salary, which very few doctors will achieve, to still not be financially independent is absurd.

 

[Dusn]

If you’re willing to share how you achieved that net worth, for example how much you were able to invest a month, that would be very helpful. I thought I was doing well but am nowhere close to the level of your success. Helps me to keep on track with my savings goals. Congrats on the early success

I don’t think the answer to your question is that difficult. Childcare can tack on a few thousand dollars a month. Most doctors will have bigger mortgages, with bigger down payments. If you have children, doctors will save for college which does not count for retirement savings. But I think the main cause is higher fixed expenses. There are many doctors who spend $15,000-$18,000 monthly. You have less expenses (no children) but also possess basic financial common sense, which a lot of people lack. I’ve spoken with colleagues who don’t even realize they’re supposed to be saving for retirement. They have a general sense that they should, but no idea of when they should start or how much they should save. Don’t underestimate how much money a doctor or spouse can blow through, I know residents leasing luxury cars and young attendings taking first class international trips. People who end up on forums like this are self-selected.

But yes I agree that on that kind of salary, which very few doctors will achieve, to still not be financially independent is absurd.

honestly, the question should be why isn’t the OPs net worth even higher.

What he did should be doable by most physicians - just keep your spending the same as resident level, start saving and investing in low cost index funds as soon as possible.

Actually, non-physicians who could make ~100K in their early 20s could be at a similar net worth because they’ve got all those extra years in the market for their money to compound.

The most important thing is time in the market — paying off high interest debts and getting money in investments as soon as possible and holding the course.

play around with a compound interest calculator and you’ll see what I’m talking about.

 

[worthless]

What part of the country do you practice? Are you a partner? Was it difficult to get this position? What do you think of the future of heme onc?

Midwest. Partner. Not difficult at all. The market for us is ridiculous. I have to block recruiters and tag their email as spam with all the offers I get in a daily basis. The future is excellent.