More Details On My Savings and Salary.

[MedicalDoc]

For more helpful (and accurate) comparisons, here is my data:

My wife and I are physicians in our mid-40s
Our total gross income: $~580K/yr
403B and academic annuity savings: ~$1,000,000 (90% stocks)
After tax retirement account: $500K (75% stocks)
Take home: ~380K/yr
Savings (403B and after tax accounts): ~125K/yr
Academic annuity (paid by our employers) 60K/yr

So we save about 1/3 of our take-home salary. How does that compare to you? Any advice?

We are hoping to retire in about a dozen years and figure that we should have around 7 million by then

 

[Lazarus]

You could retire right now. I would if I had your savings.

 

[Nords]

How does that compare to you?  Any advice?
We are hoping to retire in about a dozen years and figure that we should have around 7 million by then

Er, Doc, I'm thinking you're not going to get much help here.  I keep looking for the sarcasm disclaimer or the smiley button but I'm going to treat this post as a serious question.

Your income is greater than some of the other board members by an order of magnitude-- literally by a factor of 10.  Your portfolio is probably twice the size of many on this board and it's about to grow to nearly that order of magnitude.  And in the philosophy of "Physician, heal thyself", you're also going to be accused of having a lock on healthcare expenses.

Unless you're carrying a pile of debt, or living next door to Trump & Oprah, or planning to raise a couple dozen kids and pay for their Harvard degrees, you appear to have the assets to retire yesterday.  Of course that depends on your expenses, but again keep in mind that most people here ER on $25K-$40K/year.  The last guy who insisted that he needed $100K/year "to support my lifestyle" had a tough time of it.

As far as I can see, your biggest issue is deciding why you're still working.

 

[MedicalDoc]

This is a serious post. I live in a major metropolitan area and could retire right now IF I sell my house (major expense in mortgage, upkeep, taxes, etc.) and make other drastic changes in my standard of living. If I did that, I'd also have to pay for a divorce lawyer. I presume that most people here are trying to preserve their standard of living into retirement.

 

[retire@40]

Take home: ~380K/yr

So we save about 1/3 of our take-home salary.  How does that compare to you?  Any advice?

We are hoping to retire in about a dozen years and figure that we should have around 7 million by then

I think you are on the right track.

If you are spending $250K a year, you would need $6-$7 million to retire.

So you'll be about 57 and, being medical doctors, if you've taken care of yourselves, you might have a good 20 years of quality life remaining to enjoy your savings.

I would opt for 40 years or more of quality life to enjoy my savings, but I only need $50K a year to keep me comfortable.  

 

[Ed_The_Gypsy]

I presume that most people here are trying to preserve their standard of living into retirement.

That would be nice. In our case, however, the objective is survival.

 

[LOL!]

My advice: give away more to charity

To see how you are doing you might wish to read this article on "Personal Financial Ratios..." http://www.fpanet.org/journal/articles/2006_Issues/jfp0106-art6.cfm

And to add a personal note for you to compare: We are about the same age. Our salaries are about 1/3 of yours. You didn't mention children, we have 2 kids under 15. We have invested and saved up a little more than you have. We save about 35% of our income. Income taxes are only 15 to 17% of our income though.

More advice: Enjoy life. Practice retirement by taking one or two months of vacation each year. Reduce your investment expenses to less than 0.5% of your portfolio. And don't forget that charity.

 

[LOL!]

I would also recommend that you read The Millionaire Next Door if you have not already.  Also maybe The Four Pillars of Investing and Why Smart People Make Big Money Mistakes.

What other kind of specific advice are you looking for?

 

[MedicalDoc]

I've read The Millopnaire Next Door and enjoyed it. Mostly, I'm mostly trying to get a sense of what people are saving who hope to retire with a standard of living that approximates their pre-retirement income. Trying to figure out whether I should try to divert more income to savings by reducing my expenses.

 

[claire]

7 Million! Is medical Doc seriousy asking if this is enough!!!!

some people never see one million let alone seven million. suggest medical doc (if he is sincere and i have my doubts) looks for an ER site for millionaires.

 

[LOL!]

.... Mostly, I'm mostly trying to get a sense of what people are saving who hope to retire with a standard of living that approximates their pre-retirement income. Trying to figure out whether I should try to divert more income to savings by reducing my expenses.

Then you probably already know that you will need 25 times your annual expenses in your war chest when you retire.  And it appears you have a handle on what your expenses are.  So you just run FIREcalc and you are all set.

Whether you will reach $7MM in 12 years is an open question but easily figured out. I imagine you have already done the calculation.  What average rate of return does that use?  It reads like you would contribute more than $2MM in those 12 years, so getting to $7MM with only $5MM "growth" from now should not be too hard starting from your current assets.  What is that 8% growth rate?

I have also found it helpful to run TurboTax with numbers projected from my first year of retirement.  You can then see how drastically your taxes will change and thus account for them in your expenses.

 

[Gone4Good]

Mostly, I'm mostly trying to get a sense of what people are saving who hope to retire with a standard of living that approximates their pre-retirement income.  Trying to figure out whether I should try to divert more income to savings by reducing my expenses.

Well I have an income similar to yours and live in a major metropolitan area (New York City) too, but I'm going to save about 75%-80% of my take home pay this year (before investment income).  I plan to retire at my current standard of living in 3 years . . . I'll be 38.  

I work with people who make multiple times what you and I do, but won't retire early because they let their spending get away from them.  With annual expenditures of ~$255k, you might be in a similar boat.  I think the trick is to not let your spending get that high in the first place, because it is easier to do without the 6,000 sqf home then it is to downsize.  My advice would be take a hard look at your expenses and try to move that retirement date forward.  

But in the end it is a matter of personal preference.  For me, I'd rather do without the big home and the beach house if it means I can spend the rest of my days doing the things I love to do.  

 

[retire@40]

Mostly, I'm mostly trying to get a sense of what people are saving who hope to retire with a standard of living that approximates their pre-retirement income.

I am saving enough to keep my before-retirement standard of living the same for semi-retirement and the same for full retirement.  If you think you are going to go on a financial diet when you retire, your likelihood of success will be smaller.  

Just like food diets don't work long-term, neither do financial diets.  It has to be a lifestyle with which you can be happy.

I'm not saying you shouldn't live on $250K a year even after retirement, if that is what will keep you and your wife happy.  For me, $250K would be excessive since I am happy with what I have using about $50K a year.  For others $50K may seem excessive.  I could get by bare bones on about $32K a year, but I wouldn't choose to retire to that.  I could also live it up a bit more on $75K a year, but I'm not willing to trade my fun hours left on this Earth to work 5 or 10 more full-time years to accumulate enough to draw an extra $25K a year.

 

[Spanky]

So we save about 1/3 of our take-home salary. How does that compare to you? Any advice?

We save 0.375 of our gross income - which is piny in comparison to $125K. No advice - you are doing exceptionally well.

 

[Nords]

This is a serious post.  I live in a major metropolitan area and could retire right now IF I sell my house (major expense in mortgage, upkeep, taxes, etc.) and make other drastic changes in my standard of living.  If I did that, I'd also have to pay for a divorce lawyer.  I presume that most people here are trying to preserve their standard of living into retirement.

Ewwwwwkay, I understand.

I should point out that of the 2200 other posters on this board, many of them also live in major metropolitan areas and are probably living on ER expenses a little lower than your current budget. A lot of things get cheaper in ER when you're not paying the expenses associated with working. I'm not suggesting that your standard of living is inappropriate or needs to change, but I am suggesting that you would benefit from a look at how you'd spend your time and money in ER. It might be less expensive than you think.

As for your spouse's feelings about her ER standard of living... well, she's free to keep on working to preserve whatever standard of living she wants, isn't she? I know a guy married to a doctor who's pulling down some serious money-- north of $500K/year-- and he's deliriously happy to be the at-home parent raising their four pre-schoolers.

As for the rest of the numbers... well, if you're trying to compare to the rest of the board, you need a new board.

 

[Robert the Red]

If  you divide all MedicalDoc's numbers by something like 3-5, you end up where an 'average' poster hereabouts might be in mid-career.  So his idea of working 12 more years to retire seems about right.  The peculiarity is the division you have to do get this perspective.  If he's sick of dealing with whiny ungrateful sick people, nurses, med students, interns, residents, malpractice worries, billing departments, insurance companies, IRBs, NIH IRGs, et cetera (which is why he's ended up here, probably), then he is in an unusual situation -- he could pare back to a merely comfortable lifestyle and get out of the medical ratrace now.  But if he even mumbles this idea to himself, his wife looks at him like he's mad.

So the problem might be mid-life mixed expectations and aspirations.  Not a financial problem.  Meet the wife in the middle?  Maybe an adventure -- go overseas and practice medicine for expats for 2 years.  Maybe go practice in a beautiful rural area (for me, the Rockies call) at lower pay and lower pace?  Maybe give up the glorious clinical salary and just do research?

 

[Brat]

If  you divide all MedicalDoc's numbers by something like 3-5, you end up where an 'average' poster hereabouts might be in mid-career.  So his idea of working 12 more years to retire seems about right.  The peculiarity is the division you have to do get this perspective.  If he's sick of dealing with whiny ungrateful sick people, nurses, med students, interns, residents, malpractice worries, billing departments, insurance companies, IRBs, NIH IRGs, et cetera (which is why he's ended up here, probably), then he is in an unusual situation -- he could pare back to a merely comfortable lifestyle and get out of the medical ratrace now.  But if he even mumbles this idea to himself, his wife looks at him like he's mad.

So the problem might be mid-life mixed expectations and aspirations.  Not a financial problem.  Meet the wife in the middle?  Maybe an adventure -- go overseas and practice medicine for expats for 2 years.  Maybe go practice in a beautiful rural area (for me, the Rockies call) at lower pay and lower pace?  Maybe give up the glorious clinical salary and just do research?

It seems to me that Doc and wife-Doc should start thinking about their goals and develop a plan to acheive a common goal.  This couple may be so busy working that they aren't in sinc.  If she takes the position that the goals cannot be reconciled it is better to know that now than later.

 

[rs0460a]

Well - to just answer the basic question (without getting into who has/does what  : ), my DW/me currently save/invest an amount that is 1/3 of our current gross income.

No, we did not start at that level (I understand that some folks save/invest more, some less).  We started at about 2%, increasing it over the years.

Our plan is on track to retire at 60 (less than 2 years), having 100% of our current NET income (it's a lot easier to think that way, then how the "advisors" suggest).  Sure, it's taken us a little less than 25 years to get here, but we were at the "survival" level the first 10 years of our marriage (financially), and everybody understands that you have to have at least food, shelter, and clothing before you can think about saving/investing.

We don't have multiple homes, nor travel round the world.  We do have the house we built 12 years ago (no mortgage) and travel to Europe every year (with a second vacation in the U.S.)

Everything we do, or buy, is done for "cash".  That includes our vacations, our cars (my wife saved for 10 years to pay for hers; I still drive a 17 year old Olds).  Our 30 year mortgage was paid (through a lot of "delayed gratification) in 5 1/2 years (of course, we "saved" $125K in "unpaid interest".  If you calculate what we would have had to earn to pay that interest, our savings was closer to 150K).

Anyway, that just some info for comparison, for the Doc for his original question, and some additional on "financial lifestyle", regardless of income.

Just one other thing - we live about 90 miles west of the City (NY) and our "cost of living" is greatly influenced by the folks from NY and NJ that are moving here and taking public transportation to their jobs in the City.

- Ron

 

[Lazarus]

This is a serious post. I live in a major metropolitan area and could retire right now IF I sell my house (major expense in mortgage, upkeep, taxes, etc.) and make other drastic changes in my standard of living. If I did that, I'd also have to pay for a divorce lawyer. I presume that most people here are trying to preserve their standard of living into retirement.

Your standard of living is much higher than most people now. ($250K) per year in expenses. I live on about $50K expenses now and don't lack for anything. In fact I probably have more than most of my neighbors. I have earned about 1.5 Million in my entire life. I have about 1/3 of that in net worth now. Are you saving enough?

Your wife would divorce you if you lowered your standard of living to something like mine? If so, you have a serious matter to think about. Much of your spending is most likely for status. Would you rather have freedom or status?

 

[Eagle43]

Errr ruh, What's Up, Doc?  Why do you want to retire?  You have the loot to walk this minute.  But, you have spent half your life training to be a doctor, I suppose, where you can do some good.  If you want to just chuck the lifestyle, why not start charity work somewhere in a ghetto?  Then you could still use your skills.  If your wife will divorce you, and you want to stay married, then the decision is made.  Anyway, you got more money than I will ever have.  Good luck in your decision(s). 

BTW:  I heard somewhere that doctors and lawyers have the most serious problem with regards to lifestyle.  They just have to live high on the hog.  True??  If so, then you probably need all that money.

 

[Rich_by_the_Bay]

BTW: I heard somewhere that doctors and lawyers have the most serious problem with regards to lifestyle. They just have to live high on the hog. True?? If so, then you probably need all that money.

Speaking only for myself, I believe there is a grain of truth to that stereotype. An in-depth discussion is probably more suitable to http://DocsOver50.com when that gets rolling, but here is some food for thought. BTW, it probably applies to quite a few professions:

1. Medicine selects for very big egos, understandable considering the stakes and the daunting trust people give you almost automatically (yours to keep or lose)
2. Medicine selects for high academic achievers, meaning more than a little competitive nature
3. Medicine - at least until the last 15-20 years - has been half a job and half a calling, with self-image tightly intertwined with the profession.

Now you are suddenly retired, no more or less important to those around you than anyone else, still wealthy but in a phase when that is often less important as a measure of worth, and used to a controlling lifestyle but with very few people interested in you controlling them. Is that a setup for failure or what?! I am hoping that my long history of never quite fitting the professional stereotype bodes well for a satisfying retirement!

Let me be the first to point out that stereotypes are stereotypes, and many do not fit, but I think the point is made. Also, the latest generation will likely be employees of large organizations and will drift toward the mean in all things occupational.

Just some observations. We'll see...

 

[Spanky]

2. Medicine selects for high academic achievers, meaning more than a little competitive nature
3. Medicine - at least until the last 15-20 years - has been half a job and half a calling, with self-image tightly intertwined with the profession.

These two are applicable to other professions also, i.e., law, engineering, science, business, finance, etc.

 

[HFWR]

Without any judgement from this section of the peanut gallery about your "lifestyle", plug your numbers into Firecalc, see what number you get back, then determine if you can live on that. If not, well, Plan B...  

 

[haha]

Now I know for sure where to start cutting to get a handle on our national medical expenses.

Hey Doc, if you really want to quit, how about splitting down the middle with your Frau, and saying auf wiedersehen to her? If there is a person under the “Doc”, you will soon enough find him.

Ha

 

[eridanus]

Doc, could you and would you want to go part-time anytime in the future? Let your assets grow organically and relieve some stress.