how long does it take the average doctor to hit the 25x fat fire numbers?

[finalpsychyear]

Fat fire = 100k x 25 = 2.5 mill

By average I am considering what 2019 medscape rated all physician salaries around 300k average of course that counts specialists with pcps.

Do people hit this 10,15,20 years into their attending life if we define the numbers above?

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[dpmd]

Fat fire = 100k x 25 = 2.5 mill

By average I am considering what 2019 medscape rated all physician salaries around 300k average of course that counts specialists with pcps.

Do people hit this 10,15,20 years into their attending life if we define the numbers above?

How fast CAN they, or how fast do they actually? Because physicians in general are notorious under accumulators of wealth.

 

[finalpsychyear]

How fast CAN they, or how fast do they actually? Because physicians in general are notorious under accumulators of wealth.

1. Can: 300k for single male after taxes in a state tax would leave about 190. My guess is 6k monthly expenses counting loans and all leaving about 118-120k a year for investing. If they had 0 investments at the start of attending life and they got a 7% return I think it takes 14 years to hit 2.5mill which actually sucks because that's actually taking about 30% inflation so the buying power of that would be only 1.75 mill adjusted for inflation.

Damn its not easy to get there so if attending at 31-32 including fellowships and all they are hitting non inflation 25x near 45 ish.

 

[Mman]

1. Can: 300k for single male after taxes in a state tax would leave about 190. My guess is 6k monthly expenses counting loans and all leaving about 118-120k a year for investing. If they had 0 investments at the start of attending life and they got a 7% return I think it takes 14 years to hit 2.5mill which actually sucks because that's actually taking about 30% inflation so the buying power of that would be only 1.75 mill adjusted for inflation.

Damn its not easy to get there so if attending at 31-32 including fellowships and all they are hitting non inflation 25x near 45 ish.

For most physicians earning $300K per year, I'm guessing their monthly expenses including loans are >>>> $6K per month. I mean student loans are probably $1K a month if not more. I'll assume something in the neighborhood of $2500-3000 per month for housing costs (mortgage + tax +insurance + upkeep) if not more. Throw in transportation, food, clothing, cable, cell phone, internet, entertainment, occasional vacation, etc. and it adds up quick.


Also I find it humorous when you note it is not easy to get $2.5M in the bank. No kidding. It isn't supposed to be. A very low percentage of college graduates will ever get there in their life.

 

[LookForZebras]

This depends a lot on how much you're saving and how your investments do. It will vary considerably based on the cost of living in your area, your spending habits, and your investing policy. Living like a resident in some aspects of your spending can be helpful to get there faster.

 

[finalpsychyear]

This depends a lot on how much you're saving and how your investments do. It will vary considerably based on the cost of living in your area, your spending habits, and your investing policy. Living like a resident in some aspects of your spending can be helpful to get there faster.

Well in the example above the "attending" was living on 6k a month which i am sure is on the low end and almost similar to live like a resident and after post tax money was left with about 120k which he invested 100% getting 7% returns on. It still takes 14 years and this doesn't consider many other expenses such as wife, kids, etc. So for someone in the 300k range with 7% average returns on anything left post tax being invested 14 years seems
like a long time.

I am trying very hard to stick to live like a resident in about to be year 4 next year as an attending and i was told to do it at least first 5 years if possible. Also, since i'll be married in 2021 lawyer told me in passing make as much $$ before then as possible as all assets aquired prior to marriage are solely yours even without prenups.

My personal budget right now is 3500/month which includes housing, car, credit card. Business expenses obviously are separate but my overhead is insanely low as I do a lot of admin work but other than wanting to lease a used bmw from leaseswap websites i haven't in the least deprived myself.

 

[finalpsychyear]

For most physicians earning $300K per year, I'm guessing their monthly expenses including loans are >>>> $6K per month. I mean student loans are probably $1K a month if not more. I'll assume something in the neighborhood of $2500-3000 per month for housing costs (mortgage + tax +insurance + upkeep) if not more. Throw in transportation, food, clothing, cable, cell phone, internet, entertainment, occasional vacation, etc. and it adds up quick.


Also I find it humorous when you note it is not easy to get $2.5M in the bank. No kidding. It isn't supposed to be. A very low percentage of college graduates will ever get there in their life.

It's not just that it's so damn difficult to get there. Even when you do it won't be the buying power of 2.5m in 2019 if you achieve it in 2032 it would only be worth 1.7m equivalent. In the above example that 300k doctor would have to work 18 years amassing 4 mill which after subtracting 36% for inflation then would achieve 2.5 mill. So in reality its going to take 20-25 years.

Just eye opening for me that is all. I really don't want to be working nearing 60 and 7% gains is no guarantee. We really need a massive stock market correction so the dow gets back to 14-15000.

 

[dpmd]

1. Can: 300k for single male after taxes in a state tax would leave about 190. My guess is 6k monthly expenses counting loans and all leaving about 118-120k a year for investing. If they had 0 investments at the start of attending life and they got a 7% return I think it takes 14 years to hit 2.5mill which actually sucks because that's actually taking about 30% inflation so the buying power of that would be only 1.75 mill adjusted for inflation.

Damn its not easy to get there so if attending at 31-32 including fellowships and all they are hitting non inflation 25x near 45 ish.

Dual income no kids gets you there quicker (as does being able to put more away tax free like self employed people can do)

 

[Mman]

It's not just that it's so damn difficult to get there. Even when you do it won't be the buying power of 2.5m in 2019 if you achieve it in 2032 it would only be worth 1.7m equivalent. In the above example that 300k doctor would have to work 18 years amassing 4 mill which after subtracting 36% for inflation then would achieve 2.5 mill. So in reality its going to take 20-25 years.

Just eye opening for me that is all. I really don't want to be working nearing 60 and 7% gains is no guarantee. We really need a massive stock market correction so the dow gets back to 14-15000.

you are focusing on returns in nominal terms, not real terms. If you simply focus on real returns of your investments (after inflation), it's easier to mentally do the math IMHO. Personally I would not expect any real returns above maybe 4-5% over the next 20 years for planning purposes.

 

[finalpsychyear]

Dual income no kids gets you there quicker (as does being able to put more away tax free like self employed people can do)

dual income physicians sure or IT/dentist/pharmacist making 100k but my guess is most doc partners are 50k or under.

 

[dpmd]

dual income physicians sure or IT/dentist/pharmacist making 100k but my guess is most doc partners are 50k or under.

You forget the time value of money. Between getting lucky with a job in undergrad that included me in their profit sharing plan and my husband working a job with a 403b while I was in med school and residency we ended up with a decent chunk in retirement accounts even when our net worth was negative. But even without that, if your partner is earning 50k and your combined expenses don't increase unduly (that is the bigger concern and why I mentioned no kids) you have most of their take home (plus whatever retirement benefits they might have) to put towards your number.

 

[dpmd]

Because two people shouldn't have double the expenses.

 

[finalpsychyear]

Because two people shouldn't have double the expenses.

Sure there is the tax bracket story so that single 300k doc after tax getting close to 190k if he is married with a non working spouse its 215k in my state for the same income. If partner makes 50k you net 30k of that post tax. Of course there's 401k being a solo prop so if doc does 55k 401k and partner is part of staff thats nother 20k for them so 75 tax deferred. So even from that 300k you theoretically take home 165 plus 75k tax differed.

Too bad most people don't know all these nuances of the tax code.

 

[finalpsychyear]

For most physicians earning $300K per year, I'm guessing their monthly expenses including loans are >>>> $6K per month. I mean student loans are probably $1K a month if not more. I'll assume something in the neighborhood of $2500-3000 per month for housing costs (mortgage + tax +insurance + upkeep) if not more. Throw in transportation, food, clothing, cable, cell phone, internet, entertainment, occasional vacation, etc. and it adds up quick.


Also I find it humorous when you note it is not easy to get $2.5M in the bank. No kidding. It isn't supposed to be. A very low percentage of college graduates will ever get there in their life.

I have been told by several retirement plan advisers that a cash balance and solo 401k combo will get most except those who are under 35 very close to 2 mill tax deferred in more or less 10 years given they are maxing it out every year. I get it that it may not be practical to tax defer 150k per year plus the costs aren't cheap for having those plans so another expense but it sounds very simple. I feel most docs don't even know about it or they aren't in a position to have one. Seems like the easiest way to hit FIRE and if you can somehow do some HSA,roth you have hit that magical 2.5m number in 10 ish years then its game over.

Personally, I'm too conservative and risk averse. I'd rather try to get to 5m and use a 1.5-2% withdrawal rule.

 

[Mman]

Personally, I'm too conservative and risk averse. I'd rather try to get to 5m and use a 1.5-2% withdrawal rule.

A 1.5% withdrawal rate isn't conservative, it's foolishly low. You'd end up having to accumulate double the wealth compared to a 3% withdrawal rate that is already insanely conservative and likely to last for 50+ years in even very bad scenarios.

 

[finalpsychyear]

A 1.5% withdrawal rate isn't conservative, it's foolishly low. You'd end up having to accumulate double the wealth compared to a 3% withdrawal rate that is already insanely conservative and likely to last for 50+ years in even very bad scenarios.

Fair Point. If one was only going to ever use 75k-100k per year for the next 50 years and of course we are assuming no social security here,
the cash balance/401k gets to that 2.5m in 10 years all by itself and 3% of that is 75k. There's no reason to save anymore then if you were
never going to spend more than 75-100k. Makes things very simple.

 

[finalpsychyear]

A 1.5% withdrawal rate isn't conservative, it's foolishly low. You'd end up having to accumulate double the wealth compared to a 3% withdrawal rate that is already insanely conservative and likely to last for 50+ years in even very bad scenarios.

So say I'm being conservative and realize 3.5% withdrawal is safe enough for me which gives me 88k/yr on 2.5m nest egg. Lets even say i somehow attain this number in 5 years from now. Is there any type of extra safety margin suggested once this is attained or is that already calculated in the 3.5% withdrawal which is already lower than the 4% standard in the research studies? I am assuming my MAXIMUM spending would never pass 88k which is 3.5%

I mentioned this to my colleague and they stated they would work an additional 5 more years even after attaining these numbers just to see what the market did but i tried to explain it doesn't really matter and that 2.5m would just become closer to 3.5m and spending based on new nest egg 3.5% rule would be about 120k/yr

 

[The White Coat Investor]

Fat fire = 100k x 25 = 2.5 mill

By average I am considering what 2019 medscape rated all physician salaries around 300k average of course that counts specialists with pcps.

Do people hit this 10,15,20 years into their attending life if we define the numbers above?

As fast as you want really. Name the time period and I'll tell you how to do it. I'd aim for 20 years though. At that limit, it looks like this:

(note all numbers are after inflation, so this is 2.5M in today's dollars):

=NPER(5%,-75000,0,2500000) = 20 years

So at a 5% after inflation return, saving $75K/year, it will take you 20 years to hit $2.5M in today's dollars. That's a 25% savings rate.

Now, let's say you want to do it in 10 years. Here's an option:

=RATE(10,-150000,0,2500000) = 11%

So if you earn 11% after inflation and save $150K a year, you'll hit $2.5M in today's dollars in 10 years.

Note that earning 11% real will require a lot of leverage and market risk and likely some sweat equity into something like real estate.

You could also start a side gig business that pays $100K/year, you save 60% of every dollar it pays out, and you sell it for $500K in 10 years. All the while you're earning $300K at your main gig and saving $60K a year there. Now you're putting away $160K/year and you'll get $500K at the end. What kind of return do you need now?

Again, about 11%. But what if you sold that side gig for $1M and it paid you $150K a year? Now you only need a 0% real return. You can probably get that with bonds or CDs.

But that's what you can do. What actually happens is:

25% of docs never become millionaires
Another 25% never hits $2.5Mish
Another 25% hits it after 30+ years

And then there is the 25% who starts asking these questions in med school....

 

[TheAverageDoctor]

Fat fire = 100k x 25 = 2.5 mill

By average I am considering what 2019 medscape rated all physician salaries around 300k average of course that counts specialists with pcps.

Do people hit this 10,15,20 years into their attending life if we define the numbers above?

Hi OP!

I'm an average doctor! But I found a job in my area that pays a little more than that. Somewhere around 350k per year. I'm also married to another physician making a standard hospitalist salary, but has 200k in debt.

I did the math for us, and we plan to hit FI by year 6.

I also did the math for the average doctor like you mentioned and compared it to an engineer for fun. Assuming median undergrad debt and median residency debt, attending living expenses of 100k/year, AND market gains of 8% per year I would achieve FI at age 47, Attending year 18.

Everyone's situation is going to be different, though. Specialty. Job situations. Marriage. Divorce. Debt Burden. State taxes. etc.

The best you can do is control the things you can control. Try to minimize your debt burden. Try to make money early. Take advantage of compound interest. Find what makes you happy.

 

[Splenda88]

I will try to reach FIRE around 10 yrs. I will only need 2 mil

 

[sliceofbread136]

My fire plan... inherit a bunch of money

 

[dpmd]

My fire plan... inherit a bunch of money

What about marrying rich or winning a big lawsuit? Try for all 3 maybe.

 

[finalpsychyear]

As fast as you want really. Name the time period and I'll tell you how to do it. I'd aim for 20 years though. At that limit, it looks like this:

(note all numbers are after inflation, so this is 2.5M in today's dollars):

=NPER(5%,-75000,0,2500000) = 20 years

So at a 5% after inflation return, saving $75K/year, it will take you 20 years to hit $2.5M in today's dollars. That's a 25% savings rate.

Now, let's say you want to do it in 10 years. Here's an option:

=RATE(10,-150000,0,2500000) = 11%

So if you earn 11% after inflation and save $150K a year, you'll hit $2.5M in today's dollars in 10 years.

Note that earning 11% real will require a lot of leverage and market risk and likely some sweat equity into something like real estate.

You could also start a side gig business that pays $100K/year, you save 60% of every dollar it pays out, and you sell it for $500K in 10 years. All the while you're earning $300K at your main gig and saving $60K a year there. Now you're putting away $160K/year and you'll get $500K at the end. What kind of return do you need now?

Again, about 11%. But what if you sold that side gig for $1M and it paid you $150K a year? Now you only need a 0% real return. You can probably get that with bonds or CDs.

But that's what you can do. What actually happens is:

25% of docs never become millionaires
Another 25% never hits $2.5Mish
Another 25% hits it after 30+ years

And then there is the 25% who starts asking these questions in med school....

The fact that the stock market has corrected so much and assuming you had been stockpiling cash warren buffet style for the last 3-4 years as an attending ( i know a handful of colleagues who did this feeling market was vastly overvalued with incoming crash) I think those two big factors may cut both those timelines to 10 and 5 years possibly. Some combo of alot of luck/ignorance/paranoia would be involved to not have been in the market the last 3-4 years but an incredible opportunity now or in a few months when the bottom hits will transform those to an unusually fast tracked potential retirement not mathematically possible since the 2008-2009 crash.

 

[doctalaughs]

The fact that the stock market has corrected so much and assuming you had been stockpiling cash warren buffet style for the last 3-4 years as an attending ( i know a handful of colleagues who did this feeling market was vastly overvalued with incoming crash) I think those two big factors may cut both those timelines to 10 and 5 years possibly. Some combo of alot of luck/ignorance/paranoia would be involved to not have been in the market the last 3-4 years but an incredible opportunity now or in a few months when the bottom hits will transform those to an unusually fast tracked potential retirement not mathematically possible since the 2008-2009 crash.

If you’ve been sitting out on the stock market for the last 4 years you have missed some incredible gains that outweigh the recent losses. You are not coming out ahead, even by pouring that stockpiled cash into what you think is the lowpoint.

The only way you “fast track” that much is if you pulled out at the height 3 months ago and use that cash now— but that’s called perfectly timing the market and no one can reliably do so (unless you are a corrupt senator doing insider trading).

Best/ most reliable strategy is that you were not 100% equities going into this (based on your age, portfolio and risk tolerance) and now are rebalancing (and continuing to invest) on the way down+ up.

For example I was 70/30 before this. Lost only about 15% at the bottom (assuming that’s the bottom- who knows). Rebalanced to 90/10 (while continuing to invest- plan to go even to 95/5 if it goes way lower). With that strategy looking ahead 5-10 years I will *probably* have more money than if this downturn never happened.

The flip side is you can’t be high on equities if you are nearing retirement. Go 55/45 or even 50/50— of course giving up a lot of returns — but also the risk of your portfolio dropping 50% is near nil. Your magic number should be able to tolerate a 20% hit and still maintain chosen lifestyle.

My main hurdle with reaching FATfire is that I want at least 250k/yr guaranteed stream of income (not 100k). Maybe I’m too spoiled or like vacations too much. Maybe world travel in style is going to be unpopular in the future and I can revise down my estimates!!

 

[Mman]

My main hurdle with reaching FATfire is that I want at least 250k/yr guaranteed stream of income (not 100k). Maybe I’m too spoiled or like vacations too much. Maybe world travel in style is going to be unpopular in the future and I can revise down my estimates!!

I'm with you. I make a lot of money. I save a lot of money. It's going to take a large pile of savings that can sustain decent spending for 40+ years for me to walk away from a job I like doing. Don't get me wrong that I'd retire tomorrow if I won the lottery, but I don't have a burning need to retire from a job I hate. I like going to work but will happily stop once I can sustain ~$200K spending money per year forever (at about a 3% SWR). I don't know what that exactly looks like in terms of magic number but when I get closer I will try to calculate the tax consequences of all the various buckets I am accumulating in.

 

[finalpsychyear]

I'm with you. I make a lot of money. I save a lot of money. It's going to take a large pile of savings that can sustain decent spending for 40+ years for me to walk away from a job I like doing. Don't get me wrong that I'd retire tomorrow if I won the lottery, but I don't have a burning need to retire from a job I hate. I like going to work but will happily stop once I can sustain ~$200K spending money per year forever (at about a 3% SWR). I don't know what that exactly looks like in terms of magic number but when I get closer I will try to calculate the tax consequences of all the various buckets I am accumulating in.

So i have calculated the number that assumes you are in a state with income taxes and that you would be withdrawing from a taxable account and paying long term capital gains on 100% of the withdrawal. Obviously, there are more tax efficient ways to do this like half the money coming from roth but we will assume the scenerio where you would pay the most taxes.

8.8 million in your taxable roughly would require you to withdraw about 265k (3%) which after capital gains tax provided that was your entire income for the year woud leave you with about 202k of spending money.

Compare this with 100k of spending money you would only need to withdraw 120k from the same scenario.

 

[dpmd]

200k spending? Seems high even factoring in lots of travel unless you are planning on traveling in higher style than I am used to.

 

[Mman]

So i have calculated the number that assumes you are in a state with income taxes and that you would be withdrawing from a taxable account and paying long term capital gains on 100% of the withdrawal. Obviously, there are more tax efficient ways to do this like half the money coming from roth but we will assume the scenerio where you would pay the most taxes.

8.8 million in your taxable roughly would require you to withdraw about 265k (3%) which after capital gains tax provided that was your entire income for the year woud leave you with about 202k of spending money.

Compare this with 100k of spending money you would only need to withdraw 120k from the same scenario.

Assumptions work fine for planning 10+ years in advance, but as you get closer you need to know the actual details. For example, if you have had a high savings rate then lots of your withdrawal from a taxable account will be withdrawing principle and not gains and not subject to any tax. Say half of your taxable account was principal and half was long term capital gains. Then on average you will only pay 50% of LTCG on those withdrawals.

I get it in terms of hope for the best, plan for the worst, but the closer you get to retiring you need to stop with either and hammer out the actual numbers.

 

[mvenus929]

200k spending? Seems high even factoring in lots of travel unless you are planning on traveling in higher style than I am used to.

Especially if you're at the point of owning your home (i.e. no mortgage payment every month).

 

[dpmd]

Especially if you're at the point of owning your home (i.e. no mortgage payment every month).

Even more true in that case, but I was basing it off my current spending (which includes a mortgage) plus extra travel.

 

[Mman]

Especially if you're at the point of owning your home (i.e. no mortgage payment every month).

you can feel free to spend far less. But I can find some really fun ways to spend some money, mostly on vacations.

 

[finalpsychyear]

Assumptions work fine for planning 10+ years in advance, but as you get closer you need to know the actual details. For example, if you have had a high savings rate then lots of your withdrawal from a taxable account will be withdrawing principle and not gains and not subject to any tax. Say half of your taxable account was principal and half was long term capital gains. Then on average you will only pay 50% of LTCG on those withdrawals.

I get it in terms of hope for the best, plan for the worst, but the closer you get to retiring you need to stop with either and hammer out the actual numbers.

Fair point. So since your a long term investor with a high savings your correct half that 200k will be just principal savings tax free and half may be taxed at long term capital gains. In reality its probably skewed more a bit toward your actual contribution but if it was 50/50 and you are withdrawing half principal tax free 100k then 120k interest which after long term capital gains in a non tax free state that gives you the other 100k .

You have achieved your goal of a 3% withdrawal with just 7 mill. We didn't even get into taking money out of roth/hsa/ira just plain ole taxable.

Congrats if your already there.

 

[finalpsychyear]

200k spending? Seems high even factoring in lots of travel unless you are planning on traveling in higher style than I am used to.

this financial samarai guy with 3 million at 34 in 2012 plus the amazing bull run since then still couldn't afford to stay retired living in San Fran once he had a kid

This 42-Year-Old Retired Over Seven Years Ago, But Now Believes He’s Headed Back To Work. Here’s Why.

Sam Dogen, also known as the Financial Samurai, retired at 34. But after having a kid, along with the high cost of living in San Francisco, he's considering a return to the work force.

www.forbes.com

He says you need closer to 5 million if you choose to have kids while living in the HCOL area like San Fran, nyc etc.

I've basically given up on retiring rather i see myself always doing PT work indefinitely but not before 10 years of full time work i would think. Once i trickle into 8 figures I'll maybe reconsider things.

 

[Splenda88]

For most physicians earning $300K per year, I'm guessing their monthly expenses including loans are >>>> $6K per month. I mean student loans are probably $1K a month if not more. I'll assume something in the neighborhood of $2500-3000 per month for housing costs (mortgage + tax +insurance + upkeep) if not more. Throw in transportation, food, clothing, cable, cell phone, internet, entertainment, occasional vacation, etc. and it adds up quick.


Also I find it humorous when you note it is not easy to get $2.5M in the bank. No kidding. It isn't supposed to be. A very low percentage of college graduates will ever get there in their life.

I will be ecstatic if my student loan is 3k/month... Most people have 300k+ in student loan these days.

 

[finalpsychyear]

I will be ecstatic if my student loan is 3k/month... Most people have 300k+ in student loan these days.

That sucks. My moonlighting gig in 3rd and 4th year along with some of my attending money in year 1 was the best thing i ever did to zero it out.

With 300k the first 1500 per month is just interest i am guessing. Rough stuff.

 

[Splenda88]

That sucks. My moonlighting gig in 3rd and 4th year along with some of my attending money in year 1 was the best thing i ever did to zero it out.

With 300k the first 1500 per month is just interest i am guessing. Rough stuff.

For sure. My program (IM) does not allow moonlighting.

 

[dpmd]

this financial samarai guy with 3 million at 34 in 2012 plus the amazing bull run since then still couldn't afford to stay retired living in San Fran once he had a kid

This 42-Year-Old Retired Over Seven Years Ago, But Now Believes He’s Headed Back To Work. Here’s Why.

Sam Dogen, also known as the Financial Samurai, retired at 34. But after having a kid, along with the high cost of living in San Francisco, he's considering a return to the work force.

www.forbes.com

He says you need closer to 5 million if you choose to have kids while living in the HCOL area like San Fran, nyc etc.

I've basically given up on retiring rather i see myself always doing PT work indefinitely but not before 10 years of full time work i would think. Once i trickle into 8 figures I'll maybe reconsider things.

He is an idiot if he thinks living on under 250k a year is abject poverty. A lot of choices are made to get to that point in life. Plus perhaps an underlying materialism that isn't just a choice. If that is the case I feel sorry for him and hope he finds work he doesn't hate. As for you, I hope you enjoy the work you do and how much you do it.