4 Physicians Revisited: Dr. A & the Impact of Working After FI

Fox & Company CPA

In the Tale of 4 Physicians, we analyzed the impact of different spending budgets on wealth creation.  Each of our 4 physicians was married with 2 kids and had a household income of $300,000. 

I’d like to revisit one of these physicians, crunch some more numbers, and learn what might happen to her nest egg if she were to continue working by choice after achieving financial independence (FI).

Dr. Anderson was the most frugal of our 4 physicians.  Dr. A had household spending of $80,000 a year.  She had a net savings rate of 64% and was on track to be FI in about 10 years, give or take a year.  Let’s have another look at her numbers.






OK, fast forward 11 years.  Dr. Anderson has stayed the course, her index funds have given her market returns, which haven’t been stellar, but have outpaced inflation by 4%.  She’s got a nest egg with the purchasing power of about $2 million in today’s dollars (she’s got closer to $2.5 million but inflation has eroded the purchasing power*). 

She doesn’t love every aspect of her workday, but finds fulfillment in providing care to her patients.  She knows that she could retire today, and likely have enough money to support her and her family indefinitely with a 4% withdrawal rate. 

But there are many uncertainties.  She won’t be eligible for medicare for more than 20 years and she has no idea how our health care system might change in the meantime.  She and her husband may live another 50 years or more.  From her reading, she knows that the 4% withdrawal rate was considered safe for a 30-year retirement.  She recently read an article that convinced her that 3% might be safer. 

She can’t imagine retiring in her early forties after all the sacrifices she has made to practice medicine, which she still feels is her calling.  She is not ready to hang up the stethoscope and she wonders how her financial picture might change if she chooses to work another 5 or 10 years. 

Allow me to channel my inner mathlete and work some numbers for Dr. A.  To keep things simple, we’ll use real (inflation adjusted) return, rather than nominal return.  That will keep us looking at dollar amounts in terms of their purchasing power today. 

We’ll also assume that she’ll maintain a budget equal to $80,000, even after the mortgage is paid off and the 529s are fully funded.  Perhaps she’ll use that money to travel more or for charitable causes.

We’ll look at her future nest egg balance if she were to retire now, in 5 years, in 10 years, and in 20 years with 0%, 2%, 4%, and 6% real return rates.


What if Dr. A retires now?





If Dr. A retires now and maintains her current level of spending, the equivalent of $80,000 today, she’s got a good shot at making her money last.  If she earns 4% real, her nest egg will remain steady.  A better return will allow her nest egg to slowly grow while she lives out a long, comfortable retirement. 

If her baseline spending exceeds her returns, she will watch that nestegg shrink over time.  If it only keeps up with inflation, a 0% real return, she will run out of money in 25 years.  Doh!

Can Dr. A avoid catastrophe in the case of a long-term sluggish market?  Sure.  She should expect have a social security check coming her way eventually, having contributed the max for 11 years.  She’ll be able to cut back on expenses in lean years, more easily after the mortgage debt is gone. 

What are the odds of 25 years of 0% real return?  If she has a diversified portfolio, I would say it’s quite slim.  Even the best case scenario offered, a 6% real return, is below what the stock market has given in the modern era. 

What if Dr. A decides to continue working and retire in 5 years?





Dang!  Even in the worst given scenario, she’s doing alright.  The odds of running out of money have been minimized.  In the best case scenario, with a 6% real return, she’s sitting on a massive 8-figure portfolio 25 years after her retirement, 30 years after she attained FI.  That’s more than double what she might have had given the same 6% rate of return had she retired 5 years earlier.

What if Dr. A worked another 10 years beyond attaining FI?





At the 10 year mark from her original FI / potential retirement date, she’s got darn near triple what she would have had if she had quit back then.  She can expect to be a millionaire the rest of her life, and she can now focus her energies on how to best utilize her oversized nest egg.  She is accustomed to a comfortable, but not outlandish lifestyle.  But she can easily upgrade from the Ramada to Ritz Carlton without concern.  She’s in great shape.

What if she doesn’t retire early?





Holy Schnikes! Time to contact the alma mater and look into getting your name on a building or two.  The Anderson Center for Financial Awesomeness sounds about right.  By spending more than most Americans, but less than most physician colleagues, Dr. Anderson can expect to have 20 million dollars or more in her early 70s, after retiring in her early 60s.  Simply amazing!


The take-home message?

I think a dozen people could look at the data and come up with 13 opinions.  Some will wonder why she didn’t retire a year ago, since she’s got a decent shot at making retirement last under the circumstances.  Others will pick their jaw up off the floor after seeing a potential net worth north of 20 million and wonder why anyone in their right mind wouldn’t strive for that. 

Personally, I expect to be in Dr. A’s position in a year or two.  Looking at the numbers, another five years or more seems totally worthwhile.  Unless I’m experiencing total burnout, I will gladly continue practicing medicine to better ensure a comfortable future where the likelihood of retirement failure and regret all but disappear.

Would I consider another 20 years?  I’ll Never Say Never, but the likelihood is pretty darned low.  An absurd net worth is quite possible, but I don’t know what I would do with all that money (besides pay a boatload in taxes). 

How about you?  What would you do in Dr. Anderson’s situation?  Retire now?  Work indefinitely?  Learn how to spend more and retire somewhere in between?

*Accounting for inflation can be complex and I’m striviing for simplicity here.  For example, a 4% real return could represent a 5% return with 1% inflation or a 7% return with 3% inflation.  The final values in absolute and today’s dollars will be a bit different with different scenarios. 

To see the effects of different rates of return and inflation on compound savings, see this Investment Inflation Calculator

Other calculators used in the projections above:

Compound Interest Calculator

Regular Withdrawal Calculator

**Another factor that will skew the numbers is the sequence of returns.  My simulation assumes a steady growth rate that doesn’t vary, which is not how the markets work.  Negative returns late in one’s career are more detrimental than negative returns at the end of one’s career, when the nest egg has grown quite large.  Again, I’m trying to keep it simple here. Please understand that returns will vary.

Follow this link for the rest of the 4 Physicians series.


  • Shah

    I know you’re just starting out and there’s not many other Doctor finance blogs out there (other than WCI), but I’ve found this blog to be a gem. Hope you keep up the awesome work. I look forward to reading your blog every few days! – An ER doc

  • jk

    Really excited about your blog. Quick question from the chart above. How did you calculate the 158,000 (total savings) and 248,000 (pay + contributions) numbers from above. It’s not adding up when I do it myself. Thanks.

    • Thanks jk! The calculations are:
      All contributions = Match & Profit Share + HSA + 401(k) + 457(b) + Roth + Taxable = $20k + $5k + $18k + $18k + $11k + $86k = $158k
      I didn’t count the 529 funding in the equation.
      For Pay + Contributions, I used take-home pay (paycheck total for the year) of $187k and added back in the pre-check contributions (Match & Profit Share + HSA + 401(k) + 457(b)). $187k + $20k + +$5k + $18k + $18K = $248k.
      My thinking is that we want to measure how much is being saved for retirement versus how much is earned. There are different ways to calculate that percentage, but this makes sense to me. After tax investments (Roth & taxable) go in the numerator, pre-tax go in both numerator and denominator. Taxes create the difference between net & gross.

  • 2l2r

    You federal tax calcs seem off to the tune of at least 10k

    • I came up with $50k by plugging in the numbers into Intuit’s Taxcaster.

      Lots of deductions help Dr. Anderson in this scenario: 2 kids, large mortgage, $36,000 in tax deferred retirement accounts, 457(b) and 401(k), HSA and charitable giving deductions. I was surprised how low it was myself. State tax was additional $10,000, and FICA was listed separately as a $7000 line item. The original “Tale of 4 physicians” Post has Dr. A’s $80,000 budget.

  • radFIREwannabe

    This blog is very timely for me, thanks for posting! My situation is very much like Dr. A. Have been planning on RE for years. Recent changes in medicine and increased feeling of burnout have made me think about pulling the trigger earlier than I had originally planned. Even though I think i’m FI or close to it, I find it difficult to stop working. I know for sure I only have a few years left in me if even that.

    • I hear you, RFwannabe. Dr. A can set herself up quite well by persisting even a few years past FI. Myself, I’m pretty new to the RE concept, but I think it will suit me nicely eventually. In the meantime, I focus on the positives of the job I have. Even simple stuff. My workspace is climate controlled, people look up to me, and being FI, I can walk away if that’s my best option. You’re in a great position; don’t forget that.

  • Txpharmguy

    I’m well on my way a to FI as well. I’m 45, married with 3.kids. I’m a pharmacist and not a physician, so my discretionary income is nowhere close to those in your example. However, we live below our means. We drive our calls until the wheels fall off. Contribute the max to our retirement accounts and only take expensive vacations every 4 or 5 years. House will be paid off in 4 years just in time for the oldest to start college. I’ll l probably work until I’m dead, but just not much..

    • Sound like you’re doing awesome! It’s great to have a career that lends itself well to part time work. If you enjoy it and can work on your terms, continuing to bring in some income after reaching FI can help you achieve serious wealth.

  • Work five more year. Can’t tell where medical costs are going in the US. We’re 2 phds and my DH quit a lucrative job and we moved cross country with our 2 kids (6 and 3) and he hasn’t worked since 9/2015. He’s starting to look now in a new career field he feels happier with. Did i mention he has an mba too? So we moved somewhere closer to family, cheaper, and he’s had almost a year with the kids, I’ve stayed at home since the first. We’re 36 and 38. Will this delay our FIRE? Yes we’ve got a 7 figure cash/investment portfolio right now, and we spend $60k/year, and yes we could FIRE if we wanted to live like MMM or even curbed our spending a little.

    But my DH doesn’t and we aren’t so we’ll probably need to work until he’s 45 and we could FIRE but he won’t. He just likes the fact he can now pick and job when he wants to work, where, and how long. He’s not even applying to positions that aren’t interesting or companies that aren’t nice to their employees. So sometimes it’s not about just FIRE but it’s the journey. Our journey he’s enjoyed being with the kids and now the opportunity to “downshift”. He’s just not into retiring the kids drive him nuts but he wants to enjoy his work and said he’ll quit whenever he feels or isn’t the right fit.

  • GasGal

    Hi! I just discovered your blog and it’s awesome. Great to hear from another anesthesiologist. I’ve been more like Dr.C and it’s inspiring me to strive to at least get to Dr.B level spending wise. I’m in the Bay Area though so high salary but high costs especially housing. Keep up the great work and I look forward to more posts!

    • Welcome, and thank you! I’m actively writing about the bay area at this very minute. We loved it out there! I wish you luck on your quest to live like the fictional Dr. Benson; it can’t be easy in the bay area.

  • SFI

    What would be the asset allocation on an investment that could have 4% and 6% real returns?

    • Your guess is as good as mine and it will depend on the year. Some years 100% bond or 100% stock, and everything in between, will exceed the projections. Other years are losers for one or the other, or both. I use a range (2% to 6%) that is on the conservative end of what has been typical over roughly the last century, where stocks have delivered 7% real.

      • SFI

        Would that be a 70/30 portfolio 50/50 etc? If someone is close to or at FI then what is the best place to maintain?

        • It depends on personal risk tolerance, but it is generally accepted that the closer you are to FI / RE, the less aggressive you need to be. Increasing the bond ratio tends to lower both volatility and total return over the long haul. It’s not unreasonable to expect a 4% real return with a 70 / 30 stock / bond ratio, but nothing is guaranteed but death and (some) taxes.

  • Rich

    Hey PoF,

    Just found your site after your guest post on locums, nice!

    I too am closing in on possibility of FI (but at 52, can’t say it’s RE … nothing like a bad biz divorce aka screwed by partner to knock things off track) – the option I’m considering you didn’t discuss for Dr. A is the middle ground. If you’re working past FI, no need to continue massive contributions to the retirement funds, I personally have no desire for $20M in the bank when I pass, and the retirement answer doesn’t have to be all or nothing – the book “Work Less Live More: the Way to Semi-Retirement” by Clyatt goes into this in detail. Besides I think my patients still working some past the age of 65 are the ones that look and seem younger. I’m looking forward to working no more than 1/2 time, with plenty of extended vacations, more time for meetings I want to go to (Wilderness Medical Society anyone?) etc.

    I’d be curious what Dr. A’s picture would be if earning only half as much but redirecting retirement savings into more spending (for travel adventures etc). Perhaps a future blog post ?


    • Glad you found your way here, Rich!

      I would say you are in an enviable position, although I’m sorry to hear about the lousy business partner giving you the shaft. A semi-retirement can indeed give you the best of both worlds. I’ve read Bob Clyatt’s book recently, and quoted it in my Enough post. He’s a sculptor now, enjoying his semi-retirement and pursuing a passion.

      The picture for Dr. A would be pretty easy to calculate using a compound interest calculator. Assuming ongoing living expenses are covered by work, and no money is going into or out of the retirement accounts, we can just plug in the number of years of part-time work, an interest rate, and a starting balance. I plugged in a starting point of $2.5 million, with 10 years of 6% interest with low fees (0.1%) and no monthly contributions. After 10 years, the nest egg is about $4.4 million. Pretty sweet!


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