Christopher Guest Post: Early Retirement Now!

Welcome to another Christopher Guest Post, a Q&A interview series that I will run every few weeks to get you better acquainted with some excellent fellow writers who have graciously accepted my invitation to be showcased here for you.

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I’d like to thank Big ERN from Early Retirement Now for taking the time to share a part of his story and answers to my many questions. You’ll learn all about him shortly. He is a doctor but not the kind of doctor that wields a stethoscope. As an Ph.D. economist, I think he wields a protractor or slide rule or something. Maybe an abacus?

He’s got a great sense of humor and knows almost too much for his own good when it comes to investing. I suppose it comes with the territory.

What’s a Christopher Guest post?

 

Inspired by Nigel Tufnel, the character portrayed by Christopher Guest in Spinal Tap, I took Mr. 1500’s ten questions, and amped them up to eleven. If you’re not familiar with the scene, take 50 seconds to watch this video and enjoy the dialog between Nigel and Rob Reiner.

I decided I’d start a Q&A of my own. Not satisfied with just ten questions, this one goes to eleven. Just like Nigel’s amplifiers.

 

Presenting: Big ERN

What do you do (or did you do) for a living? What do you like best about your job? If you were a physician, what type of a physician do you think you would be? Why?

I’m an economist by training with an MA and Ph.D. and I work in the finance industry for a large U.S. asset manager. My background is in the intersection of macroeconomics, finance, and statistical methods and my day job is the best I could have hoped for. Every day I think about new ways of slicing and dicing data and solving problems. I spend a lot of time in the “lab” analyzing data and building models (no white coat required) but I also occasionally meet with institutional clients such as pension funds and sovereign wealth funds (coat and tie definitely required) to discuss our newest research and our views about the economy and financial markets. The job is intellectually challenging and pays pretty well, too.

If I were a physician I would have to pick a field that doesn’t see too much blood, so I figure a career as an orthopedic surgeon is out for me. A general practitioner/family doctor would be one nice option, maybe in a rural area (using geographic arbitrage!). It may not be the biggest money maker but probably has the best potential for a good work-life balance and keeps the blood-splatter to a minimum.

[PoF: Oncology might be right up your alley. Using different combinations of chemotherapy drugs, saving lives, making a solid living, and very little blood.]

Describe your blog and tell us why your blog would appeal to a physician seeking FIRE in eleven sentences.

[ERN: only 9 sentences, but so be it] [PoF: Second question and you’re already displaying defiance. OK. I see how this is going to go.]

Our blog is a bit of a niche in that many of our posts mix in analytical and quantitative methods (but still targeted at a general audience) and in the process I try to point out some new fun facts about personal finance that folks probably haven’t heard anywhere else.

We target at a general FIRE audience and not specifically physicians. But medical doctors face some of the same challenges as the ERN household – high income, but only after many years of education, a high marginal tax rate, having to invest large sums in taxable accounts after maxing out all tax-deferred accounts, etc. so we hope the medical community will find our blog interesting.

Being a member of the FIRE community, of course, my wife and I are non-conformist by nature, rejecting the ideas of excessive consumerism, working until age 65, etc., but we also happen to be non-consensus and non-conformist within the FIRE community. There isn’t one single way to achieve or maintain FIRE, or as the “Veterinarians on FIRE” would say, there is more than one way to skin a cat.

Specifically, my wife and I disagree with many of the widely applied principles in the personal finance and FIRE community. For example, we don’t like emergency funds, we stay away from Robo-advisers, we believe that the 4% safe withdrawal rate is not very safe right now, we believe that diversification from bonds is overrated, we’re essentially 100% in equities and plan to stay so even in retirement, and we also actively trade options and futures contracts (on margin!) and invest in private equity real estate as well.

Think of me as your crazy uncle Ern – every family has one of those – who makes the Thanksgiving dinner or family reunion fun with his non-consensus view. So, if you thought you have heard everything about personal finance already, get a second opinion (pun intended) and check out our blog!

[PoF: The same Uncle Ern that gets drunk every Thanksgiving, insists that the Lions are bound to turn the corner next year, and snags all the white meat off the platter right before it gets passed to me?

p.s. Non-comformist by Nature was one of my favorite rap acts of my youth. Still is, actually.]

What inspired you to start a blog of your own? Was there a particular event you remember that made you feel your blog had arrived? Any big plans for your blog in the future?

In the Spring of 2016 my wife and I set our likely retirement date: right after the 2017 calendar year bonus lands in our checking account (early 2018) we are going to call it quits.

To document our journey toward retirement, to keep us honest, and to better reach out to other bloggers we thought it would be a good idea to start our own blog. It’s a great hobby that will hopefully keep me busy and mentally sharp in retirement. In fact, among all the hobbies that a forty-something-year-old guy can take up, this might be one of the few innocuous ones that the wife would approve of. Better than buying a motorcycle! [PoF: We call them donorcycles.]

Right now, we are blogging incognito. Family and friends have no idea what we are planning, so it’s nice to have our online “family and friends” to bounce off ideas and ask folks to kick the tires on our retirement plan.

It’s also hard to put our motivations and entire FIRE philosophy into a 30-second elevator pitch. So, come 2018, what will I do when I have only the 30 seconds on an elevator ride to explain what we’re doing? Tell folks to check out our blog. Another positive side effect: the day after I leave my job in 2018, would you likely hear this conversation at the watercooler?

Former colleague 1: “Hey, did you hear Big ERN left?”

Former colleague 2: “Oh, yeah, what happened? Did he get canned?”

Former colleague 3: “Oh, he got canned for sure, remember what he did at the last Christmas party?”

All: “Oh yeah, he got canned!”

[PoF: You are that crazy Uncle Ern. I knew it!]

No, no, no, that can’t happen! You see, I will have my “alibi,” a record of having planned my exit for the last two years. Just look at the blog! Well, actually, I don’t really care all that much about what people think about me at work (remember the Christmas party?). But it’s still nice to have a record of our plan.

In terms of plans for the blog, I don’t think I will run out of interesting topics about (personal) finance any time soon. Once in retirement, I might shift more into writing about travel and outdoor adventures (hiking and skiing). Another plan would be to write a book to tie together some of the technical and quantitative topics I have been discussing, with more in-depth analysis than would be appropriate for a blog post. Of course, that’s still far in the future.

[PoF: Sounds perfect. I’m looking forward to more time outdoors, and I’ve thought a book might be a big, but fun project to try to take on someday.]

Give me eleven posts you think Physician on FIRE readers might want to read.

Our blog is pretty new, so let me rummage through the posts and dig out eleven that I really liked:

1: Why our emergency fund is exactly $0.00. It was featured here on PoF’s Sunday’s Best and then on Rockstar Finance!

2: The ultimate retirement account comparison in one single Google Sheet

3: Lower Risk Through Leverage

4: A primer on Tax Loss Harvesting

5: How to create a no-limit Synthetic Roth IRA in a taxable account

6: When Bonds are riskier than stocks

7: Beat Behavioral Bias: Mental Accounting

8: Be your own zero-cost homebrew Robo-adviser

9: The Great Bond Diversification Myth

10: We just saved $42,000 by not switching to a Robo-Adviser (featured here on the PoF Sunday’s Best)

11: Trading derivatives on the path to FIRE

Whoah, now we’re really scraping the bottom of the barrel. If you had asked me for twelve posts I would have named our legal disclaimer page. Whew!

[PoF: The TLH article was fantastic. I should have put that in a Sunday Best at some point. There’s always the “oldie but goodie” category. I’m up to $75,000 in paper losses between 2015 and 2016. #winning]

At what age are you most likely to retire (or at what age did you retire) from full-time work? What are you doing to help realize your retirement target?

In early 2018, I will be 44 and my wife 35. We plan to retire from all full-time work, though we might still do some side gigs. My wife is a nurse (RN) and could do some temp work here and there and I might keep my mind sharp with some consulting work to supplement our income.

We laid the groundwork for early retirement many years ago and grew our portfolio to a pretty good size that could support retirement even today. Over the next 15-18 months, we want to maintain our spending discipline and pile on another 10-20% to our net worth, just to be sure.

[PoF: We’ll be of similar ages with a plan to cut back on work a few months after you. Have you ever thought of hiking in New Zealand?]

What does an ideal retirement look like for you? What will you do with your time when full-time work is in your rearview mirror?

Pretty standard: more family time, travel, outdoor activities, blogging. My big vision is to finally be able to go on extended vacations. Currently, our vacations are planned with surgical precision (pardon the pun) to squeeze out the maximum vacation experience out of the minimum number of scarce vacation days. Once in retirement, we will try more of the slow vacation time, Go Curry Cracker style. More time for hiking is definitely on the program, so you’ll see a lot of us in the Rockies, Sierra Nevada and the Grand Canyon. Maybe I will even try one of the classic long-distance hikes, like the John Muir Trail.

[PoF: I feel like so many of us in the FIRE community have very similar plans or wishes, at least. I look forward to finding out how true to those plans we stay when we actually have the opportunity. Please, please don’t let it be like so many New Year’s resolutions that fade by February!]

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Come 2018, search for Big ERN somewhere down there

I’ll give you eleven sentences to dish out advice to a young physician. Any and all advice is welcome. We talk about personal finance, so money is fair game, but if you have advice on being a better doctor, a better parent / spouse / friend / human, we’re all ears.

  1. Take risks; MDs have the unique opportunity of income and employment opportunities relatively uncorrelated with the business cycle and stock market (unlike folks in finance careers!), so medical doctors, especially at a young age, should save aggressively in risky assets, e.g., equities.
  2. Don’t fall for the myopia trap where you try to smooth out your portfolio through the Brexit, but rather look at the big picture, 10+ years out.
  3. The Pareto Principle (80% of a task can be accomplished with 20% of the effort) applies very nicely to personal finance.
  4. The big picture is simple, so get some free advice from bogleheads and/or consult the 20 point plan right here on PoF and with very little time commitment you’re ready to roll.
  5. That saves you a ton of money on the full-service financial planners who sometimes charge 1%+ or your assets under management.
  6. But don’t neglect the remaining 20% either because in today’s low yield environment you might have to pick up few fractions of a percent here and there.
  7. You don’t even have to spend the entire remaining 80% of the time on the nitty gritty details, but do stay informed about finance, even hire a fee-only financial adviser.
  8. The trend is not always your friend (another way of saying “Past performance is no guarantee of future performance”) which sounds trivial, but retail investors still get that wrong all the time.
  9. Overreacting to short-term movements, e.g. selling right after the Chinese devaluation in 2015 (=following short-term trends), is going to cost you.
  10. Following long-term trends can be problematic, too because, by the time you or I jump on the bandwagon to invest in the style that worked so beautifully over the last 5 years, the trend might be ready to mean-revert already.
  11. Finally, a totally random thought; if you plan to have kids, start the tax-advantaged 529 plans before they are born with you as the beneficiary, then change the beneficiary later to get a few extra years of tax-free compounding.

[PoF: I can’t argue with any of those. Strong work! I wasn’t familiar with the Pareto Principle until I started reading personal finance blogs. It’s a smart and true concept.]

 

You’ve got eleven days to visit anyplace in the world with an $11,000 budget. Where do you go and what do you do?

I would take Mrs. ERN and little Ms. ERN on a European city tour, but off the beaten path. Instead of London and Paris, let’s visit Copenhagen, Berlin, Prague, Munich and Ghent in the footsteps of some of the ERN family’s European ancestors. We’d enjoy the beautiful sites and have some great food and beer along the way. Eleven days might be a little tight, but if we do this in early retirement we can extend this by a few days (because who is counting?) and still stay well below the $11,000 budget.

[PoF: Again with the defiance! But what do I care? If you’re going to spend the money to get to Europe, you might as well get your money’s worth. I’m all about the slow travel method. I’d have to go north from Copenhagen to visit my ancestral grounds.]

Name eleven beverages you enjoy. You can be as general or specific as you like.

Why, are you buying? [PoF: No.] In any case, my everyday favorite drinks, of course, are nonalcoholic: good old whole milk and freshly brewed coffee (with cream and sugar). But on some days after 5pm, I also enjoy the fortified stuff.

In the realm of beer, I enjoy a Pilsner and you can’t go wrong with the original: Pilsner Urquell, from the Czech Republic. I also like the heavier Belgian beers, for example Westmalle Dubbel or Achel Bruin (both made by certified Trappist monasteries, the latter of which I actually toured on a visit to Belgium) but only on special occasions, because the dark Bruins/Dubbels require some time and concentration to enjoy and analyze the complex flavors.

If I can get one, of course, a bottle of Pliny the Elder from Northern California is very tasty.

As an enthusiastic beer drinker, I also celebrate the 500th anniversary of the world’s oldest food safety law still in place today with an Aventinus Doppelbock or Spaten Optimator from Bavaria/Germany.

A nice Napa Valley Chardonnay (Rombauer with its with deep golden color and buttery flavor), a Russian River Pinot Noir (Rochioli, if you can find it, is one of the best!) and a smooth Single Malt (Macallan) after dinner complete the picture.

[PoF: That’s a quality rundown, Big ERN. When it comes to milk though, I can’t even deal with 1%, let alone whole milk. Might as well be drinking alfredo sauce. 🙂 I need to tour some Belgian abbeys. Put it on the list.] 

Now, eleven foods.

Every two to three weeks when we do our Costco run I will make sure to treat Mrs. ERN, the special woman that she is, to a slice of Costco pizza [PoF: $1.99] and Polish dogs. [PoF: $1.50 and includes a 20 oz. drink] Funny as it sounds, that’s actually a great family activity for a tasty meal, awesome people-watching and joking around how cheap and frugal we are.

It’s also one of the few places for us to eat out where our three-year-old daughter is not the worst behaved kid in the room and it proves that more than half of a good meal is made up of who you share it with.

Of course, we also enjoy sushi and sashimi at our favorite hole-in-the-wall Japanese neighborhood restaurant.

Foods number 5 through 10 would be all the delicious meals my wife cooks for me at home. My wife cooks great food every day and naming only six dishes would not do her justice, but I’ll do it anyways: Pork BBQ ribs, Beef Stew, Thai Curry, Chicken Adobo, Orange Chicken, Dungeness Crab. And she does all that in our tiny kitchen!

Finally, as a dessert we both love, love, love Swiss chocolate. Why not Belgian chocolate? To settle the score between those two beautiful small European countries, my ranking is:

Swiss Chocolate > Belgian chocolate (though it’s close)

Belgian beer >>>>> Swiss beer (not even close)

[PoF: Your wife can cook for me any day. I mean that in a platonic, non-innuendo sort of way.

The Swiss are known for their chocolate, holey cheese, and bank accounts for James Bond type criminals, but not for beer. I don’t know that I’ve ever had a Swiss beer.]

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This could be another favorite food, though we don’t know yet what’s actually in it

 [PoF: Use your imagination]

How did you first learn about PhysicianonFIRE.com? What one piece of advice do you have for me?

I had noticed you after you commented on other blogs and I always enjoyed your insights and sense of humor. So, it was natural to check out your blog and I remember the first post I saw was about the Mega Roth conversion. Very good work!

My number one piece of advice for you is to say thanks to your faithful readers by inviting us all to your backyard for beer and BBQ. If that’s maybe a bit too much, just keep up what you have been doing; inspire and enlighten us with your posts, stay active and responsive in discussions here and on other blogs. God willing, the rest will just fall into place!

[PoF: There’s no reason I can’t do both. Cheers! And thank you so much for participating, crazy Uncle Dr. ERN.]



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27 comments

  • Ah a fan of the German purity law, very cool. Are there any particular types of data sets or questions your focusing on in your day job? I always enjoy your posts for the level of data analysis, and of course the liberal usage of graphs.

    • Thanks! Yes, the German beer law says that only natural ingredients are allowed and it definitely reduces the effects of the hangover!
      I do global macro and asset allocation (i.e., no stock selection), so I would get my data from Bloomberg, Datastream, Haver, etc. Mostly financial and macroeconomic data. The models I build will help answer questions like what markets are under/over-valued? Which would be used to either under/over-weight or even short certain markets and we do that within bonds, equities, currencies, and commodities. Interesting job and great colleagues, too !

      • An interesting factoid about the Reinheitsgebot is that for a few hundred years, it did not permit yeast, an essential ingredient for fermenation, to be included in the beer.

        When yeast were discover in the 1800’s, yeast was added as the 4th allowed ingredient. Thank you, Louis Pasteur!

        The purity “law” doesn’t allow for all sorts of ingredients that can add to a beer’s flavor (Belgian candi sugar, spices, fruits, honey, etc…) so I don’t love it or abide by it, but it’s a fun piece of history.

  • Great interview, ERN! Always nice to get to know fellow FIRE bloggers a little better. My crazy uncle ERN bought my two year old his first gun for Christmas last year… Every year he does something that gets my wife’s jaw to drop…

    • Thanks! Well, you can’t start the kids too early, right, (uhm, 2 years is too early), but I’m sure his heart is in the right place and he’s the favorite uncle of all the under-10 kids. That’s exactly the crazy uncle Ern I envisioned! 🙂
      Cheers!

  • Arrgo

    I really enjoy the ERN blog ( and Pilsner Urquell)!

  • Thanks, PoF, for a fun and entertaining interview. It’s a great honor to be featured here!
    Hiking in New Zealand will definitely be on the radar screen, so we can combine that with the backyard beer & BBQ over there! 🙂
    Cheers!

  • Very cool to get to look a little bit behind the economic draperies of Dr. ERN! Wonderful!

    Perhaps one day we will get a chance to meet on the snow or at the bar or both! The Belgian beer stuff reminded me of a very dark morning I had after drinking one too many Kwak back in my younger days – a conference jaunt to Namur, Belgium as a chemistry student funded by the UK government and Unilever….ahh the good ol’ days….

    https://en.wikipedia.org/wiki/Bosteels_Brewery#Pauwel_Kwak

    • Thanks! I have the feeling we’ll have a “reunion” of bloggers some day. Whether it’s in NH, NZ, or the ERN family new location (TBA).
      I love Belgium! I went there many years ago for a beer tasting tour and the beer, food, and sightseeing were awesome. I’m not sure about the Kwak, but I definitely had the Tripel Karmeliet.
      Cheers!

  • Two of my favorite bloggers in the very same place at the exact same time! Many thanks to PoF and (Big) ERN for this outstanding Q&A.

    All that talk about beverages has left me with one question I’ll pose to either/both doctors in the house: Is it too early to crack a brew this morning?

    Cheers, guys!

    • Well, the good news is that while a few rounds of Belgian Bruin Beer and other delicacies were consumed in the making of this they were all strictly after 5pm in our respective time zones and when off-duty. Sorry for getting everybody thirsty so early in the morning. That Dr. PoF gets up early on weekdays, doesn’t he?
      Thanks for stopping by, FL!
      Cheers!

    • Thank you, Libre. You’re too kind.

      Regarding the beer, you’re good to go. It’s noonish somewhere.

      Skål!
      -PoF

  • EJ

    Nice Post! Piney the Elder is delicious. I am aiming for a 45 plus exit (or at least pull back). As a physician, much like a nurse, if you don’t use it then you quite literally lose it . So 9 years to early retirement. Do the Swiss even make beer?

    ERN, I look forward to reading your blog.

    Dadsdollarsanddebts.com

    • Thanks for sharing! Yes, the mid-40s sounds like an ideal time to transition over to FIRE for folks with a late start in the earnings history.
      The Swiss do make beer, but they must have diverted their top talent away from beer production and toward cheese and chocolate-making. I can’t even remember a single Swiss beer label.
      Cheers!

  • What a fun and informative post. And again, another great blogger to follow. That is in itself dangerous. Will have to check out your posts on bonds and such. My fixed income portion, I believe, has saved me a couple of times from making rash decisions and I count that as a win. I know there are others who agree with you though.

    POF could start a MMM type get together in his backyard and expand from there. I can’t do Beer or BBQ, but would come for the company and bring my own veggies.

    cd :O)

    • Thanks, great for you! Fixed income is important but I seem to have this FOMO (fear of missing out) virus and can’t keep the dry powder in Fixed Income for long. A small dip in equities and I deploy all the cash/bonds into equities. That’s how I ended up with 100% equities. 🙂
      Backyard BBQ sounds like a plan. How about BBQ’ed veggies for the vegetarians?
      Cheers!

  • ERN – love the blog, let me know if I’m mistaken but I haven’t seen too much on your site about your real estate investments. I’m intrigued… tell me more!

    Thanks PoF!

    • Thanks, Passive Income M.D.! So far we invested in 3 Private Equity Funds. Two have called all of the commitment, the third one is now 50% called. It’s really too early to tell how successful this will be. So not really that much to report yet! 🙂
      It’s obviously an opaque and illiquid investment style and I’m not yet going to publish what the funds are. There’s probably also a regulatory issue about endorsing funds that are for accredited investors only. But if you contact me directly (ernretirenow at gmail dot com) we can chat more. The funds bought several properties, mostly multi-family and student housing. The target rental yield is usually around 8% and some prospect for capital gains down the road. Pretty nice returns in today’s environment!
      Cheers,
      ERN

  • Nice to meet you, Big ERN! I second the idea of a BBQ for more quality time as a group. I’ll bring brownies.

  • Great Q&A and banter back and forth, I really enjoyed the interview. I’m much funnier after a Belgian brew myself!

    I’ll keep an eye out for the backyard bbq invite!

    • Thanks! Yes, that’s true about the Belgian brews. But who knew that PoF would be such a lightweight? Well, not with the booze but with the milk of all things!

      I’ll keep an eye out for the backyard bbq invite!

      Yeah, same here. My summer 2017 looks pretty open! 🙂
      Cheers,

  • I love reading these interviews. It’s always so interesting hearing what people’s day jobs are and getting non-finance facts about them. Thanks so much for doing this and I really enjoyed reading!!!

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