Physician on FIRE https://www.physicianonfire.com Financial Independence. Retire Early. Fri, 19 Oct 2018 02:39:18 +0000 en-US hourly 1 https://www.physicianonfire.com/wp-content/uploads/2017/02/cropped-FlameDoc-150x150.png Physician on FIRE https://www.physicianonfire.com 32 32 Giving Faceoff: Charitable Remainder Trust (CRT) versus Donor Advised Fund (DAF) https://www.physicianonfire.com/crt-versus-daf/ https://www.physicianonfire.com/crt-versus-daf/#comments Thu, 18 Oct 2018 07:55:50 +0000 https://www.physicianonfire.com/?p=8425 lucidityI’ve written extensively about how I use a donor advised fund to give more generously while taking advantage of the ability to reduce your taxable income while working and living in a high tax bracket.

Another vehicle that can accomplish the same thing in a different way is the charitable remainder trust (CRT). I knew a little about them but hadn’t explored the concept in much detail.

I’ve been accused of being greedy because I park my donated dollars in the donor advised fund before dishing it out; I can’t imagine what the naysayers would say if I were using a CRT instead!

The creator of IQ calculators offered to compare and contrast the two, and he shows one way in which the two can be used together to negate one of the downsides of the CRT.

Read on to learn more about two of the more popular charitable giving vehicles as explained by my friend over at IQ Calculators.

 


 

Giving Faceoff: Charitable Remainder Trust (CRT) versus Donor Advised Fund (DAF)

 

We have spoken at length about tax-efficient ways to give money to charitable causes. Charitable giving is one of those things that many physicians are privileged to be able to do and also reap the tax incentives for doing so. In this article, we will talk about two strategies for accomplishing tax-advantaged charitable giving.

Those two are donor advised funds and charitable remainder trusts. Both provide tax strategies for giving to charity, but they both present their own unique advantages and disadvantages. Because of this, some people even choose to combine the two strategies in order to receive the benefits of both. We will try to explain the advantages and disadvantages and why it could make sense to combine the two into one strategy.

 

Charitable Remainder Trust Overview

 

A charitable remainder trust is a trust where money is placed for a certain period of time or until the donor’s death at which point the money is transferred to the charity spelled out in the trust documents at the time the trust was formed.

During the period of time between when the trust was formed and the trust is given to the charity, the charitable trust will make payments or distributions to the donor. This is a high-level overview of how a CRT works but some of the finer details will be spelled out in the advantages and disadvantages below.

 

Charitable Remainder Trust Advantages

 

1. Upfront Tax Deduction

 

One of the advantages of giving to a qualified charity in any circumstance is the tax deduction, and that’s no different with a CRT. The calculation to determine the tax deduction is not as simple as a normal tax deduction, but there is a tax deduction given nonetheless.

The size of the tax deduction depends on the amount of money given, the length of the trust, and the amount of money that is elected to be withdrawn each year. For a charitable remainder trust calculator, see this one from IQ Calculators.

 

2. Periodic Payouts to the Donor

 

During the period of time between when the trust is set up and until the trust funds are given to the charity, the trust pays a set amount of money to the donor periodically. The amount of the withdrawal/payout is chosen at the beginning of the trust by the donor and as previously mentioned, will affect the tax deduction.

The higher the payout, the lower the tax deduction, and vice versa. To calculate your CRT payment, explore using this tool. The CRT also will allow potential growth in the payouts to the donor if the value of the assets inside the trust grow.

 

3. Avoidance of Capital Gains Tax

 

CMGAssets themselves can be donated to a CRT. Once assets are inside the trust, they can be liquidated and any capital gains tax that would normally be owed would be deferred to the point in time that the assets came out of the trust in payment to the donor.

Details on how payments to the donor are taxed can be complicated, but for simplicity sake, just know that much, if not all capital gains taxes could be avoided when donating to a CRT.

 

4. Reduction of the Donor’s Estate

 

When gifting to a CRT, the assets in the trust are no longer included in the donor’s estate and would be excluded if/when that day came to calculate estate taxes.

 

Charitable Remainder Trust Disadvantages

 

1. Choosing The Charity Years In Advance

 

The donor has to choose the charity where they want the funds to go when the trust is formed and this cannot be changed later. It can be difficult to choose the charity when the funds won’t be going there until some point in the distant future. A lot can change about the charity and the donor’s preferences during those years.

 

2. Loss of Control Of Assets

 

The moment that the trust funds are given to the charity or beneficiary of the trust and the trust expires, the donor no longer has control of the funds. Up until that point, they would still remain in control of directing how the assets are invested, but afterward, they cease to exercise any control. The charity is in control of the funds at that point.

 

Donor Advised Funds Overview

 

A donor advised fund is a fund that acts as a charity and receives donations from donors. The donor advised fund holds the invested money until the donor decides which charity the fund should be gifted to.

When the funds are given to the DAF, the donor receives a tax deduction for their charitable donation.

 

Donor Advised Fund Advantages

 

A donor advised fund has all the same advantages that a CRT has.

  • Tax Deduction
  • Capital Gains Avoidance
  • Reduction of Donor’s Estate

However, a DAF does allow the donor to choose the charity at a later date and not when the funds are immediately gifted to the charity like a CRT requires.

 

nph honduras — a monthly recipient of pof’s daf

 

Donor Advised Funds Disadvantage

 

  • No income for the donor while waiting for the charitable recipient to be named.

The main disadvantage that a DAF has relative to a CRT, is that the funds cannot generate income for the donor while the donor is alive, a feature that a CRT allows.

 

Does Combining a DAF with a CRT work?

 

Combining a DAF with a CRT can provide the benefits that both strategies offer. This provides additional flexibility and lets the donor give on their own terms.

DDQ
The way this can work is by naming the DAF as the CRT beneficiary. By doing this, the pressure involved with naming the charity immediately is removed because when the funds are given to the DAF, then the charity can be chosen.

And when the CRT is passed on to the DAF, the donor can name a charitable cause then, or he can let their family that they leave behind continue their charitable legacy by letting them manage where the DAF funds will be given.

This will also allow the individual or their financial advisor to continue managing the charitable donation funds while it’s still in the CRT. Furthermore, if the donor would like to contribute to the DAF while they are alive, they can use the CRT distributions to contribute to the DAF and receive another tax deduction in addition to the one received for gifting to the charitable trust.

 

Conclusion

 

A donor advised fund and a charitable remainder trust are both very similar in their nature, and the things that they can accomplish for the charitably inclined. Each of them have a small advantage over the other one (as mentioned above) that when combined, gives the donor the benefits of both of these charitable tools.

So next time you think about giving, be sure to check out the benefits of combining these two vehicles by consulting your legal counsel and/or financial advisor before choosing your charitable giving strategy.

 

[PoF: Thank you for taking a break from IQ Calculators to highlight two intelligent ways to donate money to charities in a tax-advantaged way. As I’ve argued many times before, doing so is not selfish — in fact, the tax deduction allows you to put more money in the charity’s coffers per dollar you part with.

I hadn’t considered a CRT before, but it may be something I consider later in life when I might be looking for a way to create some fixed income — an annuity with a charitable mission, essentially. And I love the idea of pairing it with our already established DAF]

 

For more information on donor advised funds, see my additional posts on the topic:

 

 

Have you established either a Donor Advised Fund or a Charitable Remainder Trust? Are either of them (or a combination of both) a strategy you’ll consider for charitable giving in the future? 

 

]]>
https://www.physicianonfire.com/crt-versus-daf/feed/ 4
Tax Loss Harvesting with Vanguard: A Step by Step Guide https://www.physicianonfire.com/tax-loss-harvesting-vanguard/ https://www.physicianonfire.com/tax-loss-harvesting-vanguard/#comments Thu, 18 Oct 2018 07:55:36 +0000 https://www.physicianonfire.com/?p=7616 When the stock market hiccups, as it is known to do from time to time, you may have one of several common reactions.

  • What?!? I just lost 10% of my net worth. This is horrible!
  • Meh. A 10% market correction happens in most years. It will bounce back. Eventually.
  • Cool! Let’s see what I can tax loss harvest.

 

The stock market is volatile, and it’s not unusual to see downward swings of 5% to 10% in a few days’ time. While seeing several years’ worth of spending erased from your balance sheet is less than awesome, you’re invested for the long haul.

I’m always looking for a silver lining, and I found one in not only having the ability to tax loss harvest a recent investment, but also in capturing the screen shots to share with my audience.

I have previously written about how I used tax loss harvesting to Brofit from the Brexit, but this post represents the first time I had the forethought to save the images each step of the way. Note: This article was originally published in February of 2018 and was updated in October of 2018.

 

Tax Loss Harvesting with Vanguard: A Step by Step Guide

 

What is tax loss harvesting (TLH)?

 

TLH is a way to capture a “paper loss” by selling an asset that has declined in value and subsequently purchasing a similar asset to avoid locking in an actual loss. This only works in a taxable brokerage account, also commonly referred to as a non-qualified brokerage account or simply brokerage account.

In tax-advantaged retirement accounts, such as an IRA, 401(k), 403(b) or similar accounts, there are no tax implications when buying and selling within the account, and you cannot tax loss harvest to your benefit.

The amount of any tax loss harvested in a taxable account can be deducted from ordinary income when you file your income taxes, up to $3,000 per year, resulting in savings of $1,000 or more for the typical high-income professional.

If Uncle Sam is willing to give me $1,000 or more per year for deciding to swap some shares of a Total Stock Market Fund for the S&P 500 index every once in a while, I’ll gladly take them up on that offer time and time again.

If “paper losses” exceed $3,000 in any given year, the excess losses can be carried over to subsequent years. In 2016, a year in which the market actually saw a double-digit gain, I tallied over $45,000 in losses early in the year, giving me over 15 years worth of $3,000 deductions from 2016 alone.

A handful of timely transactions in prior years have saved me thousands of dollars already (I also harvested about $30,000 in losses in 2015), and those savings have the potential to continue to save me $1,000 or so per year for decades as long as my income keeps me in the upper tax brackets.

Carryover losses can also be used to offset capital gains in the future in the event that I’d like to sell some funds to access cash from my investments in a taxable account. Every dollar of capital gains that would normally be taxed is offset by a dollar in tax losses previously harvested.

 

 

What are Tax Loss Harvesting Partners?

 

TLH partners are assets that are similar (have a high correlation) but are not “substantially identical.” That last phrase belongs to the IRS, and it hasn’t been defined precisely, but conventional wisdom is that a fund following a different index is different enough.

Funds that follow the same index, but are offered by different companies (i.e. Scwab’s SWTSX & Fidelity’s FSTVX, both total stock market funds) would be considered by most to be substantially identical, and are not a wise choice as partners.

Likewise, I would not consider the ETF version of the mutual fund you’re selling at a loss (or vice versa) to be a valid partner. Look for assets that are following different indices.

Interestingly, as pointed out in the comments, Vanguard’s VTSAX follows a different total stock market index, and it may be a suitable TLH partner to the Schwab and Fidelity funds. Personally, it’s close enough to a gray area that I would hesitate to make such a swap, but it’s probably just fine.

The same is true of Fidelity’s zero-fee funds. They follow proprietary indices, making them different from all other total stock market or total international funds.

A good partner is not only at least a tiny bit different, but also one you would not mind holding indefinitely. If you’re going to exchange or trade into the fund, you should be comfortable with that asset rising in value and remaining in your account for years.

A fund with a substantially higher expense ratio would be a poor choice. I would also advise against trading a tax-efficient passive index fund for an actively managed fund that might spin off excessive capital gains. The tax consequences of holding such a fund long-term could negate the benefit of the tax loss harvesting.

The following are some decent trading partners. I use Vanguard mutual funds, but you should be able to find similar partners in mutual fund or ETF form from your favored broker, be it Fidelity, Schwab, iShares, or whomever.

  • Total Stock Market / S&P 500 / Large Cap Index
  • Total International / All-World Ex-US / Developed Market
  • Small Cap Index / Mid Cap Index / Extended Market

 

I’ve only traded in the first two categories, as I keep my small and mid cap funds in tax-advantaged accounts. I have gone one step further in the international category, trading developed markets for European and Pacific indexes. Frankly, I was happy to see those drop further so I could jump back into a total international fund later on, so I wouldn’t necessarily recommend such a move, as it violates the principle I mentioned above about only exchanging into funds you’d be comfortable owning forever.

Of course, if you’re feeling charitable, you could always consider donating unwanted or suboptimal funds to a donor advised fund if they do eventually experience significant gains.

You could also look at harvesting losses in municipal bond funds (you shouldn’t hold tax-inefficient non-muni bond funds in taxable), but those don’t experience the wild price swings that stocks do, so it’s unlikely you’d see meaningful opportunities to harvest sizable losses with bonds unless you have a huge bond balance.

Tax Loss Harvesting Dangers

 

Perhaps danger is a strong word, but there are plenty of ways to screw this up, which is why many investors don’t bother with it or rely on a roboadvisor’s algorithm to do the tax loss harvesting for them. But really, the worst you can do is negate the tax benefit of your efforts, and most mishaps only partially reduce the amount of the loss you’ll take (assuming you choose to report the mistake).

What you want to avoid in the 30-day window before and after tax loss harvesting is a wash sale. A wash sale is a purchase of identical or “substantially identical” replacement shares of an asset you sold at a loss during that 60-day (30 days before and 30 days after) timeframe.

You also want to be sure your cost basis determination is not set to First In First Out or Average Cost in your taxable account. You want each lot to be recorded with the purchase price, and you want the ability to sell each purchased lot individually.

With Vanguard, you do this by selecting Specific Identification (SpecId) as your cost basis for all funds held in a taxable account.

 

Vanguard Cost Basis

 

I suppose another “danger” is missing an opportunity to TLH. Waiting for a loss to get bigger can be a fool’s errand. It makes sense to have a threshold dollar amount at which you’ll consider harvesting a loss. Perhaps it’s $500 or $1,000. Once that threshold is crossed, I would seize the opportunity. If the asset class continues to drop, you can TLH again into a third partner within 30 days, or back into your original position beyond 30 days.

 

How to Avoid a Wash Sale

 

The simple answer is to avoid buying replacement shares a month before and after tax loss harvesting. It sounds simple enough, but there are several ways to unwittingly foul this up.

The most likely way to inadvertently create a wash sale is with automated new investments and automated dividend reinvestments. Let’s look at each of these individually.

Automated investments often take place in a tax-advantaged account like a 401(k), 403(b), 457(b), or SEP or SIMPLE IRA. While investments in these accounts may not be noticed by your taxable brokerage account or the IRS, it’s best to avoid any gray areas, even if the impetus to report them may be on you.

Note that replacement shares purchased in any of a spouse’s account can also trigger a wash sale. Whether your finances are separate or combined, you’ll each have your own tax-advantaged accounts, and the IRS looks at your accounts as being under one umbrella when it comes to tax loss harvesting and wash sales.

 

How do you avoid automatically investing into a substantially identical asset in a tax-advantaged account shortly before or after tax loss harvesting in a taxable account?

 

The simplest way is by investing in different asset classes in your tax-advantaged accounts.

I accomplish this by investing in small cap, mid cap, and emerging market stock indices in my tax-advantaged accounts, while investing in large cap and total international / developed markets in taxable. See my portfolio for full details.

Such a strategy doesn’t jive well with a simpler three-fund portfolio, but I feel the benefits of tax loss harvesting outweigh the benefits of simplicity. I also like optimizing, even if it’s at the expense of simplifying.

 

How do you avoid reinvesting into a substantially identical asset class after tax loss harvesting?

 

This is straightforward. Avoid automatically reinvesting your dividends. Manually reinvest them four times a year (or however often your receive dividends). You may want to set up a calendar reminder — I consistently receive dividends from Vanguard late March, June, September, and December.

I have my taxable mutual funds set up to send all dividends to a Vanguard money market fund. In the fourth week of months 3, 6, 9 and 12, I manually reinvest the dividends. If I have recently taken advantage of a tax loss harvesting opportunity, I don’t buy into the fund I just sold.

If you’re afraid you won’t notice the dividends hit your money market fund, have them sent to your checking account where you’ll be more likely to see them, and reinvest from there.

If you do accidentally goof this up and create a wash sale, it’s not a huge deal. When you invest or reinvest into a fund that you sold at a loss within 30 days, you’re most likely purchasing a smaller amount than you sold.

For example, if you sell 100 shares at a loss and you automatically invested or reinvested in 10 shares, you can still take the loss on 90 of those 100 shares. This is known as a partial wash sale. If you purchase 100 or more substantially identical shares within the 30-day window before or after capturing a loss by selling 100 shares, the tax benefit of your efforts is indeed eliminated.

I have my investments set up in a way that a wash sale is very unlikely, but one of my favorite Bogleheads who goes by the moniker livesoft, the resident TLH guru, has intentionally created a wash sale as a public service. See his tutorial on what not to do, and how to file the appropriate tax forms if you do end up with a wash sale despite your best efforts.

 

Tax Loss Harvesting with Screenshots

 

So what does this look like in practice? Like I’ve done with my Backdoor Roth maneuvers, I took screenshots to make this as straightforward as possible.

 

Step 1: Recognize a loss has occurred

 

You can’t harvest a loss that you don’t know about. I track my investments with Personal Capital, and if you choose to do the same, you’ll help enhance this site’s charitable mission.

I typically like to see a loss of at least $1,000, but TLH opportunities (for better or worse) have been hard to come by over the last couple years. When the market dropped a bunch after a recent investment, I pulled the trigger.

Note that I only held these shares for four trading days. Did I create a wash sale by selling shares of a mutual fund that I purchased a few days earlier, well within the 30-day window?

No. The shares I bought were not replacement shares for the ones I sold; they were the ones I sold. If I had bought two lots and only sold one lot, then I’d have issues, but as long as you sell all shares purchased in the last 30 days, you won’t create a wash sale.

 

 

Step 2: Select the lot(s) to sell or exchange

 

Using mutual funds, I don’t have to bother with a settlement fund, and there’s no downtime where my money is not invested. I simply exchange from one mutual fund to another, and the swap takes place at the end of the trading day.

In this case, my very recent $10,000 investment in Vanguard’s Total Market Stock Index (VTSAX) had lost a few hundred dollars in the first three trading days since I purchased the lot on February 2nd, and well into the fourth trading day, it was on track to lose a few hundred dollars more.

Taking advantage of this situation feels like being allowed to bet on the winner of a football game late in the fourth quarter when the home team’s up by three touchdowns. As long as the trade is entered before the market closes, the transaction will go through based on the closing price.

 

Tax Loss Harvesting Vanguard-1

 

After logging into my taxable brokerage account at Vanguard, I click on “Exchange” in the mutual fund that has a loss.

I am then presented with a list of lots purchased, along with the gains or losses in each. Only the most recently purchased lot has a loss, and I select it.

 

Tax Loss Harvesting Vanguard-2

 

Step 3: Select the TLH Partner to Purchase

 

On the next screen, you’ll verify the fund you are selling on the left.

 

 

 

On the right, you’ll select the fund you’ll be purchasing with the proceeds of the sale you’re making at a loss. This will be your tax loss harvesting partner. If you don’t already own shares in the fund, you’ll be able to add it from this page. Each of the funds I own appear in the list, including my chosen TLH partner, the S&P 500 index fund.

 

 

Note that it looks like I’m only harvesting a loss of $283.37 ($10,000 – $9,716.63), but late in the trading day, the market was down another 4% or so, and I could count on a bigger loss barring a crazy last-minute Tom Brady-esque rally. Using ETFs, you could lock in the loss at the moment you choose to sell.

 

Step 4: Confirm the Tax Loss Harvest

 

After pressing continue, you’re done. At that moment, you’ll be presented with a confirmation.

 

 

The amount you’re selling from one fund and buying into another is based on the prior day’s closing price and is not representative of the final trade. Hence, the asterisk.

The next day, you can log in to see the true value of the paper loss you tax loss harvested.

 

 

The loss more than doubled in size from an estimated $283.37 to the actual $637.97. I had a pretty good idea this would be the case, as the stock market was down big late in the trading day when I set up this exchange.

A day or two later, I received a confirmation of the trade, which is essentially the same information you see above in a different format, but with the closing price on the day you made the exchange, representing the true value of the paper loss.

 

TLH Vanguard Confirmation

 

Under “Notes:” I am told that Vanguard won’t let me buy back into this fund in the next 30 days to comply with their frequent-trading policy. That’s a good thing — the last thing I want to do is buy more VTSAX and create a wash sale. Vanguard is protecting me from making a bonehead move, and I appreciate that.

 

 

Tax Loss Harvesting Summary

 

That’s all there is to it. Sell lot(s) that have lost money, buy something similar that’s not the same, and you’ll receive a 1099-B from your brokerage reporting a year’s worth of TLH efforts. Below is an excerpt of my Vanguard 1099-B from 2016 showing a total of $45,449.15 in losses. Most were short-term losses, with the final $6,212.57 being a long-term loss.

Note that you are not actually losing money when you tax loss harvest. You are selling one fund that has dropped in value and buying a similar (but not identical) fund that has similarly lost value. You are not out of the market for one minute when doing this with mutual funds. You are simply taking the loss against your tax burden and lowering your cost basis.

 

TLH 1099B

 

As daunting as the concept may at first seem, tax loss harvesting is not a difficult task. I hope I’ve made the benefits clear and the process approachable.

 

 

Happy tax loss harvesting!

 

]]>
https://www.physicianonfire.com/tax-loss-harvesting-vanguard/feed/ 88
Ether to FI: Don’t Call it Retirement (and a Net Worth Update) https://www.physicianonfire.com/dont-call-it-retirement/ https://www.physicianonfire.com/dont-call-it-retirement/#comments Tue, 16 Oct 2018 07:55:55 +0000 https://www.physicianonfire.com/?p=10007 What will you be up to in sixteen years?

I don’t pretend to know where I’ll be or what I’ll be doing, but our friend Ether to FI, who is in his second year now as an attending anesthesiologist, has some more concrete ideas.

lucidityIf you recall, he started writing for us a year ago and stated his goal of achieving a net worth of $3.3 Million in ten years, or enough to live on $100,000 a year with a low safe withdrawal rate of about 3%.

He’s made tremendous progress in his first full year as a physician anesthesiologist in the workforce. His finances will be outlined below in detail, but he’s also made progress in terms of thinking about his life plans and life goals.

When we met him last July, he hoped to be working into his 90s. More recently, he seemed to have a change of heart, and I almost had to add “RE” to the end of his “Ether to FI” moniker.

Today, he envisions being Retired Not Retired before his fiftieth birthday, or about 17 years after starting his anesthesia career. Note that is markedly beyond his goal FI date just 9 years away. Why keep working after achieving financial independence?

I want to thank E.T.F. for coming back with this update. But don’t call it a comeback. He’s been here for years. And don’t call it retirement…

 

Don’t Call It Retirement

 

June 30th, 2034

July 1st was the grand opening; June 30th will be the grand closing.

Let’s call it a separation of service. There is too much of the world to see and time is a limited resource. We have gained better clarity as a couple over the last year about our future desires.

First is spending more time together as a family. Second on the list is eliminating our need to trade our time for money. The third is traveling extensively at a leisurely pace. Goals 1, 2, and 3 are not compatible with full-time work.

In the FIRE community, retiring in your late 40s is not considered early. In the medical community, it’s extremely early. There are too many things we want to do as a couple to wait till the age of 65 to stop. 2034 gives us the balance of accomplishing career goals, giving our kids a stable environment (K-12), and still young and fit enough to enjoy traveling.

 

How long will the break last?

 

I have seen these “breaks” last a few years for some and forever for others. I refuse to call it retirement. One year ago, I placed great emphasis on FI, because I cannot imagine a complete break from work.

Work of some sort will always be there, I can see myself taking a few years off and then working for a few years, and repeating the cycle. Mrs. ETF will likely spend her time between years “on,” volunteering, but I doubt she will have an itch to return to work.

To make this hope a reality, we will need some money. Currently, we are trying to grow our net worth substantially by 2034. We are setting a big audacious goal of $300,000 available a year to spend.

(I can hear people already, $300k, seriously?)

Yep, $300k, we don’t plan on spending anywhere close to that amount. Who knows what the future will bring, but I cannot imagine having financial problems with a buffer that large. Even if we live past a hundred years old, starting with a buffer that large in my late 40s will guarantee our great grandchildren will never run out of money.

Setting a target this large will force out of our comfort zone of a steady paycheck. We have discussed creating other streams of income, this new goal should spur us to action.

 

ETF Hiking Views

a view from E.T.F.’s recent hike in seattle

 

Our finances: One year in review

 

We have made some progress over the past year, growing our net worth from $80,283.87 to $364,089.20. I am very proud of our progress. New year, new goals: $800,000 by the end of year 2.

CMGGo big or go home!

Let us review this past year. I rolled my residency retirement account into an IRA. The Roth 403B portion went directly into a Roth IRA. The traditional 403B plus the employee match was moved into a Traditional IRA.

I then converted the traditional IRA balance to Roth, paying the taxes. This opened up our ability to do Backdoor Roth IRAs.  $22,000 was added to our Roth IRAs, $5,500 in each of our IRA’s for 2017 and 2018.

We beefed up our cash position primarily for our house purchase hopefully in the next six months, and we will keep on adding to it.  $25k is our emergency fund, the additional $67k will be part of our home down payment.

We have cranked up our retirement account contributions, maxing out all available options at our jobs.  I am happiest about our college savings for our kids. Initially, it stood at $7,080, and now they have $37,795.  It looks like the mini E.T.F.’s are going to college.

 

 

DDQThere will be a few things spurring our net worth along. We are planning on buying a house. I don’t expect much appreciation over the course of one year, but we will have a 15-year mortgage. I am debt adverse, and I will have extra motivation to aggressively rid us of the mortgage in 4 years or less.

We will continue to contribute to retirement accounts which between myself and the Mrs. E.T.F. is $120k a year. We will top off little E.T.F. 1’s 529 at $40k, and increase ETF 2’s 529 to $25k.

We will also open up a taxable account this year with at least a $10k VTSAX contribution. We have a lot of moving parts, but Mrs. E.T.F. and I work best with defined goals.

It has been a great year, thanks for following along and stay tuned.

Only 5,760 days left.

 

Follow Ether to FI’s progress to financial independence in these previous posts:

 

 

[PoF: This is a great example of what can happen when you have a laser focus on your finances from the day you start earning a physician’s salary. Now I’m not saying every physician will be able to replicate his numbers; he’s got several advantages that a lot of you won’t have (and some that I didn’t have, either).

His wife worked and helped pay his way through medical school, graduating with manageable student loan debt, which they paid off by the time he finished residency.

He’s in a high-paying specialty.

He does not have a high state tax burden.

Nevertheless, these benefits he enjoys are no reason to think you can’t make smart decisions with your money and save a significant sum at a relatively young age. It might take you twice as long, or you may only save half as much, but anyone with a physician’s salary should be able to increase their net worth by paying down debt and / or investing from day one.]

 

 

What do you think of the E.T.F.s’ progress thus far? Or their audacious goal of adding $536,000 to their net worth over the next twelve months? What odds would you give them?

 

]]>
https://www.physicianonfire.com/dont-call-it-retirement/feed/ 14
The Sunday Best (10/14/2018) https://www.physicianonfire.com/the-sunday-best-10-14-2018/ https://www.physicianonfire.com/the-sunday-best-10-14-2018/#comments Sun, 14 Oct 2018 07:55:53 +0000 https://www.physicianonfire.com/?p=9650 The Sunday Best
The Sunday Best is a collection of articles I’ve curated for your reading pleasure.

Expect most of the writing to be from recent weeks and consistent with the themes presented on this website: investing & taxes, financial independence, early retirement, and physician issues.

 

Presenting, this week’s Sunday Best:

 

Early retirement and real estate are featured together by Katy McLaughlin in the Wall Street Journal. With shoutouts to me, Mr. Money Mustache, ChooseFI, and Financial Samurai, How to Thrive in Early Retirement. [If you’re stuck behind the WSJ paywall, try this link for a stripped-down version]

 

lucidityIt’s important to stay fit to truly thrive in retirement. Miguel, the lawyer known as the Rich Miser understands this, and he’s not afraid to invest in his physical fitness. 20 Reasons Why I Spent Over $10,000 on a Home Gym.

 

That’s a decent sum to spend on a home gym, but most millionaires with financial advisors spend more annually on investment fees. The Wall Street Physician thinks this could change. Will The Cost Of Financial Advising Drop Like Other Fees In The Financial Services Industry?

  • [Pro Tip: This site’s vetted Recommended Financial Advisors already charge considerably less than the typical FA, particularly at higher net worths.]

 

If you’re spending unnecessarily on high AUM fees and have a similarly overpriced home and stable of automobiles, you may be a High Earner, but Not Rich Yet. Yes, the HENRYs are everywhere — The Minimalist in the City is surrounded by them in Singapore. Meet the HENRYs.

 

Why are some high earners not yet rich after earning millions of dollars over the years? Some believe they are expected to have or deserve to have all the trappings and trimmings of an upper class lifestyle. I would call this a limiting belief. The Guy on FIRE has found success by Overcoming the Power of Limiting Beliefs which run rampant in our society.

 

Pessimism is the first ingredient in many limiting beliefs. You know, the glass half-empty phenomenon. But it’s not just the fullness of the glass that matters. Size matters. Side Hustle Scrubs asks, How Big is Your Glass?

  • Bonus: Size also matters when it comes to benefits, and I don’t know that I’ve ever seen a package as impressive as SHS’s. How Big is Your Package?

 

However big yours is, it’s nothing compared to the size of the Ponzi scheme Bernie Madoff almost made off with. XRAYVSN thinks he’s identified an even bigger scam. Is Uncle Sam Worse than Bernie Madoff?

 

CMGMadoff’s victims believed they could get outsized returns without much risk. There’s a misconception that such a thing has to exist, but there is no free lunch. There are also mistaken assumptions about the FIRE movement and Cody at Fly to FI has been busy Dispelling the FIRE Movement Misconceptions.

 

Why the recent pushback against these myths and misconceptions about the FIRE movement? Oh, yeah… that whole Suze Orman thing. I’m not going to devote most of the page to it (like I did last week), but there are some follow-ups worth noting:

 

Well, that was cathartic. I promise not to mention Ms. Orman the rest of the month. Let’s pick on a different public figure in the personal finance space. For all the hate directed at Matt, the lawyer who writes at Optimize Your Life, I’d say he actually went pretty easy on Dave and his followers in Loan Forgiveness (or Why Dave Ramsey Doesn’t Know What He’s Talking About).

 

 

Playing With FIRE: The Documentary

 

At FinCon17, there was a film crew following a number of my FIRE blogging friends around. A year later, they were back at FinCon with footage from that event and a whole bunch more. The trailer for the documentary film, which you can see below, debuted at FinCon18. The three-minute trailer sent chills up my spine, and I can’t wait to see the finished product early next year.

 

 

I won’t be appearing in the film, but I will get a mention in the credits thanks to the Kickstarter campaign, to which I gladly kicked in $100. I had the pleasure of chatting with both Scott Rieckens, who stars in the film, and his co-executive producer Travis “William” Shakespeare at an Orlando brewery meetup organized by our friends at ChooseFI. They’re great guys and I hope their film spreads the message of financial independence to an even wider audience.

DDQI missed the panel session at FinCon where a number of the people featured in the trailer above gathered to discuss the film, but I plan to watch it now that videos of all the sessions are now available.

On a semi-related note, I had the displeasure of watching my alma mater lose a football game to Scott’s alma mater last weekend, a game on which I foolishly placed a bet with him. A care package with some of Minnesota’s finest (along with a North Dakotan Scottish Ale for his upcoming Scottish houseguests) are en route to Oregon.

I still hold on to a 2014 memory of rushing the field after a 51-14 victory over the Hawkeyes, putting my arm around head coach Jerry Kill, and hitting the power button instead of the shutter button on my camera in a failed attempt at a selfie.

 

 

Minnesota Beers

a few of minnesota’s finest beers (and one from nd)

 

If you’re looking for new blogs and podcasts to follow, check out this year’s Plutus Award Finalists and Winners, many of which have been featured here in The Sunday Best or a Christopher Guest post.

 

 

Physicians Rise!

 

Dr. Brian J. Dixon reached out to me asking if I could help spread the message of physician empowerment. Given my disheartening experience with MOC and frustrations with certain aspects of the profession, I was happy to oblige. Here is that message:

 

Imagine physicians of all political stripes and practice philosophies coming together to strengthen physician autonomy.  Now imagine those physicians creating the most powerful physician empowerment campaign in the last 50 years.

Practicing Physicians of America is breaking the mold of the traditional legacy medical societies and associations.  Founded by Wes Fisher, MD and Marion Mass, MD and chaired by Judith “Judy” Thompson, MD, PPA is coming out the gate, no holds barred.  We will beat burnout.  We fight back against all threats to physician sovereignty.  We inspire hope while equipping physicians to own their freedom to practice how we’re trained.
Join us (for free) at www.PhysiciansRise.com and share with your colleagues.

 

Recommended Insurance Agent

 

The Disability Doc

Chris Wimberly, at The Disability Doc, has helped hundreds of physicians protect their income.  As an “independent agent”, he works for you and not on behalf of any carrier. Chris brings a fresh and unique approach to the table.  He is a master at “Specialty Specific” Own Occupation coverage and has worked hard to simplify the process of selecting a plan. In addition, The Disability Doc offers a plethora of resources and videos to help you navigate your options.  And of course… Chris also has access to exclusive nationwide discounts to help you save significant money on your plan! The Disability Doc Application

 

 

Have an outstanding week!

-Physician on FIRE

]]>
https://www.physicianonfire.com/the-sunday-best-10-14-2018/feed/ 17
How Much Money Will You Take to Your Grave? https://www.physicianonfire.com/money-to-your-grave/ https://www.physicianonfire.com/money-to-your-grave/#comments Sat, 13 Oct 2018 07:55:02 +0000 https://www.physicianonfire.com/?p=9975 This is a timely post given some recent fear-mongering about mudslides, duck boats, and crazy talk about $2 Million being “nothing” in this day and age.

lucidityIt’s also a good reminder that, in spite of a rough patch here and there (like the 6% decline in the S&P 500 over two days earlier this week), most well-prepared retirees in the past have ended up with much larger portfolios than they started with on their retirement day.

Dr. Jim Dahle believes in a four percent withdrawal rate as a great starting point, and he doesn’t see the sense in relying on something ridiculously low, like the 2% or 2.5% withdrawal rate I was planning on when I wrote my first investor policy statement.

Read on to learn how much money you might have left over for your charities or children if you follow a reasonably safe withdrawal rate pattern when retired. This post appeared first on The White Coat Investor.

 


How Much Money Will You Take to Your Grave?

 

I have been having a few thoughts lately about withdrawal rates, spurred by a comment  on my previous post on the subject. Many investors don’t realize what usually happens in a withdrawal scenario. When they look at a Safe Withdrawal Rate (SWR) table like that from the Trinity Study, (reproduced below) they simply try to figure out how to have a 100% success rate (i.e. never run out of money.)

 

 

With our current low-interest rate environment, and many gurus projecting low future stock returns, some investors even argue that the Safe Withdrawal Rate should be 3.5%, 3%, or even 2.5%. I think that’s kind of silly for several reasons I’ve discussed before and will discuss again in this post.

However, what people DON’T really think about, is just how much money they are likely to have left if they go for a “100% success SWR.” In order to look at that, it is worthwhile looking at a paper by Phillip Cooley in the Journal of Financial Planning.

In this paper, Cooley et al included this table, which shows how much money you have left, on average (technically median), using any given withdrawal rate adjusted for inflation.

 

 

 

This table assumes a starting portfolio value of $1,000. So if you use a 4% withdrawal rate (adjusted each year for inflation) and a 50/50 portfolio, on average, after any historical 30 year period, you would be left with $2,971 at death.

That’s right. On average, you die with three times as much money as you had upon retiring. Even with a 5% SWR you will on average end up with more than you started with. Surprised? Don’t be. That’s just the nature of averages. That’s why it’s called a “Safe” withdrawal rate. It’s very safe. You can take out more money, and may even do okay, but that would be a risky withdrawal rate. You know, 6 or 7%.

Just for fun, consider a hyper-conservative investor who goes with the 3% SWR for 30 years and has a 100% stock portfolio. He ends up with 13 times as much as he started with…on average. Half of those guys ended up with MORE!

If your goal is to enjoy your money and use it to increase your happiness (and that of others) in life, then I would suggest that a withdrawal rate that is very likely to leave you with 10 times as much as you had on the eve of retirement is probably the wrong approach.

Six Other Reasons To Avoid Hyper-Conservatism

 

There are other good reasons not to use some ridiculously low withdrawal rate (like 2.5%.) You all know I like lists, so here’s another one.

# 1: You probably won’t live for 30 years after retirement.

 

CMGRemember that if the odds of you running out of money in 30 years are 10%, and the odds of you actually living 30 more years are 10%, then your actual risk is 1%. That’s lower than the risk of an experienced mountaineer dying on Mt. Everest (1 in 64, it’s 1 out of 5 on K2.) At any rate, if you retire at 65, your life expectancy as a man is 18 years (20 as a woman.) Chances are not great you will make it 30 years. Now if you’re retiring at 45, then I think it’s a good idea to be a little more conservative, but you get my point.

 

# 2: Nobody actually follows a fixed SWR

 

Everybody I know in real life retirement keeps track of how they’re doing. If their returns are poor, they cut back, tighten their belt, cancel a few vacations, give less to charity, give less to heirs and make it work. When times are flush, they spend a little more. Retirement withdrawal rate researchers like Wade Pfau are starting to acknowledge this fact in their work, but real retirees like Taylor Larimore have known this for years. In a recent forum post, Taylor explained his simple strategy:

 

I retired in June of 1982 at the age of 57. We had about a $1 million dollar portfolio to last us the rest of our lives. I didn’t know about safe withdrawal rates (the Trinity Study wasn’t published until 1998). We had no computers, Internet, Monte Carlo, or sophisticated calculators. We only knew that we had to be careful to make our money last ($1M at 4% = $40,000/year before tax).

So what happened? We simply withdrew what we needed and kept an eye on our portfolio balance. Most years our balance went up and we spent the money on vacations, luxuries and charity. When our balance went down, we tightened our belt and economized. This is what most people do and it works.

 

Critics point out that Taylor retired into the greatest stock and bond bull market of all time. That’s true. But just because nothing bad (you know, like 1987, 2000-2002 and 2008-2009) happened doesn’t mean Taylor wasn’t prepared to economize in case it did. A million bucks in 1982 was no small portfolio. That’s the equivalent of $2.7 Million in 2018 money, far more than most docs retire with.

 

# 3: Most Retirees Spend Less As They Go

 

Retirement spending follows a curve where it is highest the first few years of retirement when lots of purchases are made and traveling is done and then gradually decreases until just before death, when it ramps up dramatically with medical and/or long-term care costs. So if 4% (indexed to inflation) provides plenty of money for those first 5 years, it’ll probably be more than enough for the 20 after that!

 

# 4: 75% Certainty Is Good Enough

 

DDQThe Trinity Study authors themselves suggest a 75% success rate certainty is “good enough.” Even William Bernstein, who is quite conservative with regards to future expected returns, has written that going for anything more than 80% is foolish because there’s a 20% chance of your country imploding at some point during a 30-year retirement.

Well, 75-80% certainty over a 25-30 year retirement for a portfolio of 50-75% stocks corresponds to an SWR in the 5-6% range. That’s 25-50% more money to spend each year in retirement. That’s hardly insignificant.

 

# 5: Your AUM Advisor Has A Serious Conflict Of Interest

 

Your advisor, especially if paid a percentage of assets under management (AUM), may suggest you only withdraw 2.5-4% of your portfolio each year. However, always remember his or her bias.

First, the larger your portfolio gets the more he gets paid. The biggest threat to your portfolio as a retiree is you spending it! So if he can keep you from spending it, his paycheck gets larger. AUM fees are the best kind of passive income!

Second, he’s only going to get in trouble if you run out of money and live a long life. If you die with lots of money, nobody is going to get mad at him. But he could really care less how often you go on vacation, how much you give to charity, or how comfortable your retirement is. Higher portfolio withdrawal rates are all downside to him, whereas they are a mix of upside comfort and downside risk with you.

 

# 6 You’re Probably Too Conservative Already

 

Those who acquire large nest eggs and those who read financial blogs like this one are honestly very unlikely to ever run out of money. It is really hard to go from saving and investing during the accumulation stage to actually spending your money in retirement.

My parents have been fully retired for several years now, living on a pension. My dad is now taking Social Security. If it wasn’t for the IRS mandated RMDs, I don’t think I’ll ever get them to start spending anywhere near 4% of their stash each year. They didn’t become affluent by being spendthrifts, and who is going to change habits after half a century of living?

 

WCI’s Dad out turning money into happiness flying to his favorite hunting spot

 

 

One Invalid Reason

 

Some think it reasonable to increase the SWR because the original Trinity Study used large cap equities only. However, I think that’s probably not valid. Yes, they used only large cap equities, and small cap and value equities probably have a higher expected return.

However, they also used long-term corporate bonds- not exactly the short term treasuries that many investors are using today in their portfolios. While none of us really know what to expect out of equities in the future, bond returns over the next 5-30 years are very likely to be lower than they have been over the last 30 given the interest rates we are starting from. Those two factors probably cancel each other out…at best.

The other factor that far too few investors take into account is the effect of advisory and other portfolio fees. If you’re paying 1% in fees, your 4% is really 3%.

[Update: I was challenged by someone who cited Kitce’s study about how a 1% AUM doesn’t lower your SWR by a full 1%. I found the argument weak in that it certainly DOES lower your withdrawal rate by 1% of your assets in year one and that whether it lowers the SWR by 1% or not, it still lowers the amount of money you have to spend by the amount of the fee, which is really the point of my statement anyway.

Why any retiree would consent to have 1%+ AUM fees assessed against their portfolio when there are asset managers willing to do it for far less (or even a flat annual fee of just a few thousand) is beyond me, but I’m sure there are plenty of retired docs out there paying $20K+ a year in asset management fees.]

The Bottom Line on Safe Withdrawal Rates

 

As I’ve said many times, the point of the Trinity study wasn’t that the SWR is 4%, it was that the SWR is not 8%, 10%, or even 12%. Start with something around 4% and adjust as you go. Staying flexible is immensely valuable both in increasing your ability to spend as well as decreasing your likelihood of running out of money if you are lucky (unlucky?) enough to live into your 90s. Better yet, put a floor under your spending with Social Security, pensions, and perhaps even a SPIA or two and then have at it with your portfolio withdrawals.

 

 

What do you think? Were you aware that most who followed a 4% SWR rule die with more than they started retirement with? How are you (or how do you plan to) managing your retirement withdrawals? Comment below!

]]>
https://www.physicianonfire.com/money-to-your-grave/feed/ 38
Christopher Guest Post: Early Retirement Dude https://www.physicianonfire.com/early-retirement-dude/ https://www.physicianonfire.com/early-retirement-dude/#comments Thu, 11 Oct 2018 07:55:23 +0000 https://www.physicianonfire.com/?p=9964 lucidity
Today’s guest needs no introduction from regular readers of this website. The Early Retirement Dude has been featured numerous times in The Sunday Best and he recently shared a guest post with us entitled Early Retirement Doesn’t Have to Suck.

He’s right you know, and with 13 years of it under his belt, he should know.

The monkey-loving Dude was kind enough to supply an introduction of his own, saving me a bit of time. Thanks, Dude!

Here it is:

Early Retirement Dude was once clean-cut and corporate. But having retired at age thirty-six and being forty-nine now, he looks like he oughtta be leading an Entmoot.

He has a wife, a daughter, a cat named Satan, and however many dogs his family happens to be sheltering that week. Oddly, he’s cool with it all. ERD releases whole cavalcades of dexterous FIRE-centric BS at his blog, EarlyRetirementDude.com. You can follow him on Twitter at @RetireEarlyDude and/or join his mailing list.

 

 

What in the world is 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.

 

 

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?

 

Before I retired I was the senior director of operations for a niche commodity trading company in New England. You’ve heard of Enron, right? We competed with them in the energy trading sector…but not for jail time, thank God, because in our 150-person company we had eleven lawyers keeping us what let’s call “honest.”

So if I could be a doctor, I’d be a Doctor of Jurisprudence. I’m telling you right now: lawyers save as many lives as proctologists. You hope you never have to see one because they’re prone to shining light into places you’d rather not have light shone…but by God, are they great at pulling your head out of your [REDACTED AT THE INSISTENCE OF THE AUTHOR’S ATTORNEYS].

Yuk-yuk. But I’m realizing that must be a stale joke in the medical profession. So sue me.

 

[PoF: A lawyer for every eleven people on the team (give or take)? That’s quite the ratio. I’m glad someone was keeping you people “honest,” although the quotation marks give me pause.

I didn’t ask what kind of doctor you would be — doctorates are handed out like candy on Halloween these days (joking… topical hyperbole this time of year) — I asked what kind of physician you’d be. You mentioned proctologist, so I’ll take that as your answer. Final answer.]

 

 

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

 

Having retired at age thirty-six and stayed that way for thirteen years, I’m speaking from what I’ve personally experienced, and both the knowledge and the ignorance that’s revealed, rather than from theory and/or conjecture. And my blog’s as much if not more about the philosophy and humor of FIRE as it is things technical.

I say that because “technically right” isn’t always the best kind of right to be, especially when the moment calls for color and chaos…like, say, a monkey running amok with a suitcase full of money and a gun. The subtitle of my blog is therefore “Financial Independence, Early Retirement, and Monkeys with Money and Guns.” You might come for information, but I hope you’ll stay for the show.

Show?

Look, I have no idea what the stresses on an M.D. are, but I gather they’re bad and getting worse. Consequently, it’d be terribly insensitive for me to pile stress upon stress, which is why you won’t catch me fear-mongering with articles like “WOE BETIDE YE WHO HATH NOT SAVED SUFFICIENTLY FOR RETIREMENT.”

None of us need that. I’m out to make your day a little brighter…and never ever darker. If I inspire you a little and maybe make you smile, I’ve succeeded.

 

[PoF: The math is the simple part. It’s the psychology and “the feels” part that is tricker to figure out. Thank you for brightening our days.]

 

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?

 

My right hand to God, I started my blog when I was marooned on a desert island.

It was a solo early-spring camping/fishing trip to Cape Lookout–which if you’re not familiar is an undeveloped barrier island off the coast of North Carolina. About as wild and natural a beach as you can visit on the east coast. You can’t drive there…you and your 4WD have to ride over on a canoe-sized ferry that books up months in advance. And if the weather turns foul: suck it up, sailor. You’re stuck.

So of course towards the end of my trip the weather turned foul. Went from eighty degrees and clear skies to ice-cold with forty-knot winds and strong rain. The ferryman balked and the fish all fled, which left me little to do but hunker down in the camper shell of my pickup and entertain myself with my own stench.

CMGI depleted all foodstuffs save for oatmeal and mangoes and spoiled bait. In a valiant effort to stay sane, I drove down to the one eentsy corner of the island where I could get cell phone signal, set up a hotspot, opened my laptop, rented server space at GoDaddy, installed WordPress, and hacked my blog together in a single day. Wrote article after article until the weather finally broke. Caught the ferry, escaped the island, and here we are.

You asked if there was a particular event that made me feel like my blog arrived. There was. At the beginning of September 2018, it got mentioned in a couple of New York Times FIRE articles that went viral. That was damned validating, man. I mean, people used to treat me like I was nuts when I explained my early retirement plans to them, but now we’re a “movement.” In the future, I’d like to keep pushing this movement forward in my own peculiar way.

 

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

 

Posts? Well, what I’m laying out for you is definitely POSTED, so…

First, David Foster Wallace’s “Consider the Lobster” oughtta be required reading for every medical practitioner in the entire world. Dr., RN, NP, EMT-P/IV/B, WFR, plain vanilla FR, what-have-you.

Then in no particular order:

 

[PoF: You are quite generous to share the work of many. I was expecting 11 of your posts, but to be honest, I like this approach. That last one might be my favorite.

Not long ago, I watched the Franco brothers’ The Disaster Artist, a film based on the making of Tommy Wiseau’s The Room. What a fascinating story — too bizarre to be made up. Now, why don’t you give me some of your own posts to share with the community?]

The Best of Early Retirement Dude, Appropriately Contextualized with Quotes from Monty Python and the Holy Grail.

 

How I Retired at Thirty-Six — And thirty-six shall be the number of the counting.

Early Retirement’s Magic Bullet — Everything you need to know, distilled into once sentence. Could’ve gone with the title “Early Retirement’s Holy Hand Grenade,” but whatever.

The History of the FIRE Movement — AKA, the Tale of Sir All-Of-Us.

Suze Orman Is the New Avocado Toast — And they were forced to eat Oprah’s minstrels. (YAAAAAAY!)

In Which I Burst an Aorta over the Financial Ignorance in This Nation — I fart in your general direction.

We Lost $750,000 in the Housing Bubble, and I’m OK with That — Look at the bones!

When Markets Are Scary, Look to the Vix — The Black Beast of AAAAARRRGGGGHH!

In Praise of My Worst Boss — A spanking! A spanking!

To Find Your Passion, All You Have to Do Is Stop Looking — Oh, I see. Running away, eh? You yellow bastards! Come back here & take what’s coming to you!

A Serial Killer Speaks out on Corporate Life — I got nothing.

Scott’s Big Night: A Tale of Money, Degeneracy, and Woe — The peril is too perilous.

 

 

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?

 

Like I said, I retired at thirty-six…and I’m glad you phrased that as “full-time work,” because I harp on something: people confuse retirement with idleness.

People think retirement is when they pat you on the back (gently, because old bones are easily broken) and hand you the gold watch and you and your blue-haired and/or bald spouse buy the condo in Punta Gorda and relocate there.

Then the two of you sit around sipping Rob Roys and reminiscing about the glory days until your time runs out and all four of your collective marital kidneys forsake you at the same instant, whereupon you both simultaneously pitch over off your chaise lounges and into the sand and the crabs lap up what’s left of your drinks.

No. That’s not retirement.

In your question, you reference “your retirement target” as if it’s a number preceded by a dollar sign and followed by many zeroes, but it’s NOT. Your retirement target oughtta be a fine full adventurous life. To make that happen you have to engineer it. Money is the wrench; not the machine. You could, in fact, quit your job today and have that fine full adventurous life on zero, but most people can’t handle that kind of risk.

But as far as how much money I thought I needed to retire? Back during my “accumulation phase”? I wanted to own forty pounds of hundred-dollar bills.

 

[PoF: Great take on retirement, but now we’ve got to do a little math to determine exactly how valuable 40 pounds of Benjamins would actually be.

It sounds tricky, but this is one instance in which the U.S. Government actually adopted the metric system in a sneaky way. Our legal tender in the form of “paper” bills (actually 25% linen and 75% cotton) each weigh one gram. 

It takes 10,000 $100 bills to make a million dollars. Those 10,000 grams would weigh 10 kg or 22 pounds. Your 40 pounds would be closer to $2 Million dollars. To be precise, 40/22 = 1.81818181818, so we’ll call it $1,818,181, give or take a few Bennies.

Our governments CPI Inflation calculator tells me that amount of money 13 years ago has the buying power of $2,334,251. Close enough to fatFIRE to count in my book. Nicely done!]

 

 

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?

 

When the day came and full-time work was in my rearview mirror, I smashed the f-bomb rearview mirror. I didn’t want to spend a bunch of time gazing back at the place I’d worked so hard to leave. And besides, staring overmuch into the rearview is how people cause front-end collisions. I figured the road up ahead would lead someplace interesting, and whaddaya know, it has.

 

[PoF: Most of my interviewees can only envision what they hope early retirement will look like. You, my man, are living it and it appears to be as colorful as your self-censored language.]

 

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.

 

    • Most people think about themselves all the time.
    • For the love of the Holy Virgin, do what you know is right and heat up that damn stethoscope before you mash it into my bare chest.
    • Someday, when somebody pitches you on the idea of investing in a venture capital fund that specializes in medical technology, read and think about the prospectus before you write the check.
    • It’s not my place to tell you how much narcotics to prescribe and to whom, but I like them way WAY too much…so if I show up in your office complaining of severe pain in my glabella and demanding perc tens, call my wife and tell her you’re having me arrested and she needs to bail me out of jail and take me to rehab immediately.
    • If you have a calling, you’re fortunate. The FIRE movement wouldn’t exist if everybody felt called to their occupation.
    • ER docs especially: if you’re in a happy committed relationship and you’re thinking about getting married, STOP! Why isn’t being in a happy committed relationship enough?
    • As I hope you already know, you wouldn’t say “he is bipolar” anymore than you’d say “he is cancer.” Too easy to define people by their medical conditions, especially when it comes to mental disorders.
    • Wrap it.

 

[PoF: Were you married or engaged to an ER doc? I feel like I’m missing some background info here. 

Sorry about the cold stethoscopes and the over-prescribing of narcotics. At least we’re starting to do something about the latter complaint. I don’t personally write scripts for narcotics or anything else, but opioid addiction awareness is high, and new guidelines are finally being written.]

 

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?

 

DDQ
Cash? Locate a House of Joy, I suppose, and–

Or not. I’d likely hop a flight to Spain, buy an expensive bicycle, spend eleven days riding from tapas restaurant to tapas restaurant until I got to Pamplona, run with the bulls, and–assuming I survived–fly the bike and myself home.

 

[PoF: Muy bien! I’ll bet you’d have a grand time on that bicicleta.]

 

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

 

Is sausage gravy a beverage? No?

Then let’s go with 7-Up and Four Loko. Adds up to eleven, if I’m not mistaken.

 

[PoF: Too funny. Almost made me spit out my Four Loko!]

 

Now, eleven foods.

 

Killer hot biscuits with organic honey & olive-oil ersatz butter, conch chowder, pawpaws, homegrown shiitake mushrooms, pot brownies, my wife’s world-class Caesar salad, S&BJD (a need-to-know basis thing), snack boxes from Dublin streetcorner fish & chips places, spinach sautéed in olive oil with red pepper and garlic and sea salt, caprese, and Sriracha anything. I’d eat a croquet ball if it had Sriracha on it.

[PoF: That could be arranged.

I’ll assume that a pot brownie is a brownie baked in some sort of pot or skillet. Sriracha optional.]

 

 

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

 

Twitter? Reddit? Somewhere in social media-land. Early in my bloggery you featured me in “The Sunday Best” out of the clear blue, so I said thanx and we made nice.

One piece of advice? For what? Your question was truncated in the questionnaire you sent me…hence my one piece of advice is twofold: “Prepositions require objects,” and “A sentence should end with a period, question mark, or exclamation point.” Love ya, doc. 🙂

 

[PoF: Nothin’ but love back at ya. And I fixed the sentence with the dangling participle or whatever it was.

Thank you for taking the time to indulge us with your insight and intellect. May the next 49 years be as fruitful as your first 49, Early Retirement Dude.]

 

 

Interested in hearing how other top personal finance bloggers have answered these questions? Check out a few of these Christopher Guest Posts:

 

 

 

]]>
https://www.physicianonfire.com/early-retirement-dude/feed/ 13
2018 Q3 PoF Portfolio, Spending, and Blog Performance Update https://www.physicianonfire.com/2018-q3/ https://www.physicianonfire.com/2018-q3/#comments Tue, 09 Oct 2018 07:25:48 +0000 https://www.physicianonfire.com/?p=9931 lucidityWith another quarter in the books, it’s time for a quarterly update on my investment portfolio, family spending, and blog stats. It’s the 11th quarter since I started this website, and I’m within 11 months of wrapping up what I believe will be my last “permanent” position in anesthesia.

It was also the last quarter of part-time work before returning to full-time anesthesia for the rest of the year. With one of my colleagues departing for a military obligation, I agreed to step up my hours. After learning that he won’t be returning to us, we’re looking at bringing in temporary help while his replacement is identified.

It’s likely I’ll be back to part-time work in January, and I’ll be looking to head south for a spell to escape the Minnesota winter. It’s early October, but it already feels like late fall — friends of mine a bit further north in the state have already seen trees downed in a snowstorm!

 

2018 Q3 PoF Portfolio Update

 

Cash is building up as we prepare to build on our lakefront property next spring. We were hoping to get that project underway this fall, but the granters of permits had different ideas.

I don’t include any of our properties (primary home, cabin, or the 7 acres on the water) in the retirement portfolio below. Also not included are two six-figure 529 Plans and $259,000 in donor advised funds. Only dollars that can be used to fund our retirement are listed below.

I’ll be using screenshots from my universal portfolio tracker. You can grab a copy of the Excel sheet for yourself with a quick subscription. Download it and you’re free to unsubscribe at any time, including right away. My feelings will only be hurt a little.


To avoid sharing my exact numbers, I divided the dollar amounts by a factor that would make it all add up to $1,000,000.

The percentages are accurate, as is the fact that holding this portfolio costs me $657 per million dollars invested annually. Compare that to typical AUM fees plus higher expense ratios adding up to 1% to 2% which would be $10,000 to $20,000 per year per million dollars invested.

 

 

Broken down by category, the percentages look like this:

 

 

Anticipating building a home without a construction loan, we’ve been stockpiling cash, leaving us temporarily, but intentionally, heavy on cash. In the spring, I intend to start spending that down, and when we eventually sell our current home, I’ll do some serious rebalancing with new cash.

At that point, I’ll probably look more closely at additional crowdfunded real estate investment opportunities. I’ll also be investing more in international stocks, as those have taken a hit lately.

On a percentage basis, about 56% of my investments are in after-tax accounts, including the non-qualified brokerege (a.k.a. taxable) account, cash, and brewery investments. Yes, breweries.

Tax-deferred investments are only 18% of the total, putting us in an excellent position for a low-tax retirement when I stop earning an income one day. Note that will not be next year, as I may be retired from medicine, but not exactly retired. Retired not retired.

About 25% of the money exists in Roth accounts, and there’s a little bit in the HSA and crowdfunded opportunities. I also own a small piece of Passive Income MD, and I should really update that valuation as Dr. Kim is doing amazing things over there.

 

2018 Q3 PoF Portfolio Performance

 

It’s good to have a diversified portfolio, but this was one of those quarters where diversifying away from U.S. Stocks was not beneficial.

Weak performance from a variety of other asset classes, including bonds, international stocks, and REITs were a drag on my returns in the third quarter of 2018. Overall, according to Personal Capital’s You Index, my returns were 3.7% whereas the S&P 500 returned 7.2%.

 

 

Leading the pack, after a rough second quarter in which it lost 6.4%, was Berkshire Hathaway, returning 14.7% last quarter. From worst to first — while it is a stock with a large market cap and many holdings, it’s still a single stock and compared to index funds, it still acts like one.

 

 

Bonds “smoothed the ride,” as they tend to do, and in a market where U.S. stocks are performing well, that means they keep my overall returns down, although they only represent a bit less than 10% of my portfolio. Vanguard’s Total Bond Fund lost 0.7% in the third quarter of 2018.

Meanwhile, my cash sitting in Ally Bank is returning 1.9% (before tax).

 

The biggest loser in my portfolio was emerging markets, but with a drop of 1.75%, it’s a loss I can easily stomach.

 

The REIT fund was volatile like always, dipping into negative territory a few times and eking out a slightly positive return of 0.52%.

2018 Q3 Spending

 

Please don’t get used to this section. At the end of the calendar year, I plan to do away with it.

Why?

There are a few reasons. First, I became financially independent without tracking spending or following a budget. I only started tracking it to prove to myself and my readers that I had truly achieved FI.

CMGSecond, I’ve been tracking for a full three years now, and without trying, our spending has remained remarkably consistent. We spend between $60,000 and $70,000 a year.

While I expect that to increase with inflation, and perhaps increase a bit more as we have more freedom to travel, our spending habits are pretty well ingrained. We’re not going to accidentally spend twice as much if we’re not paying attention.

Finally, the tracking does take a little time and editing of categories (the stop at Hog’s Breath Saloon in Key West wasn’t “Personal Care” exactly) and it can create new headaches. For example, Mint.com struggled to keep up to date with Chase and several other accounts. Somehow, its futile attempts to log in would lock me out so that I couldn’t directly log in with Chase without calling and having a human manually unlock the account. I gave up on Mint.

Now, I’m tracking with Personal Capital. It works nearly as well, although it doesn’t allow you to divide one expense into more than one category or allow for manual entry of cash expenses. It’s not perfect, but it’s good enough, and I’ll use it until this year is over.

 

 

It looks like we spent about $18,000, but what’s not accounted for are reimbursements for tickets to a number of events. I didn’t win in the lottery for NCAA Men’s Basketball Final Four tickets — an expense that was included earlier this year — and I got my $900 back.

I also sold a couple football tickets from last weekend when I was on call for $220 on StubHub. Back in July, I sold two of our Hamilton tickets via the same online broker for $550. We bought tickets for four to the Book of Mormon, but the friends we plan to go with will be paying us back for their two tickets.

Factoring in that “reverse spending,” our actual expenses for the quarter were closer to $16,200. After spending about $33,500 in the first half of the year, we’re on target for an annual spend of about $66,000.

Two years ago we spent $62,000, last year we spent $61,000, but now we’re paying an extra $5,000 or so in property taxes this year. See what I mean about consistency?

 

 

How do we keep most of our expenses at a reasonably low level? I’ve mentioned this before, but it bears repeating. We are able to spend less while living a comfortable life as a family of four by taking advantage of the following “cheats.”

  • No mortgage or rent payments. We own our homes.
  • No loan payments. Student loans have been paid off.
  • No term life or disability insurance. We dropped them once we were FI.
  • Health Insurance provided by employer. We will bear this cost when RE.
  • Travel Rewards. Credit card points and CME travel reduce our travel costs.
  • School-aged children. Both are enrolled in a quality public school.
  • We live in a fairly low cost of living area.
  • I do not count income tax in our “spending.” It’s a cost of earning income.
  • Donations. We give to and from donor advised funds, and track that separately.
  • Any money spent improving our lakefront property is tracked separately. We’re building equity as we do that and the costs will eventually be offset by selling one or both of our other properties.

 

2018 Q3 Blog Performance

 

The second quarter saw three consecutive months of month-to-month declines in blog traffic? Would the terrible trend continue? Where’s everybody going? What did I do?!?

Nothing wrong, apparently. We bounced back in a big way this quarter, topping 300,000 pageviews for the first time ever in August. Later this week, we’ll have the two millionth pageview of the year and a couple weeks later, the four millionth pageview since the site’s inception in 2016.

 

 

 

E-mail subscribers (become one today!) have already seen the rest of the data I’ll be sharing. They were also privy to site revenue information — a perk I reserve for those who receive emails when I publish new posts or my once-a-week weekly digest.

 

As of 10.9.2018, the site has 494 published posts and 46 pages. These have been visited by people in 215 countries. Still no visitors from Greenland, North Korea, or a few nations in Africa.

 

 

How readers are following Physician on FIRE

If you’ve got any friends who may benefit from my content, please forward this e-mail on to them. The more people who hear the message of financial independence, the better.

 

The Top 5 Most Viewed Posts of all-time:

  1. Vanguard Backdoor Roth 2018: a Step by Step Guide (100,714 views)
  2. Is Having a Mortgage a Great Way to Force Savings? (52,473 views)
  3. The PoF Portfolio (35,593 views)
  4. How Much Does a Doctor Need to Retire (33,175 views)
  5. Tax Reform! How Physicians and the Self-Employed are Affected(30,023 views)

He Has Read Over 250 Investing Books. He Recommends These Three Funds and A Fifth Physician Revisited: The $10 Million Dream dropped out of the top 5.

#2 is a Saturday Selection from PIMD that had amazing traffic over a few days, presumably thanks to Google’s content suggestion in new tabs in Chrome and on Android phones. I think physicians are searching online for how much they’ll need to retire, as #4 is also a new entry to the Top 5.

 

DDQThe Top 5 Posts of the Quarter:

  1. Is Having a Mortgage a Great Way to Force Savings? (52,473 views)
  2. Vanguard Backdoor Roth 2018: a Step by Step Guide (18,002 views)
  3. How Much Does a Doctor Need to Retire (9,906 views)
  4. What is fatFIRE? (8,907 views)
  5. Money is Everything (8,707 views)

fatFIRE, which remains in the Top 5 for the 2nd consecutive quarter, is not a new concept, but I was among the first to feature it in a blog post, and definitely the first to start a Facebook Group around the fanciest flavor of FIRE.

Next in line are The PoF Portfolio and Credit Cards for People Who Love Travel and Money.

 

Where is my traffic coming from? Top 5 referring sites all-time:

  1. White Coat Investor (92,930 sessions)
  2. Twitter (70,253 sessions)
  3. Facebook & Facebook Mobile (51,895 sessions)
  4. Rockstar Finance (38,647 sessions)
  5. Reddit (15,537 sessions)

Doximity is #6 with 11,576 sessions, followed by Passive Income MD with 9,999. I fully expect that to be a five-figure number momentarily.

 

Top Referring Sites this Quarter:

  1. White Coat Investor (13,050 sessions)
  2. Facebook & Facebook Mobile (12,080 sessions)
  3. Twitter (10,593 sessions)
  4. Googleapis (6,829 sessions)
  5. Business Insider (4,806 sessions)

My BI “Real Money” generated significant traffic, as did Google. I continue to get strong referrals from WCI and social media.

 

Where do people go from Physicianonfire.com?  All time clicks:

  1. ESI Money (21,293 clicks)
  2. Passive Income MD (13,473 clicks)
  3. Bogleheads (11,650 clicks)
  4. Early Retirement Now (9,307 clicks)
  5. The Happy Philosopher (7,758 clicks)

WCI would very likely show up in the Top 2 or 3, but some must exist that keep me from seeing those clicks in the Jetpack Site Stats. Passive Income MD, the newest addition to the WCI Network rose from #2 for the first time.

 

Most clicked site this quarter:

  1. ESI Money (4,276 clicks)
  2. Passive Income MD (3,780 clicks)
  3. The Physician Philosopher (2,233 clicks)
  4. Root of Good (1,998 clicks)
  5. Trapped in Work (1,994 clicks)

That’s one former marketer followed by two with medical degrees and two with legal degrees. Somehow, we all seem to get along. Most of the referred traffic from my site occurs via The Sunday Best.

 

What’s Next?

 

I’ve got guest posts lined up through the end of the year. We’ll see a Christopher Guest Post from a recent Plutus Award winner, a discussion of different charitable giving vehicles, learn about investing fraud, and hear how a physician retired early and was met with scorn.

I plan to write about the somewhat marginal benefit of the “backdoor Roth,” my experience on a medical mission to Honduras, my first year of good-weather bicycle commuting, and I’m going to ask for your help in a fun charitable giving experiment just before Thanksgiving on 11/20. Don’t worry; it won’t cost you a thing, but you’re going to want to read that post first thing in the morning.

Personally, I’ll be turning 43 next month, we’ll be celebrating the holidays, and we’ll close out the year with a family wedding on New Year’s Eve. It will be a busy but fun few months, and I’ll be ready for life to slow down as I return to my part-time schedule in 2019.

Best wishes for a happy holiday season, victories for your football team when they’re not playing mine, and continued success in your quest for financial independence.

 

Cheers!

-Physician on FIRE

]]>
https://www.physicianonfire.com/2018-q3/feed/ 25
The Sunday Best (10/7/2018) https://www.physicianonfire.com/the-sunday-best-10-7-2018/ https://www.physicianonfire.com/the-sunday-best-10-7-2018/#comments Sun, 07 Oct 2018 07:55:47 +0000 https://www.physicianonfire.com/?p=9649 The Sunday Best
The Sunday Best is a collection of articles I’ve curated for your reading pleasure.

Expect most of the writing to be from recent weeks and consistent with the themes presented on this website: investing & taxes, financial independence, early retirement, and physician issues.

 

Presenting, this week’s Sunday Best:

 

FIRE is back in the mainstream media. [Did it ever leave?] This time, it includes me! From Eileen Ambrose, senior editor at Kiplinger, FIRE Savers Race to Retirement.

 

lucidityGrownups say the darndest things, particularly when meeting an early-retired person. Mr. Firestation shares some oddball reactions from the people he’s met since saying goodbye to his 9 to 5. Funniest FIRE Reactions.

 

Those reactions are nothing compared to that of Suze Orman when asked about the FIRE movement. The battleaxe rants for the better part of an hour at our friend Paula Pant from Afford Anything#153: Why I Hate the FIRE Movement, says Suze Orman.

 

I’ll share my thoughts on Suze Orman’s rant later in today’s post, but first I’ll give you those of the Early Retirement Dude. Suze Orman is the New Avocado Toast. You Can’t Afford to Buy Her.

 

Mr. Money Mustache doesn’t post all that often anymore, but he felt compelled to weigh in on this latest “controversy,” which is really an amalgam of misunderstandings that seemed to come to a head this week. What Everybody Is Getting Wrong About FIRE.

 

It may be that Suze Orman is just fighting back in response to slights against her, however well justified. In 2012, she referred to FinCon founder Philip Taylor as an idiot when justifying her prepaid debit cards. Earlier this year, PT’s buddy Jeff Rose of Good Financial Cents revisited that unpleasantness while listing 14 Reasons to Not Listen to Suze Orman.

 

The Financial Wellness DVM, a Doctor of Veterinary Medicine for those of you not into the whole brevity thing, explains how and why she began pursuing financial independence. Interestingly, it has less to do with her career than that of her husband’s (he’s a surgeon). What is Lighting Your FIRE?

 

CMG“None of this is about retiring, though people confuse retirement with financial independence. It’s about having choices, and being able to deepen your self-knowledge while aligning how you spend your time with what you care about most. It feels amazing to live life this way.” – Vicki Robin. As an appropriate complement to my recent Retired Not Retired article, the Your Money or Your Life co-author gives her unique perspective on Financial Independence — What’s the Point?

 

With another FinCon in the books, some of my favorite bloggers got together on Florida’s gulf coast and pondered money and life questions, partaking in a fun exercise answering the titular question in four ways with different stipulations. From J.D. Roth of Get Rich Slowly, How Would You Spend $100,000?

 

We’ll close with an article on how a few people spend the money they earn. I don’t love the slideshow format, but one of the featured spenders is me, so I’ll give this one a pass. From Cameron Huddleston, writing for Go Banking RatesWhat It’s Really Like to Live on $50K, $300K and $1M.

The Time I Asked Suze Orman a Question and She Answered.

 

I was curious as to how the self-proclaimed “matriarch of money” felt about the 4% rule (of thumb) as a safe withdrawal rate, so I asked. And she answered! In video, no less. This was several weeks ago, before the brouhaha over her hatred of the FIRE movement.

To see the 12-minute video, you must first join Elizabeth O’Brien’s Retire With Money Facebook group — you’ll then have access to the video where she answers my question (at about the 3-minute mark) and a handful of other questions.

I’ve taken the time to transcribe her answer here. First, I’ll say that I appreciate her taking the time to do a Facebook live with a small group of about 1,500 members, and particularly for fielding my question. I’ll also say that I don’t always do a great job of answering questions on the spot, but she does have a couple decades’ of experience doing exactly that.

 

Does Suze Orman Agree with the 4% Rule?

 

Here’s what she said when asked if she agrees with the four-percent rule when presented with the question by my Facebook alter-ego Milo Andersson:

 

“No, I actually don’t. Because… if you withdraw 4… let’s just go back a little, back to 2007. Let’s go back to 2008. Now, let’s say Milo’s in retirement now, and let’s say it’s lasted a long time. Now, I get the stock market turned around in 2009, but it still took a long year, many years to come back to where it is now.

DDQNow let’s say Milo was taking out 4% and now his money has just crashed and it’s down there and now he’s eaten up because there’s not a lot. He can’t live on 4% of $10,000. Maybe he was living on 4% of $200,000, but he can’t live on 4% of a reduced amount of money.

So now what’s he gonna do? Now he’s not going to take out 4%. He’s gonna have to take out 50% and 100%, so do you understand, Milo, it isn’t across the board that you’re going to be able to take out 4% of your retirement for the rest of your life because things fluctuate.

Now, with that said, if your money is in dividend-paying stocks, and it’s yielding you 5% a year, and those dividends are solid and you’re just taking out 4%, then OK, ’cause then we don’t care what happens with the fluctuation of your money. But not many people are 100% invested in dividend-paying stocks. Are you, Milo?”

 

To answer the question, no, I’m not invested in 100% dividend paying stocks. In fact, I’m not a big fan of dividends. I’m more interested in the total return and having better control over the tax implications of receiving money from my investments.

 

Does Suze Orman Understand the 4% Rule?

 

Just after deriding the 4% rule as leaving you destined for ruin, she wholeheartedly greenlights Dave’s inquiry as to whether or not he can retire in his fifties with 27x expenses saved up. “You’re approved. Go for it, boyfriend.”

Dave’s relying on a 3.7% initial withdrawal rate. I guess that extra 2 years of expsenses (the 4% rule implies having 25x expenses saved) makes all the difference in the world. Like many in the FIRE community, he’s accounted for health care and has a paid off house.

How does one reconcile having no faith in the 4% rule while thinking someone with just a little bit more is A-OK? To be honest, I don’t think Ms. Orman has a firm grasp of what the 4% rule entails. I doubt she’s read the work of William Bengen, the Trinity Study, or more recent safe withdrawal rate research from Wade Pfau, Michael Kitces, or ERN.

None of these authors say the 4% rule is foolproof and the “rule” doesn’t imply that you withdraw 4% of your portfolio each and every year.

What the studies do suggest, based on the last 90-plus years’ returns, is that if you withdraw 4% of your initial portfolio in the first year of retirement and increase that amount with an inflation adjustment annually, your portfolio has a better than 95% chance of lasting at least 30 years, and a decent chance of leaving you with more nominal dollars than you started with.

In Ms. Orman’s response, we go from living on 4% of $200,000 (living on $8,000 a year — maybe she meant to say $2 Milliion?) to not being able to live on 4% of $10,000, or $400 a year.

I realize these numbers were thrown out off-the-cuff, but they represent living far below the poverty line and a sudden 95% drop in portfolio value. I don’t have confidence that Suze Orman can relate to her target audience any easier than we can relate to her life of flying a private jet to her private island, her reality which she boasted of numerous times in the now-infamous podcast interview on Afford Anything.

 

a penguin and some boobies on a private island

 

In her hypothetical, “Milo” has been retired a long time and things have been going well. If that’s the case, Milo isn’t drawing down 4% of his portfolio at this point. After a couple good decades, if he’s following the 4% rule blindly, he’s probably now drawing less than 2% of his portfolio. If the market drops by 50%, he might be back to actually drawing 4% to meet his standard of living, but not 50% or 100%.

Suze Orman wants to take Milo back to 2007 or 2008. Well, my friend “Big ERN” has taken us back to an even worse time in history — the year 2000. The 2000 retiree has been through two of the worst three market drops in the last century.

“Big ERN” has looked in detail at the 2000 retiree with $1 Million following the 4% rule without variation despite the two market disasters that befell her. Guess what? Despite making no adjustments whatsoever, this person is back to a portfolio of about $1 Million.

Due to inflation, today’s $1 Million doesn’t have the same purchasing power, but it’s only about 30% off what it was 18 years ago. With some adjustments along the way (spending a bit less or earning a little money along the way), earning power could have been preserved.

We recognize that the 4% rule isn’t a be-all-end-all. It’s a starting point. It’s best to be flexible and willing to spend less money, earn some money, and respond to market conditions as needed. Most of us won’t have to do that, though — the 4% rule (and most of us retiring early use a smaller number of 3.5% or less) accounts for a nearly-worst-case scenario. If we were aiming for a 50% success rate, we’d use a 6% or 8% rule.

You may think we shouldn’t care what Suze Orman says, but she has tremendous influence, and millions of people will accept what she says as gospel. If we don’t refute her poorly-conceived notions about what is and isn’t acceptable as a retirement goal or plan, how are people to know they don’t actually need $5 Million or $10 Million to retire?

Why should people be scared into working until age 70 when they could take a calculated risk and pivot to a more meaninful life (that may or may not include some form of work) a decade or three earlier?

Just as I did when reading all those negative comments on Doximity, I felt a need to respond. The level of ignorance out there proves we still have a lot of work to do.

 

A $500 Cash Welcome Offer on No-Annual Fee Chase Business Credit Cards

 

These are pretty great offers. Chase has two business cards with no annual fee ever that currently offer $500 back after spending $3,000 in the first three months.

If you have anything that could be considered a business (professional survey taker, eBay seller), you can qualify for a business credit card.

The Chase Ink Business Cash card gives you the aforementioned $500 welcome bonus, plus 1% cash back on most purchases, and 2% to 5% back on specific, rotating categories.

 

The Chase Ink Business Unlimited card does away with the categories and gives you 1.5% cash back on every purchase (plus the $500 welcome offer).

 

 

Finally, if you don’t mind a reasonable annual fee, the Chase Ink Business Preferred card offers 80,000 Ultimate Reward points, which can be used to fund travel worth $1,200 or more after spending $5,000 in your first three months as a cardholder. The annual fee is $95.

 

Not a business owner? Check out the current top offers for personal cards from CardRatings. As always, don’t even consider applying for a credit card if you have consumer debt or can’t afford to pay a card in full every single month.

One More Thing

 

Like Suze Orman, I earn money writing and talking about money. I didn’t earn a dime speaking at FinCon, but I’ve found a number of other ways to earn money online. You see those ads and cards up there? And down below?

Another quarter has come and gone, and I’ll be sending out my quarterly progress note tomorrow with interesting statistics, including this site’s revenue — numbers that I share only with e-mail subscribers. If you’d like my newsletter to land in your inbox, please subscribe below. You’ll have the option to unsubscribe or switch to a weekly newsletter anytime.

 

Have an outstanding week!

-Physician on FIRE

]]>
https://www.physicianonfire.com/the-sunday-best-10-7-2018/feed/ 31
Obstacles Doctors Face in Pursuing a Side Hustle https://www.physicianonfire.com/doctors-side-hustle/ https://www.physicianonfire.com/doctors-side-hustle/#comments Sat, 06 Oct 2018 07:55:07 +0000 https://www.physicianonfire.com/?p=9897 lucidityThe side hustle. While it’s nothing new — paper routes and bartending have been around for ages — side hustles are getting a lot of attention in the new “gig economy.”

You’re looking at my side hustle. A medical student shared his various side hustles not long ago, and my WCI Network partners each have successful side hustles of their own.

While you may not think side hustles are for physicians, more and more of us are looking to do something different. Some side hustles can become main hustles, and that will soon be the case for me.

Today’s post from Passive Income MD discusses the challenges we face pursuing paid work outside of clinical medicine. This post originally appeared on Passive Income MD.

 

Obstacles Doctors Face in Pursuing a Side Hustle

 

The idea of a side hustle seems to appeal to most people I talk to. It’s a great way to learn new skills, supplement your income, and build streams of passive income — all without quitting your day job. And as evidenced by the discussions in our Facebook group, many physicians also love the idea of a side hustle and gaining passive income. Honestly, who doesn’t?

However, despite their apparent desire to pursue a side hustle, plenty of obstacles seem to stand in the way for physicians. The same issues seem to pop up again and again, keeping many physicians from realizing their passive income potential. Here are some of the big ones, as well as some things to consider about each.

Not Enough Time

 

We already feel overworked as physicians. Residents are working 60-80 hours and attending physicians’ hours don’t seem to be much better. Even when we’re not seeing patients, we’re spending an extraordinary amount of time on paperwork. Many barely make it home to see their families in the evening. How can we possibly find time for a side hustle? There simply aren’t enough hours in the day.

I started with this one because it seems to be the biggest challenge in the physician life – finding time to not only be a physician but also to pursue other meaningful things. Therefore, this is an entirely valid argument. However, for many of us, if we take a hard look at our daily routines, we might just be able to create some more time.

How do we do that? Well, one thing I’ve mentioned is to perhaps find ways to outsource activities and errands that we don’t enjoy, in the form of paid help, like a virtual assistant or someone from TaskRabbit or Fiverr to perform a service.

Another way is to perhaps reprioritize how you’re spending some of your time. I’m not saying that you shouldn’t binge-watch Game of Thrones or Black Mirror, but how you spend your time reveals where your priorities lie. If it matters to you, you’ll find time for it.

 

Not Worth the Money

 

Despite steadily dropping reimbursements, physicians consistently top the lists of highest salaries in the U.S. We make a decent living. Are there really side hustles that exist that provide anywhere near the amount we’re making as physicians? Can a side hustle provide the kind of financial security that we’re looking for? Why even start a side hustle when you can just work a little more as a physician and likely get paid significantly more?

Another valid point, especially when starting a side hustle. It’s true – many of us will not be able to find side hustles that compensate us as well as our physician salaries do.

However, it’s also true that we as physicians are trading precious time for money. There is very little opportunity to scale our income, meaning that in order to make more, we have to put in more time. But with some side hustles, the opportunity to scale is there, and ideally, these side hustles will lead to truly passive income. Just check out my True Doctor Stories for examples of physicians who have found some of those profitable side ventures, like this one of Dr. Jim Dahle.

Sure, that stream might be a trickle at first, but the income potential in some of these side hustles is limitless. One day, they may even make your physician salary look small.

Not Enough Expertise

 

As physicians, we’re trained for one specialty. Even if we want to venture out, medical school doesn’t prepare us for the realm of business, and many of us don’t know where to start or what to do. Our path to our specialties has been pretty clear-cut – get into residency, do a fellowship, and get a job.

CMGThe truth is, many successful business owners had little to no expertise in their exact business sector. They just figured things out as they went. They googled things, they found mentors, they tried and failed. But they got back up every time.

Just listen to the How I Built This podcast, and you’ll hear amazing stories of entrepreneurs who started with just an idea. Largely through trial and error, they figured it out and formed multi-million dollar companies.

Having a base of knowledge is great, but it’s not a necessity or indicator of success with a side hustle in any way.

 

Too Much Risk

 

Physicians are fairly risk-averse people. Everything we do in our daily lives involves a risk-to-benefit analysis. In fact, many of our clinical decisions are made to minimize risk, not necessarily for maximum benefit. This carries over into other parts of our lives, particularly when it comes to investing or having side hustles. Many of us fear that the risks simply outweigh the benefits and that keeps us from starting a side hustle.

However, perhaps we should be considering the risks of inaction. The real risk is doing nothing and expecting medicine to give us the lives we want, whatever that means to you. Is it possible that you could fail? Possibly. But how would your life and the lives of your family be improved if you were no longer dependent on trading time for money?

 

how can i fail when i have logo koozies?!?

 

Too Tired

 

Being a physician can be mentally and physically draining. You give so much and at the end of the day, there just isn’t much left in the tank for anything else. The last thing you want to do is think about another venture and have it keep you up all night. Those trying to juggle family and jobs feel the exhaustion on a daily / weekly basis.

In the selection process known as “Hell Week”, Navy Seals are pushed to the point of complete exhaustion and then are pushed harder. They force people to tap out. However, those who ultimately make it into this elite force are the ones who find that extra determination when everyone else is giving up. They realize strength they didn’t know they had.

Ultimately, I think this is part of what separates those who successfully create side hustles and those that don’t. Every successful entrepreneur seems to have a story where they were pushed to the edge and perhaps thought of giving up but endured. It may not be easy to dig and find that extra motivation and energy, but for those that do, it could be worth it in the end.

 

Don’t Want the Distraction

 

Physicians have to devote a lot of time, energy, and brainpower to excel in their fields. The last thing they want is something that takes away from that. Being a physician requires constant studying and staying up to date on current literature. Have a side hustle could be a distraction from being the best physician that you can be and the desire to be as well.

It is possible that a side hustle can be a distraction. I’ll be honest, when I leave work, my thoughts immediately turn to my family first, then side hustles second. I try really hard not to let any side hustle take away from my day job.

Although when I leave work, I love the fact that I have something else to focus on. In some way, it may not be healthy to always have the day job on the mind. I’ve found that these side hustles are an amazing way to stretch and use different parts of my brain that I may not have used before. It keeps my day job fresh in a way because I’m not always fixated on it.

Then again, it’s all about priorities. If your day job demands all your focus and if that’s where your priorities are, there’s nothing wrong with admitting that perhaps a side hustle isn’t right for you.

Conflict of Interest

 

DDQPhysicians are bound by ethical and moral rules to do best by the patient. It’s important for these potential conflicts of interest to be recognized so that decisions for patients are made appropriately.

If a side hustle you’re considering does contain a conflict of interest, then it’s probably best that you figure out how to deal with that ASAP – by either quitting your day job or quitting your side hustle. There are many, many ways to accomplish the passive income dream without causing any undue stress and conflict.

Lack of Inspiration

 

Many people love the idea of having a side hustle but can’t figure out which one to pursue. Nothing seems to fit within their passions, or perhaps nothing seems to gel with their personality. All that brainstorming seems to only lead you to dead ends.

In reality, sometimes finding that first idea is the hardest part. However, there are ideas all around. Perhaps expectations are keeping you from honing in on one. Maybe you’re waiting for the perfect idea. But the “perfect idea” doesn’t exist. It’s very, very unlikely that a single idea will be one that you’re perfectly interested in, have a passion for, have expertise in, and makes a lot of money without any effort.

The best thing is to grab at an idea and make it into the perfect idea. Shape it the way you want, even if it doesn’t appear perfect at first.

Is a Side Hustle in Your Destiny?

 

I’ll be the first to admit that having a side hustle is not necessarily for everyone. But it’s also true that everyone can have one. It’s just a matter of having the right mindset, making it a priority, committing, and just going for it. If it fails, get back up and try again. Many successful entrepreneurs have failed miserably, and they credit that failure for making them the massive successes that they are.

If you think having a side hustle can make a positive difference in your life, you have to ask yourself: are you letting obstacles and roadblocks get in the way? If so, identify them and overcome them. You’ll be glad you did.

 

 

If you’re interested in discussing side gigs and related money topics with other physicians and belong to Facebook, join in the ongoing discussions in these fine groups.

 

Not a physician? While these groups aren’t side gig focused, you’ll find some good discussion among high-income professionals discussing personal finance in these.

 

Do you have a side hustle? What are some of the obstacles you’ve faced in having a side hustle?

]]>
https://www.physicianonfire.com/doctors-side-hustle/feed/ 7
How to Negotiate an Increased Physician Signing Bonus — And What To Do With It https://www.physicianonfire.com/physician-signing-bonus/ https://www.physicianonfire.com/physician-signing-bonus/#comments Thu, 04 Oct 2018 07:55:29 +0000 https://www.physicianonfire.com/?p=9879 Fall is upon us, and that means final year resident physicians and fellows are busy on the interview trail. Hands will be shaken, dinners will be eaten, and contracts will be presented.

lucidityToday’s guest post is from Rebecca Safier. She writes for Student Loan Hero about education, careers, and other personal finance topics.

I was given a few topics to choose from, and I thought today’s topic of signing bonuses was timely. I once took a job with a $100,000 signing bonus. It’s true, but there were strings attached. I would have been better off negotiating an extra $20,000 a year into the salary and taken no signing bonus.

Let’s see what Rebecca has to say about signing bonuses and what to do with them.

 


How to Negotiate an Increased Physician Signing Bonus — And What To Do With It

 

After spending most of your 20s in college, medical school, and residency, you’re probably eager to start working as a doctor and making a doctor’s salary. After all, medical school didn’t come cheap, and you have the student loans to prove it.

But before you start work, you must agree on a contract with your new employer. As with your salary and benefits, your signing bonus is up for negotiation. According to The Medicus Firm, the average signing bonus for physicians in 2017 was $30,000 — but the largest was $200,000.

So how can you negotiate for an increased signing bonus without risking your chances of getting hired? Here are some tips on the process, as well as advice on what to do with this cash windfall once you get it.

 

where physicians earn up to $60 USD a month and can’t negotiate

 

Do research so you know what’s a reasonable request

 

According to a report by HealthLeaders Media, The Medicus Firm helped 9 out of 10 physicians hired by the firm get a signing bonus in 2016. Of those doctors, 34.2% received a bonus between $25,000 and $75,000, and 4.2% received bonuses of $100,000 or more.

As you can tell, signing bonuses vary greatly. The amount depends on several factors, including your field of medicine and prospective place of employment. For instance, surgeons can typically expect to receive a larger signing bonus than doctors who practice family medicine.

CMGAnd rural hospitals might offer hefty signing bonuses to attract talented doctors who otherwise don’t live in the area. Recruiters in major cities, on the other hand, often don’t need such big incentives since they have a line of well-qualified applicants out the door.

So when considering what’s an appropriate signing bonus, don’t pick an arbitrary number such as the amount you’d need to pay off your student loans, as wonderful as that would be. Instead, try to dig up data on your prospective place of employment, as well as the signing bonuses that have been received by others in your field with a similar level of experience.

If you can back up your request with data, you’ll have a better sense of what’s a reasonable signing bonus for which to ask — and what’s not.

Determine what you’ll accept and what you won’t

 

Once you have a figure in mind, clarify your priorities before going into negotiations. Of course, not everyone’s finances will allow them to be selective. But if you have some wiggle room, make sure you know what you’ll accept — and what number will make you walk away.

And don’t forget to take every form of compensation into account, including base salary, annual bonuses, and benefits such as health insurance, malpractice insurance, or student loan repayment assistance. Even if the signing bonus isn’t much, all the other parts of your compensation might make up for it.

Consider bringing in an attorney or professional negotiator

 

Doctors’ contracts can involve complex agreements and large sums of money, and you spent years studying to be a physician, not a lawyer. If you don’t know your value or you’re not confident going through the process on your own, it could be in your best interest to bring in an attorney or professional negotiator.

According to Physicians’ Advocates, bringing in a professional is more likely to impress the employer than alienate them. Hiring an attorney or negotiator could send a message that you’re careful about the business aspect of your contract.

Of course, context is everything, so use your best judgment on whether having an advocate negotiate on your behalf would be helpful.

 

Find out if any strings are attached to the signing bonus

 

Besides figuring out your bottom line, you should also be cautious about accepting a signing bonus if you’re ambivalent about the workplace. Even if you have a short contract, accepting a large signing bonus could send an underlying message that you intend to stay at the practice for a long time.

Some employers even require doctors to return signing bonuses if they leave before a certain period. Whether your bonus has this stipulation, it’s probably best to make sure you’re committed to a workplace for the foreseeable future before accepting a big bonus check.

Use this windfall to make a dent in your student loan debt

 

Once you’ve agreed on a signing bonus, your next step is figuring out what to do with it. Although not the most fun option, putting it toward your student loan debt could be the most financially responsible in the long run.

According to the Association of American Medical Colleges, the average doctor graduated with nearly $190,000 in student loans in 2016. Although that’s a crushing amount of debt, you can likely pay it back, maybe even ahead of schedule, on your doctor’s salary.

Or if you went into a lower-paying role, you might qualify for student loan repayment assistance or Public Service Loan Forgiveness. Whatever approach you take, consider putting some or all of your signing bonus toward your student loans.

With an extra payment, you can save money on interest and get out of debt more quickly. Check out this Student Loan Hero calculator to see how much interest you can avoid by making a lump-sum payment.

 


Current Refinancing Rates

 

Earnest: Variable rates 2.47% – 6.23%
Fixed rates 3.89% – 6.97%


SoFi: Variable rates 2.470% to 6.990%
Fixed rates 3.899% – 8.179%


CommonBond: Variable rates 2.48% – 6.25%
Fixed rates 3.20% – 6.25%


ELFI: Variable rates 2.55% – 6.01%
Fixed rates 3.09% – 6.69%


Laurel Road: Variable rates 2.95%-6.37%
Fixed rates 3.50%—7.02%


LendKey: Variable rates 2.47% – 8.05%
Fixed rates 3.49% – 8.72%


Credible: Variable rates start at 2.57%
Fixed rates start at 3.25%


Splash Financial!: Variable rates 2.85% – 7.59%
Fixed rates 3.75% – 7.03%


(above rates updated 10/17/18)

 

Consider refinancing student loans to snag a lower interest rate

 

Along with extra payments, refinancing your student loans could be another useful strategy for managing your medical school debt. When you refinance, you could qualify for a lower interest rate.

DDQYou can also restructure your debt by choosing new repayment terms. A shorter term might increase your monthly payment, but it would get you out of debt faster. Alternatively, you could go with a longer term to lower monthly bills and take some of the pressure off your budget.

A third benefit of refinancing is that it could simplify your debt. If you owe a bunch of different loans to various loan servicers, refinancing could help you combine them into one. Some lenders, such as SoFi, work with medical residents and doctors to refinance their debt.

That said, refinancing federal student loans turns them into a private one. As a result, you lose eligibility for federal programs, such as income-driven repayment plans and Public Service Loan Forgiveness. If you’re relying on either, refinancing could be a mistake.

But if you have no issues turning your debt private, refinancing your student loans might help you meet your repayment goals.

Learn about personal finance so you can make the best decisions for your life

 

The medical profession is well-known for offering a variety of high-income careers. But before making a high salary as a doctor, you’ve probably spent years living on little and racking up debt in medical school.

As a result, you likely have (or will have) some hefty financial obligations as you finish med school and residency. And you might not have much experience managing your personal finances or know how to deal with your new, higher salary.

If you’re not sure where to start when you get your first paycheck, take some time to learn the basic concepts of personal finance. For instance, one of your priorities should be setting aside some of your income to create a three- to six-month emergency fund.

Another should be to have a certain percentage of your salary automatically deposited into a tax-advantaged retirement savings account. And all the while, you also should work on paying off student loans and tackling high-interest debt.

Once you’ve gotten those priorities squared away, you can start focusing on other savings goals. Even though it might involve some sacrifice for a few more years, your finances will be much healthier when you’ve finally cured yourself of your severe case of student debt.

 

 

[PoF: Back when I got my $100,000 signing bonus, I used it to pay off the last of my student loan debt. Even though I left after two years and had to write a check nearly two thirds the size of the one I received, it was no hardship, partially because I was no longer making student loan payments and had been banking a little bit more each month.

It’s rare to receive a signing bonus that exceeds a student loan balance, so refinancing may be a viable option if you’re not pursuing PSLF. If you do so, look for cash back bonus offers. Some sites (like mine) offer them, and some don’t. I believe in sharing the referral bonus with my readers and donating half the profits from the portion that I receive. That’s just how I roll.]

 


Cash Back Refinancing Bonuses

Earnest: $300 bonus


SoFi: $300 bonus


CommonBond: $500 bonus


ELFI: $325 bonus


Laurel Road: $300 bonus


LendKey: $300 bonus


Credible: $300 bonus


Splash Financial!: Up to $1000 bonus


 

 

Have you received a signing bonus for a job you’ve taken? Were you able to negotiate it higher? In hindsight, would you have done anything differently when negotiating your contract?

 

]]>
https://www.physicianonfire.com/physician-signing-bonus/feed/ 7
Retired Not Retired https://www.physicianonfire.com/retired-not-retired/ https://www.physicianonfire.com/retired-not-retired/#comments Tue, 02 Oct 2018 07:55:41 +0000 https://www.physicianonfire.com/?p=9852 lucidityAs my quote-unquote “retirement” approaches — I plan to leave my job as an anesthesiologist in August of 2019 — I’ve been thinking more about what my life will look like after that. I don’t think “retired” will be a great word to describe my existence as a husband, father, blogger, and traveler.

I’ll be retired not retired.

What do I mean by that? It’s kind of like when someone makes a phony public apology, a tactic known as saying “sorry not sorry.” It goes something like this.

 

“I am sorry that you were offended when I referred to you as a no-talent a**clown. While your music makes me physically ill, I respect the fact that you’ve won Grammys and finally got a tasteful but long-overdue haircut. Please accept my sincere apology.”

 

You want to say you’re sorry, but you’re not really sorry.

Sorry not sorry.

 

Retired Not Retired

 

I recently attended FinCon — the conference where media and money meet. This year, I was part of a panel moderated by (name drop alert) The Today Show’s Jean Chatzky, discussing withdrawal strategies in early retirement. One point she made, that we all agreed upon, was the fact that retirement needs to be redefined.

I love the word “retire” as a verb. I plan to retire from medicine. My Dad retired from his dental career after the markets recovered from the Great Recession.  At some point, most of us will retire and start doing something different with our time.

I’m not a big fan “retired” as an adjective or “retirement” as a noun. People tend to get hung up on what a person can or can’t do in retirement and still say they’re retired after they retire (for perhaps the first of several times).

If you ask me what my Dad does, I would not say “oh, he’s retired.” That doesn’t do his busy life justice. He designs things and builds them. He makes gallons upon gallons of maple syrup every spring. He hunts, fishes, travels to far-flung places with my Mom — they’re heading to Uzbekistan next week — and sometimes has the distinct pleasure of caring for two rambunctious grandchildren.

Now, I’m not trying to argue that he’s not retired — the dictionary tells us that retired people no longer work for money. For the most part, that’s true of my Dad and many other people who have retired.

CMGOr is it? He does still work. In the last few months, he built a sturdy new deer stand, poured a concrete floor in the sugar shack, helped a neighbor build a shed, and fried fish for a few dozen friends, among other things.

He also still earns income. His 401(k) and taxable account pay dividends. He’s receiving annual income from the sale of his dental practice. He receives checks from Uncle Sam related to his military service in Vietnam and from the Social Security department.

So he did retire, and he now does different work and earns money in a variety of ways. I’m not saying “retired” is an inaccurate description of his status; I just like to think of it as something he did rather than something that he is.

 

My Next Life

 

At this recent conference, at which Tanja from Our Next Life won a well-deserved Blog of the Year Plutus Award (and yes, that heading above is a nod to her excellent FIRE blog), I learned many ways  I can grow this site’s readership, influence, and income, furthering my charitable mission. I also learned it’s best not to have run-on sentences in your blog posts. Clearly, I’m a slow learner.

Now, I ‘ve got all these ideas and I want to do all the things, but I realize I won’t have time to implement many of them until after I retire from medicine. I’m not sure I’ll have time then, either, as I’d like to shift most of my blog work away from the nights and weekends to focus more on family as the wise J. Money has done.

I don’t know exactly what my next life will look like. I’ve uttered “We’ll take it one year at a time” more times than I can possibly count.

I plan to be a more present father. We plan to travel as a family for months at a time. We’d like to be Airbnb hosts. I will continue my attempts to educate, enlighten, and entertain a growing readership. I’ll still be attending, and perhaps even organizing get-togethers with like-minded people. Events like Camp FI and FinCon are just awesome.

Doing this the way I do this looks, and sometimes feels, a lot like work. It’s fun work and I love doing it, but I do have self-imposed deadlines, am active on social media (InstagramTwitter, and Facebook) and I’m constantly communicating with people from all around the nation and world through all these different channels. It’s work I choose, but I’d be lying if I said it never feels like work.

 

Retired not Retired

climbing fake rock walls feels a lot like work, too

 

 

The Infamous Internet Retirement Police

 

I was stoked that ( second name drop alert) the blogger, philanthropist, and world saver Mr. Money Mustache agreed to join our FIRE panel (Thank you, Pete!) and it was also great to see him talk on a bigger stage in a Keynote talk. In that discussion, he referred to himself several times as a retired person.

If you ask him what he does, he doesn’t simply say “I’m retired.” He says something like this: I’m a retired person who likes to do physical labor for a few hours in the morning, spend a little time on my computer in the afternoon, get some exercise in, mess around with musical instruments, and spend the evening relaxing with family and friends, and perhaps a beer or two.

One of his more popular blog posts lambastes the infamous “Internet Retirement Police,” a collective of naysayers who are quick to point out that anyone who does something productive with their time, particularly if that something earns them money, absolutely positively cannot be retired or use that word.

I think it’s a great post, and I agree with the sentiment that individuals should be able to decide for themselves whether or not they’ve retired and how they define their status.

The fact that the post had to be written does identify an issue with our messaging, though. While many of us in the financial independence community have retired or will soon retire from our careers to do something different, there will always be people who see a busy blogger, podcaster, author, or influencer as something other than retired.

DDQWhile they don’t have to be rude about it, as they often are, I do see the point they’re making. I am a fan of transparency and I don’t want people who discover the FIRE movement to get the wrong impression that early retirement only works if you have a monetized life after retiring.

The fact is that those of us that are making some money after reaching financial independence are earning dollars we don’t actually need to live our lives the way we want.

Unfortunately, that fact is often lost on those who are first exposed to the FIRE movement by a feature article in the mainstream media. It’s easier to dismiss the idea of a very early retirement as implausible than it is to take a deep dive into a blog or podcast to discover just how it can be done, with or without future work or active income.

 

On a related note, the Academy recently graduated a fresh new batch of recruits for the IRP. Beware!

 

If the naysayers were to dive into the deep end, they’d find out that Mr. Money Mustache donates lots of money, I give away half of my blog profits (and greedily keep the other half, but that drives me to work harder #human_nature), and this community is full of people who have moved beyond a scarcity mindset to one of abundance. If we’re making money somehow, it’s by choice and not out of necessity.

 

The Verdict: Retired Not Retired

 

It doesn’t actually make any difference to me whether or not people use the word retired as a noun, verb, or adjective, or not at all. If you’re working 60 to 80 hours a week, earning six-figures, and telling everyone you’re simply retired without qualifying that statement, I would take issue. Honestly, I don’t know people doing that, but I think that’s the impression some people get. Hence, the backlash and rude comments.

The issue isn’t really with the word itself, but with how it’s used and understood differently by different people. As Jean Chatzky said, we, as a society, should be thinking about retirement in a new way that embraces all sorts of different activities, even some paid work. In spite of what the tee shirt says, retirement isn’t just a beach.

Mr. 1500 is on record saying he hates the word “retirement.” Yet, he’ll say he retired because it’s the best word we’ve got. I like it more as an action than a state of being. Retire may be something you have done, but it does not define what you do now.

Each of us is free to decide which words to use to describe who we are, what we do, and what stage of life we’re in. To be told you”re wrong when there are so many shades of gray — more than fifty, I’ll bet — is just silly.

Personally, I haven’t yet determined how I’ll answer the “so, what do you do?” question after I retire from medicine, but I don’t think “retired” will find any place in my one-line response. It’s become too loaded a word.

I’ll probably start with something like “I’m a personal finance blogger.” If that leads to further questioning, which I suspect it usually will, I may mention that I retired from an anesthesia career and now do this other thing, but I won’t lead with “I’m retired.”

I’ll be retired not retired.

 

 

To those of you who have retired from your career job, how do you respond to “what do you do”? Bloggers and podcasters who have plans to FIRE, how will you approach that question? Will you use the word “retired”?

]]>
https://www.physicianonfire.com/retired-not-retired/feed/ 63
The Sunday Best (9/30/2018) https://www.physicianonfire.com/the-sunday-best-9-30-2018/ https://www.physicianonfire.com/the-sunday-best-9-30-2018/#comments Sun, 30 Sep 2018 07:55:45 +0000 https://www.physicianonfire.com/?p=9648 The Sunday Best
The Sunday Best is a collection of articles I’ve curated for your reading pleasure.

Expect most of the writing to be from recent weeks and consistent with the themes presented on this website: investing & taxes, financial independence, early retirement, and physician issues.

 

Presenting, this week’s Sunday Best:

 

JimJim and I had a pleasant conversation going over this extreme makeover I’m undertaking from physician anesthesiologist to blogger on the JimJim Reinvention Revolution podcastJJRR Ep39 Finding FIRE as a physician – Discovering new talents through blogging. Bonus: there’s a picture of me, my family, and a bunch of monkeys crawling all over us.

 

low cost 401kPodcasts are great and new ‘casts pop up every day. This new one featuring the founder of Vanguard caught my attention. Bogleheads On Investing: Episode 001 – special guest John C. Bogle, hosted by Rick Ferri

 

An emergency physician compares two workdays side by side. How does his main job compare to the side gig and which does he prefer? The answer from Side Hustle Scrubs surprised me. A Day in the Life.

 

From a day in the life of a doc to a year in the life of a blogger. From Winning at Personal FinanceA Year of Winning Personal Finance: 40+ Incredible Success Stories from many of your favorite personal finance bloggers.

 

We’ve decided to pay for a substantial portion of our kids’ college costs by building up six-figure 529 Plans for them. Not everyone can afford to do so and some who can afford it choose not to. Visit Rockstar Finance to see both sides of the debate from Finance Stoic and Pretty Minted in Money Match-Up: Should You Pay for Your Kids’ College Education?

 

Ryan Inman of Financial Residency invited The White Coat Investor over to help with another common financial question, resulting in The Golden Answer to “Should I Pay off Debt or Invest?”

 

set for life insuranceIndie Docs ask a question of their own. Is Financial Independence the Key to a Global Medicine Career?

 

Humanitarian work is one way to breathe life back into a career that starts to lose its luster. The Millionaire Doc explores a whole bunch of other ideas in Mid-career Crisis: How to Deal When Things Get Less Awesome.

 

Having transitioned from reading mostly mainstream media to reading lots of blog posts, I’ve found I get a lot more value and knowledge from the blogs. As Jonathan Clements says at The Humble Dollar, there’s a lot of Bad News out there on big sites.

 

The good news is you’re well on your way to becoming a millionaire if you’re not there already. I’m a millionaire, ESI Money is a millionaire, and so are these five folks. Check them out and learn from their stories.

 

 

20+ Physicians at FinCon

 

If you’ve been following any of about two dozen physician financial bloggers on social media over the last few days, you know we’ve all been hanging out together in Orlando among another 2,000 or so attendees at the conference where money and media meet.

When Dr. Jim Dahle attended for the first time in 2012, he was quite likely the only doctor in the house. My first FinCon was last year in 2017 and there were a solid dozen or so docs there — a big change in just five years. This year, at FinCon18, there were about twice as many. How many will we see in Washington, D.C. next September?

lucidity locumsWhatever the number is, I’m sure it will again be larger and I think that’s wonderful. We’re all doing what we can to connect with our colleagues from our own perspectives, helping them better understand how to manage their finances and hopefully improve their lives as a result. The more voices, the better.

I’ve had a great time getting to know the people behind these online voices, attending sessions to learn some new tips, and sharing the stage with a lot of people I have looked up to for years. I’m already excited for the next meeting, and if you’re a blogger, podcaster, or Youtuber, I hope to see you there!

Oh, and as was widely predicted, this site did not win Blog of the Year, but it was a great honor to be a finalist, and I was excited to see the crown placed upon my friend Tanja from Our Next Life. Of the ten finalists, three were FIRE blogs, including the grand champion. Strong work, Tanja and FIRE community!

Another Cruise?

 

Earlier in the week, we visited Key West and Havana, Cuba on a cruise as a group of about two dozen doctors, bloggers, and family members. We’ve never before traveled with such a large group of people we knew (or were getting to know) and it was super fun.

Havana was eye opening and educational. I learned, from the perspective of the Cuban government, the myriad ways in which the CIA has thwarted every attempt by supposed heroes Fidel Castro, Che Guavara, and others to make Cuba a prosperous nation of plenty.

 

cuba classic cars

classic cars in cuba… they’re everywhere!

 

The classic cars were, well… classic, the people were friendly, and we felt safe everywhere we went. That included a stop for lunch where we had Mojitos on Monday with Waffles on Wednesday at the original Sloppy Joes just one day after visiting the Key West bar of the same name which is famous for its Ernest Hemingway look-alike contest.

Based on feedback from the crew that joined us and those that wished they had in the Physicians on FIRE Facebook group, I think we may have to do something similar again.

Would you be interested in joining us on a future cruise?

 

 

Have an outstanding week!

-Physician on FIRE

]]>
https://www.physicianonfire.com/the-sunday-best-9-30-2018/feed/ 23