FIRE Crossroads 007: $2 Million Net Worth at Age 39. Time for a Career Change?

A Ph.D. data analyst and an internal medicine physician, with three children and relatively modest salaries given their degrees, today’s interviewees have done quite well for themselves.

With a $2 Million net worth, two thirds of which is in retirement accounts, he, the Ph.D. is considering a transition to a less stressful, less lucrative, but more meaningful career. He would also like for his wife, the internist, to be able to drop to part-time if and when she wants.

Thus, he shares their financial story in great detail, wondering if the time is right to stray from the career path he’s been on for more than a decade.

If you’re interested in participating in one of three interview series, and I hope you are, please download the most appropriate form for your life situation: FIRE Starter, FIRE Crossroads, or Post-FI Notes.

Getting to Know You

Where are you on your financial independence journey? Have you crossed the halfway point in terms of net worth and/or passive income?

We are towards the end of our 4^th year after we finalized our financial independence journey. That is, four years ago we came up with a plan, spreadsheet and all, on how we’d save and pay off debt.

This was not a “get to financial independence as soon as possible” plan. Rather, it was a concrete enough plan to give us 5-year, 10-year, and 20-year goals but vague enough to let us adjust goals that were further away.

To some extent, we were already on the journey before we put pen to paper, but I discovered all of the FIRE blogs 4 years ago and made a plan.

We have not crossed the halfway point yet, but the plan wasn’t to cross the halfway point until we were ~45 years old. We’re ahead of schedule and should cross the halfway point when we’re 42. We’re 39 years old now.

We have ~$300,000 more than I thought we would when I came up with the plan and projections back in 2017. My projections assume a 6% return, which I knew were pretty conservative at the time and at this point has proven to be correct since we’re $300,000 ahead of where I thought we’d be.

2012, the year my wife transitioned from resident to attending, was our year when we were deepest in the hole. We had a student loan balance of $185k and a nice new mortgage + HELOC balance of $810,000. We had $90,000 in home equity and about $71,000 in retirement accounts.

To give you an idea of where we are now, our net worth is $2 Million. The breakdown is about $60,000 in cash for an emergency fund, $1.3 Million in our retirement accounts, and a home that would probably sell for around $1.15 Million and has a $522,000 mortgage currently.

We have 529 accounts and cars, but I don’t include those in our net worth. When I discovered FIRE in 2017 it made me go back to look at our NW journey, so if you are curious, here is how much we grew it by (I even went back in history to our statements before FIRE started):

2013 = $100,000

2014 = $188,000

2015  = $158,000

2016 = $198,000

2017 = $227,000

2018 = $182,000

2019 = $326,000

2020 = $406,000

2021 = $517,000

We got to a net worth of $0 in 2017 and a net worth of $1 Million in 2020 during the pandemic. Compared to other FIRE people I read, we were in the slow lane. Yet I know compared to the average person, we’re way ahead.

These last few years we’ve been growing more and more, and it’s mostly due to compound interest rather than a total financial makeover. As you’ll see, we were doing a few things right before we found FIRE (also some wrong things that I’ll point out).

Here are our expenses (I’ve been tracking/budgeting since I finished college but I’ll show just the more recent years here), which represents money spent on anything but taxes:

2016 = $159,000

2017 = $189,000

2018 = $179,000

2019 = $232,000

2020 = $168,000

2021 = on track for $182,000

That uptick in 2019 was buying a newer used car with cash. Our biggest expenses have been student loans/mortgage/HELOC/daycare. With three kids, daycare has been a huge expense.

At one point, we had 3 kids in daycare before the oldest started kindergarten and we spent $45,000 that year alone, losing $1k/week. Now among those big expenses, we just have the mortgage….even daycare isn’t as much because we only have 1 left there. Losing only $350 to daycare/week hardly seems like an expense when it used to be $1k!

Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?

We are a household of 5. My wife and I are both 39 and our kids are all under 8 years old.

We only support ourselves and live in a major Midwest metro area in a medium cost of living area (probably high for the Midwest, but compared to the coasts, it’s certainly lower cost).

In what field are you working? How is your career going? What do you like best and least about your chosen profession?

I work in data analytics while my wife is an internist at an academic hospital. While I work in data analytics, the industries I’ve worked in have varied from public health to information technology to my last two jobs in the finance industry.

While I do not personally sell these financial products, I work for the main parent company (think Raymond James or Northwestern Mutual). It’s been very interesting working for these companies, as I was working for one when I discovered FIRE.

While I already knew to stay away from non-term-life products and annuities prior to discovering FIRE, the hatred of these products I see in this community has certainly impacted me.

Rest assured, many of the people I work with admit that our products are “complicated” and we have whole departments set up to try to push back against the negative narratives surrounding whole life insurance and variable annuities.

I obviously bite my tongue because at least for a little while longer I need to keep working here. But I can tell you that the FIRE community has a huge barrier as these institutions have a ton of money to fight the negative narratives, and our sales folks and most folks who work here who have an obvious vested financial interest are never going to understand why these are poor products.

They have been shaped and molded to tell stories about how these products are helpful to people. Basically, it boils down to how these products help people who would otherwise hurt themselves and/or the complexities of these products are a “value-add” for the customer, and as they benefit from “it” they should be expected to pay “a portion” for it. They see their products as something that does not replace stocks and bonds but rather complements them.

As for my own personal job, there are two things I like. First, as a data analyst I feel extremely well informed about the fundamentals of what drives the business at the company.

I build models and algorithms that use previous data to predict future results. It can be fun to see how well the models and algorithms perform once they are in place.

My job has also offered me a lot of flexibility that has helped our family function well as my wife still works roughly 50 hours per week.

If you’re in a dual-income household with kids, you need at least one person to be flexible. Usually in our society still today, that has fallen to the mother but in our household just due to the nature of our jobs, that has tended to fall to me.

Still, there are several things about my job that I do not like. The first by far is that historically, I haven’t worked for people who know what the heck I am doing.

My bosses for some reason do not have an analyst background. I’ve been left wondering why they are in the boss’s chair and I’m doing the grunt work, which I know they personally can’t do.

I know the answer. The answer is “politics” and it is “who you know” that gets them there, but that doesn’t mean I’m wrong when I say they are totally unqualified to be my manager.

This has improved very recently, which is great, but having dealt with this for numerous years prior among at least ten different managers (that sort of incompetence should tell you a lot about the people making organizational decisions not knowing what the heck they are doing) at different organizations has deeply affected me.

The second thing I do not like is somewhat related. Too often, I’ll do projects and come up with a recommendation that isn’t taken because “politics” and many people whom I’ve delivered to don’t seem to understand what I’ve given them.

It’s my job to get them to understand but too often there is so much skepticism from the start that I never had a chance.

It’s similar to a person not trusting that their health professional would be the best person to help them make an informed health decision like getting vaccinated. Too often, gut decisions are made or “we’ll do it this way because we’ve always done it this way” and I’ll wonder what my purpose is at the company.

At this point, I’m so disassociated from my work that I do it but I no longer feel the desire to change opinions based on what I’ve learned.

I play the game and make it seem like I am working but I have no desire to get promoted or even make more money. It’s easy to play the game if your supervisor doesn’t have a background in analytics. This is why a career change is needed.

Do you feel you’ve come to a crossroads of sorts? If so, tell us about it. What options are you contemplating?

I am approaching the crossroad. I originally wanted to teach when I was in college. For a variety of reasons I choose plan B which is what I do now.

It has helped us financially because I make far more than I would as a teacher but when I discovered FIRE and made a plan in 2017 I tried to see when I could switch careers and take a serious pay cut. Back in 2017, I determined this would be in 2021.

Alas, I’m suffering from one more year syndrome but I’m also impacted by the pandemic as I don’t want to do remote teaching ,and that’s a deal breaker.

So once schools are normal again (hopefully by fall of 2022), then I can make the switch. That said, my wife isn’t totally on board with this big income cut.

My plan, at least for right now, is actually to cut the difference. I’ve taken multiple steps since 2019 to start making sure this pivot is correct for me.

During that time, I’ve found part-time teaching in high schools is a thing and as I get to know my current workplace more, I become more convinced that I can go part-time here and do part-time teaching as well. That will mean just a 25% paycut instead of 40%.

Due to the progressive nature of the tax system and the fact that we’ve front-loaded a lot of our savings already, we can scale back the percentage saved to retirement and keep our take-home pay the same.

In other words, we shouldn’t really “feel” a pay cut. Just like you pay yourself first for retirement so you never see the money, we’ll dial that back just a bit so we won’t see the lower amount of money being saved.

At $1.3 Million in retirement at age 39 and assuming our money will double every 10 years with zero additional savings, that gets us to $2.6m at 49 and $5.2m at 59, which you’ll see is beyond what our goal is.

And we will continue saving, just saving less money. So I am overshooting here.

Those amounts and with no specific plans to retire are also why I’ve been telling my wife she can cut back to .75 FTE now. She also suffers from one more year syndrome.

I’ve shown her doctor burnout articles over the years periodically, and she’s passionate about that as well as female empowerment in the workplace.

She can totally switch careers at age 43-44 if she wants as we won’t need to save anything anymore. At that point, our investments should be around $2 Million and so they should be $4 Million (our number) around the age of 55 with no new money added. [PoF: Based on the Rule of 72 assuming compound growth at 6%].

I plan to teach because I’m passionate about the topics I want to teach, and while I realize teenagers can be a tough bunch and most don’t care about what you are talking about, there are some that do care, and I want to feel like I’m making more positive contributions to the world via teaching.

I feel that I don’t make meaningful contributions in my line of work anymore. I am going in eyes wide open, though, and I know I could miss the mark with a lot of my audience. But I won’t miss it with 100% of my audience. If it doesn’t work I will need to come up with a new plan.

Investing

How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?

We have an emergency fund of around $60,000 but we don’t include that in our asset allocation. Our retirement nest egg is 85-90% equities, 5% REITs, 5-10% bonds. We own no individual stocks or alternatives like crypto.

Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?

75% of our retirement is tax-deferred and 25% is Roth. 0% is in a post-tax taxable account, and this is going to present us with a conundrum in the future.

Given our path and current situation, the only way I see us getting post-tax taxable account money is via inheritance.

You see, I have a Roth IRA and a 401k through my employer. My wife has a Roth IRA, and 401k, and then also a 401a and a 457b (governmental). That’s a ton of tax-advantaged space for our household.

Further, at least for a doctor, my wife and I don’t make that much. Income is asked below but our gross income is around $340,000 to $360,000. For our early years, it was around $280,000 to $300,000.

Compared to most of America, that is very good income. But in the doctor world, that can be the take-home pay of just one person.

With us both working, we have access to a lot of tax-advantaged space….to the tune of around $75,000 to $110,000, depending on the employer match.

If the common mantra is to save 20% for retirement, that is anywhere from $55,000 to $85,000, depending on the income year and the match. If we max out two 401(k)s, 2 Roth IRAs, and a 401(a) (employer limits this to mandatory contributions + match) and a 457(b), we’re over 20%.

Including the employer match, we’re saving around 30% for retirement. I know some people will run the numbers and say something is off but I’m leaving out a few details just because it’s too in the weeds like the exact employer match.

Also, that first financial institution I worked for gave me access to the mega backdoor Roth IRA. That was golden.

I took advantage of that for a few years which is why we’re even fortunate enough to “only” have 75% in tax-deferred instead of more. During those years we had access to around $110,000 to $115,000 in tax-advantaged space on income that was at most $330,000.

If I teach, my salary will go down. It will also start me on a path towards a pension and there will be a 403(b) plan, maybe even a 457(b) plan.

My wife will also cut her salary. So you can see how I don’t see how we’ll ever get a taxable account.

I’m a big believer in Roth conversions, but we won’t have the taxable money to pay the taxes on those conversions. If Dad’s inheritance is big enough to pay for college (more on that below), and there’s some left over, we’ll use it to pay the taxes on these Roth conversions when we retire early.

That’s over 10 years in the future though, so who knows what will happen. But it’s nice to have a plan.

I don’t know how we’ll otherwise get a taxable account, and “save more” isn’t the answer when we’re already saving 30-35% because my wife and I would like to also spend meaningfully.

Do you have investments in an HSA? How about 529 Plans?

We do not have an HSA. We have 529 plans for each of our 3 kids that total $50,000. We max these each year to get the state tax deduction.

It’s not enough, and I consider these to be underfunded and they probably will remain so because we want to pay off the mortgage by college time instead and/or could well get a lot of help from a grandparent by college time.

My father currently gives them $1,000 in their 529 for each birthday. He’ll be 87 by the time the oldest goes to college.  We have discussed the possibility of him helping to cash flow college should our kids go to super expensive private 4-year schools.

My wife and I were both lucky enough to do that ourselves and our parents paid for it. I believe now that my parents got taken hook, line, and sinker for this idea that if you go to a good private school you’ll do great, and more.

However, I look around me now and see ALL people who work with me got college degrees and went to public school. Not only that, they have a bachelor’s degree or a master’s and I have a Ph.D. (fortunately neither I nor my parents had to pay for my graduate education, but those were years in my 20s I did not work).

These people I work with I’m sure are paid what I’m paid. So I ask myself why the investment in me was so much greater than my colleagues and the outcome is the same? Like I said, I think we got taken.

We have some very good public colleges here in the upper Midwest. I would prefer my kids go that route. However, I’m well aware that my wife and I had positive college experiences and we live in an area where plenty of kids are going to expensive 4-year private schools.

I will have that discussion with my kids at some point. But I could lose this battle due to my environment and I know my wife would also like for that to be an option for our kids.

This is where my dad comes in. He is a big believer in private school education too, which is why he made it such a focused goal when I was young.

I can see him helping us out a lot with this if we don’t have enough by the time our kids go to college. I realize an 87-year-old can change their mind or the market won’t be great then, etc…

So if we don’t get that anticipated help, we’ll cash-flow college (my goal is to have the mortgage paid off by the time the oldest goes to college, which should help).

If we need more, the one thing I’m not worried about at all is our retirement nest egg. I mentioned we’ll be above our FI goal in our 50s. So if we need to take out loans for college we will b/c we’ll know our retirement income balances will allow us to pay those off easily once we’re eligible to dip into them, whether it’s age 55 or 59.5 or using one of the other ways to get to that money before we’re 59.5 years old.

As you can see, with this topic so up in the air (will all kids go to 4-year-private? Some public and some private? Will they do post-grad work? What will tuition be? Housing costs?) we have a plan A, B, and C.

Between those three I’m hoping we’ll get it right. I have at least 11 more years to figure out if we need a plan D and also whether some original plans come into focus. Being flexible is key.

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What has been your best investment?

It’s hard to identify the best investment. I would say initially that my wife and my educations are our best investments, even though we overpaid for it and I personally might have overdone it with a Ph.D.

That has given us both the ability to earn and also have the confidence in ourselves that we can find new jobs in a competitive market.

Twice in the 2008-2010 period, I went on the market to find jobs as we moved after medical school and then after residency, and as you know, the job market was pretty bad then.

Yet, I had full confidence I could find a decent job each time, and I did, within 3 months of starting to look each time.

I also would say a great investment was my parents setting me up with a Roth IRA when I turned 18. I was working at the time in a high school job so they put some money in there too. I hope to do this for my kids as well.

Your worst investment?

I discovered a certain stock in 2007 or 2008 and was engaged at the time. I knew we’d be taking a honeymoon in May 2009 so I invested the funds in this stock. I told my buddy about the stock and he invested in it as well. I put in $2.000 I think.

Within less than a year it was up over 66% and my buddy thought I was awesome. I didn’t want to sell yet because I only wanted to pay LTCG (never mind that I didn’t know what the time I’d pay no LTCG because my income was so low).

By the time the year was up, the stock started falling and so I waited to sell since “it would go back up” and it didn’t, and I lost all the money. It was not a huge deal because I was working at the time so I could cash flow the honeymoon (we still went to where we planned).

That Roth IRA my parents gave me when I turned 18 was with 3 different advisors from 1998-2012 and the growth on the money during that time was very low, like around 1-2% certainly not the ~4-6% I was expecting. It was within the lost decade but I should have done better here.

I took total control back when I discovered FIRE in 2017. My main beef at the time was the advisor who had the Roth IRA had told us for years we couldn’t contribute to Roth IRAs because of our income once my wife became an attending.

I listened to that but then discovered the backdoor and became irritated that I was wrongly advised and we had missed contributing for 2013 through 2016. It was only 4 years, so not a huge deal, but I expect my advisor to be knowledgeable of these things. I shouldn’t be learning things on my own that I’m paying my advisor to already know.

Into the FIRE

Numerically, what is your FI goal?

$4 Million in retirement accounts with a paid-off house (not included in the FI #). We’re at $1.3 Million at age 39 and you already saw I think we’ll be at least at $2.6 Million at age 49 and $5.2m at age 59. We’re planning for a 3.5% withdrawal rate.

When do you suspect you will achieve financial independence? Will you retire from your career once you’re comfortably FI?

Age 54 or 55. That nicely lines up with a few key milestones, including when the youngest child is 18-19 and just out of the house; we have no desire to retire with kids still home.

As I mentioned, I would have already retired from my first career at age 40 or 41 and so I’d be ~15 years into a second career as a teacher. If I enjoy it as much as I think I will, I will probably not retire at age 54 or 55.

I’m not sure when I will retire then, as that is over 15 years away. Age 54/55 also lines up nicely when both my wife and I can access our employer 401(k) plan penalty-free. Of course, my wife has a 457(b) plan if we need access to any retirement money and some unexpected early retirement happens before age 54/55.

What are your post-FI plans? How will your life change? What do you look forward to the most?

I think conservatively, we’ll be able to sell the house for $1.4m in 15 years. We would downsize into two smaller homes. One in the upper midwest if the kids are still here so we can see grandchildren and children and one in a much warmer climate with lower taxes (we’ll have official residence in the southern state).

I need to find hobbies as I won’t have much to retire to right now but I have time to figure that out. I want to eat well and travel internationally, and my wife does as well. We were both quite well-traveled before we turned 30 so I think/hope we both want that once we’re in our mid-50s.

We’ll do some international trips with the kids before they leave the nest, but we’ll do far more once they are out. We may be able to do all of this travel while I still teach (given all the vacation time) and my wife may be working quite part time and have enough flexibility to be able to take weeks off at the time, especially during the summer.

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Have you made any major changes in your lifestyle or investments to accelerate your FI path?

I have mostly just tweaked things and made our finances a lot more efficient. Before I found out about FIRE, I knew/saw we did some things wrong but we did many things right too.

What we did wrong:

• We bought too much house. I wanted to buy because I knew interest rates were super low. I got a great rate, and in early 2013 at least until early 2021, interest rates were their lowest ever, so I felt I was right on the money here. My wife wanted a house at the time because she was finally an attending and we were going to start a family. We bought 6 months after residency, $900,000 with 10% down and 10% HELOC while also $175,000 in student loans still there. That being said, while things could have turned out differently, we did expect to be in this house while we raised a family. We actually bought before we were ever pregnant with the first. But we are still here in the house and after all this time, I think we got a great deal because at the time, the seller only lived in the house a year and wanted to get out so I knew we had the upper hand in the negotiation. We paid less than the seller had paid a year prior.

• We took just over 10 years to pay off the med student loans, which is too long. We did not refinance them ever and we kept them on standard repayment the entire time. We did not pursue PSLF even though my wife worked for a 501(c)(3) non-profit during residency and after residency (she still works there so she easily could have seen she would have met the 360 payments while working for a nonprofit the entire time).

What we did right:

• Didn’t get suckered by whole life agents.

• Didn’t buy a house during residency.

• Bought disability insurance for my wife before she finished residency because we heard it was a good idea.

• Kept the same cars in college/grad school/residency and didn’t update until an attending for at least 5 years.

• Kept minimal assets with a financial advisor who I found out was costing us the equivalent of  ~.75%/yr. Could have been worse! But the assets were minimal. Most of our assets were in 401(k)/403(b) accounts and I already knew about expense ratios (ER) before FIRE and felt I had kept them down. The average ER across our accounts before I found FIRE was 0.29. Not bad. Now that I discovered FIRE, I simplified the portfolios even more and have an ER of 0.04 across our total portfolio which is obviously awesome. I took our bond allocation from 20% (too conservative I think in hindsight) to 5-10%.

• I had always heard to save 15% for retirement. It was never clear to me whether that included a company match or not. Since I’ve been more of the saver, I saved 15% in my 401(k) and then got the match on top of that. My wife has great retirement plans, but in a way they disincentivize saving. For her plans, if she puts in 5% her employer will put in 10%. Boom! She’s at 15% that way. So she put in 5% and didn’t want it to be higher for the longest time. I finally changed that in 2017 when I discovered FIRE. We had been putting roughly $40,000 per year into tax-advantaged accounts for 5 years. In 2017, I discovered all this time she had access to a governmental 457(b) plan that we never used. I also discovered the backdoor Roth. And then I also discovered my new employer had the megabackdoor Roth IRA. So suddenly I was able to put ~$115,000 in tax-advantaged retirement accounts. You’d think going from $40,000 to $115,000 would be hard, but we went at it piecemeal. First, we maxed out her 401(k) and mine. The next year, we added the backdoor Roth IRAs and the 457(b). Finally we did the megabackdoor Roth in the next year.

• Work/life balance has been pretty good. My wife is not a high-income doc, but she’s around all weekend and home to see the kids in the morning and evenings every day. I make good money doing stuff I don’t like to do, but I do have a lot of flexibility. I’ve been making $90,000 or more for 12 years now, and over $110,000 for the past 5 years.

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Are you facing any unique challenges making FI or RE more difficult?

Children? 😊. My spouse and I are not 100% on the same page in terms of our FI journey but we’re probably 75% there and I’m hopeful we’ll get to 100%. Basically, I wish she’d spend less on stuff, especially since she feels our house has too much stuff. I hardly buy anything.

On the other hand, I need to constantly remind myself that we’re saving more than 20% for retirement and meeting other financial goals so I need to be more okay with spending money on things even if I don’t agree we need it and it’s a huge waste.

What advice do you have for others who are seeking financial independence?

I hope it’s come through that for several future things we have a few different plans. Be flexible/enjoy the journey. Don’t rush too much.

Try not to be too miserly and don’t be too spendthrift. It’s equally heartbreaking to hear that people can’t retire at 65 or 70 because they didn’t save enough, and also to hear that people saved 50%+ of their money and retired at 50 or younger only to find themselves bored and/or their health suffered mightily while they were killing it just to save more. Their health suffered enough that they can retire because of finances but cannot achieve their non-financial goals now because of their poor health.

Try really hard to be okay with getting 80% of the results rather than 100% if the 100% is going to “cost” you too much, whether it’s a relationship or your health or something else.

Look at the compound interest calculators and you’ll see that as long as you have a plan, if you dial it up to 11 ,you’ll get to FI 3-4 years faster, but my question is, was it truly worth it to you? If you get to FI 3-4 years later instead but you have good relationships and health and enjoy your job more, isn’t that worth it?

Make a plan, but make it balanced and make it adjustable.

Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.

Financially, I’m concerned about high RMDs given no taxable account nor plans for such an account. I’d have to stop contributing to the Roth IRA and 401(k) to start a taxable account and that makes little mathematical sense. Since we’re not certain when we’ll retire, this makes it even harder to plan. The idea had been to do Roth conversions and we might have 15-18 years to do this if we retire early at 54/55, but we also might continue to work until 65 and thus only have 5 years to do Roth conversions.

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I’ve shared my feedback privately with today’s guest. I wouldn’t want my opinions to influence yours. Please give your take in the space below!

Again, if you’d like to partake in a future Q&A, please download a FIRE Starter, FIRE Crossroads, or Post-FI Notes interview form.