He’s a primary care physician, and she’s an obstetrician and gynecologist. He thinks of his career as a good job. For her, it’s more of a calling.
Less than a decade into their respective careers, they’ve grown both their income and net worth much faster than anticipated, and that is what led him to this crossroads.
His self-described perfect day looks a lot different than his current days, and he’s wondering if it might make sense to start transitioning to part-time work or less sooner than later. Like me, he did not anticipate pondering such a move less than a decade into his career, but that’s where he finds himself.
If you’re interested in participating in one of three interview series, please download the most appropriate form for your life situation: FIRE Starter, FIRE Crossroads, or Post-FI Notes. To see other posts in the series, visit our Q&A archive.
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?
I’m actually a bit dumbfounded that we’re having a “crossroads” conversation this early into our careers, but looking at the numbers and our current dissatisfaction with work-life balance, it seems appropriate.
My wife and I are both physicians just seven years out from residency, but we’ve already crossed the halfway point to FI based on our nest egg, not (yet!) with passive income. Our net worth is just shy of $2,500,000 at the time of this interview.
I’d estimate the value of our home after transaction costs at $650,000, and our investment nest egg at $1,850,000 (breakdown below). In addition, we have $600,000 in 529 accounts that I don’t include in our nest egg number since it’s tabbed for education and mentally already spent.
We’ve built our practices and W2 income from $500,000 annually when we started out, to the point that our total household income over the past few years has remained pretty stable between $800,000 and $900,000. Ever since completing residency, we have maxed out Roth IRAs, 403(b), 457(b), and HSA annually, and added small monthly contributions to the kids’ 529s.
All income beyond that went to whichever financial goal was lined up next, and we took a very focused step-wise approach. First, we paid off our student loan debt of ~$360,000 total in our first couple of years out of training.
Once that was paid off, we attacked the mortgage over the subsequent 3 years (paid off entirely by the 5 year anniversary of the initial closing), which started out around $480,000.
The next year, we superfunded our kids’ 529s to our goal, described in better detail below, and we now consider that box checked. Then we had a bit of a “now what?” moment. We were debt-free and already completed most of the financial goals we had initially set out to accomplish.
I always had an interest in real estate investing but didn’t know where to start. I also didn’t think I had the capital needed for meaningful investments.
Once we squashed our debt, freed up some cash flow, and had a little more downtime during the infancy of the COVID pandemic, I decided that real estate would be the answer to our “now what” question.
I took Peter Kim’s Passive Real Estate Academy course last year and it gave me the confidence to finally take the plunge into private equity real estate deals. Now we’re invested across 5 separate real estate funds with plans to add to them.
My wife and I are both naturally relatively frugal, but have started to incrementally loosen the purse strings a bit in the past few years. We have spent more on travel (when COVID allows), entertainment, sports, health, and dining.
We prioritize getting babysitters for date nights routinely. My wife had been planning small and large home remodel projects for some time but we held off until the house was “ours” after we paid off the mortgage. I think planning but delaying those projects helped us stay focused during that years-long mortgage paydown plan.
We have never carried a credit card balance. We now pay cash for all purchases, including cars and home improvement projects. If we don’t have the cash to pay for something, we can’t afford it yet.
We don’t maintain any traditional budget since our income dwarfs our expenses. It’s hard to really pinpoint our exact annual household spending since it has varied so wildly recently, and we have had a number of “one-time” expenses, particularly with home projects in the past year. Our baseline expenses as best as I can calculate are around $60,000.
If you add in the “extras” like giving, vacations, and other entertainment our more typical spending is $80,000-$90,000. I know there are likely diminishing returns in happiness with spending beyond our current levels, but ideally, we would do more living and giving beyond this current amount, towards a more fatFIRE lifestyle.
I would like to get to the point where our real estate and dividend distributions cover our baseline expenses. I know it’s simply a mindset problem, but there’s something about hitting the sell button that just eats at me.
Tell us about your household. How many people and at what ages? Are you supporting anyone outside of your home? Where do you live?
My wife and I have 3 wild kids together, ages 5-7 (with all 3 now in public grade school, saving a ton done in daycare and nanny costs!). We live in a low cost of living area close to a large Midwest city.
We don’t currently support anyone outside of our household, but we do love to give generously to family, whether it’s funding a nephew’s 529 college fund monthly or paying for family to vacation with us.
In what field are you working? How is your career going? What do you like best and least about your chosen profession?
I’m a primary care physician and my wife is an OB/GYN. We’re both W2 employees at a large healthcare system. I am essentially a solo practitioner at my office in a relatively rural setting.
Along the spectrum from job to life’s purpose calling, I’d place my medical career toward the job end, but my wife would consider hers much more of a calling.
I really do enjoy many aspects of primary care as a career (becoming part of a family and doing a small part in shaping their health and well-being), but the day-to-day work has become overwhelming, with increasing EMR and documentation requirements, exploding inbox, decreased time allotted for patients, etc…
We’re being asked to do more with less, and the current pandemic has only exacerbated the problem with less support staff and even greater patient needs.
Do you feel you’ve come to a crossroads of sorts? If so, tell us about it. What options are you contemplating?
I had always planned on accumulating 25x to 33x annual expenses, then calling it quits. I assumed that would take a couple of decades, crossing the finish line around age 50.
We’ve had better than expected incomes coupled with better than expected investment returns, so these might cut that timeline in half. But I find myself burned out at work, and the COVID pandemic has made me reconsider what I value.
It reminds me of the quote “if it costs you your peace, it’s too expensive.” My job is currently too expensive. I rarely come home from work without more to do, and I find myself not as present at home and with the kids as I would like.
Now that we’ve reached coast FI and lean FI, we’re not sure where we go from here. I struggle with the idea of keeping this current work pace for the next 3-4 years for full FI vs. slowing down now, and how could I implement that?
Maybe an interest becomes a side hustle that ends up making some income? Would I enjoy more active real estate investing? Depending on the day you ask me, my answer to any of these questions may be very different.
On bad days, I feel like I could easily walk out of the office and never return, but that’s more of a “running from” rather than “running to” mindset.
How is your nest egg invested? Approximately what percentage is allocated to stocks, bonds, real estate, and alternatives?
Excluding our primary residence and kids’ 529s, we’re approximately 60% stocks, 10% bonds, and 30% real estate. The vast majority of our stock allocation is in index funds, with approximately 2/3 total U.S. and 1/3 total international index funds.
We still have a few legacy individual stocks and actively managed funds in a taxable account from early in my financial journey, but they now only make up about 5% of our total holdings.
Currently, all of our real estate allocation is invested in passive private equity funds. We hold only enough in cash to cover monthly expenses plus a negligible buffer amount. We own no crypto, gold, or any other alternatives.
Are your investments primarily in tax-deferred, Roth, or “taxable” post-tax accounts?
Our breakdown is currently 55% tax-deferred ($980,000), 10% Roth ($180,000), and 35% taxable ($620,000). Our HSA has a balance of $40,000, and we have the intention of using it as a triple tax-advantaged retirement account, so it could effectively be added to the Roth bucket above.
Our taxable account should quickly overtake tax-advantaged accounts in the next couple of years. We continue to max out backdoor Roth IRA, 403(b), and 457(b) accounts, and now that we’re completely debt-free and are done with the kids’ 529s, our annual contributions to taxable accounts are 2-3x our retirement account contributions.
Do you have investments in an HSA? How about 529 Plans?
We’ve been maxing out a family HSA annually since being in our current post-training jobs, all invested in a small cap index fund, with a balance of $40,000 currently.
We pay for medical bills out of the HSA, rather than using post-tax money and tracking receipts. We’re taking a “good enough” approach with this one.
I think we probably went a bit overboard with the kids’ 529s. We opened one for each kid as soon as they got a social security number, funding it monthly since they were babies.
Leading up to the mini COVID bear market, balances were already approaching 6 figures each. We decided to superfund each 529 in the initial COVID aftermath, shoveling every extra cent we could scrounge up to $75,000 each contributed last year.
The swift recovery sent the balances to about $200,000 each. We’re still a decade away from our oldest graduating high school, so this may turn out to be much more than we’ll need for their education, but time will tell.
If there’s a surplus, maybe we’ll take a culinary class in Italy or winemaking course in Napa. Likely, any surplus will just go to extended family or grandkids in the future. [PoF: These may be an option, but the schools must be on this list to qualify.]
What has been your best investment?
It’s probably cliché to say our marriage, but it’s completely true. Both financially and non-financially our marriage is the easy answer. We certainly wouldn’t be as far along our financial journey without each other. My wife earns a substantially higher income than I do, but she has no interest in personal finance or growing wealth. We complement each other well and make a great team.
Your worst investment?
I “invested” in a penny stock in high school (a hot tip from a substitute teacher) that went to zero, but I had such an insignificant amount invested that it was essentially meaningless to our current financial path aside from a lesson learned.
Similarly, even with individual stocks I bought during the 2008 financial crisis that did really well, the amounts were so small that looking back I wasted so much time “doing my research” (coincidently now my least favorite phrase I hear from patients and families). Whenever I’d 2x an investment I’d sell and lock in the gain, but typically with amounts no more than $1,000.
My biggest meaningful financial mistake was never opening a Roth IRA until after med school (despite having earned income since a middle school paper route) and waiting to invest in a 401(k)/403(b) until my attending job. Over that time, I had been investing in a taxable account, losing that tax-free and tax-deferred space forever.
Hindsight is 20/20, but it was a mistake from a strictly financial standpoint to aggressively pay down our mortgage instead of investing our extra capital. I still don’t regret it. I always saw it as the bank’s house until we paid it off. Now it’s ours.
Into the FIRE
Numerically, what is your FI goal?
$3,000,000 is the nest egg number (excluding home value and kids’ 529s) I’d like to hit before I consider hanging up my stethoscope for good. That should give us enough wiggle room to deal with most of life’s curveballs thrown our way.
When do you suspect you will achieve financial independence? Will you retire from your career once you’re comfortably FI?
Along the journey toward a traditional full FI or even fatFIRE, I feel comfortable saying that we’ve already achieved coast and lean FI. If we maintain current annual contribution amounts, based on our expected spending, we should reach full FI within the next 4 years or so.
I don’t see myself completely retiring from medicine without an encore career or a really well thought-out plan in place. I suspect my job would be more enjoyable if I could do it on a part-time basis.
What are your post-FI plans? How will your life change? What do you look forward to the most?
I don’t yet have a specific post-FI plan, but presumably, it’ll involve a slower pace of life. I think I’d like to simply slow down my medical practice, maybe doing a practice share with another physician who wants to work part-time as well. If I cut down to 0.5 FTE, that could be a pace I can maintain indefinitely.
Some days I want to just give up medicine entirely. I fantasize about days of sleeping in, settling in with a cup of coffee and a good book or some finance blogs in the morning, tossing some weights around, going for a walk, then having an afternoon glass of wine or two while I peruse Zillow (my secret addiction), +/- trashy daytime TV in the background until the kids come home from school.
That sounds like a pretty perfect day to me right now. I’d do more exploring, more traveling, try new physical disciplines, maybe scratch my real estate itch more. And definitely drink more wine.
I mostly look forward to the downtime. I look forward to spending more time with the kids, more impromptu adventures, saying yes to them more times than not.
Our journey toward FI has already given us incremental freedom. We now have an easier time saying no at work to anything that will become a time or energy vacuum that we’re not passionate about. We’re adopting something akin to Tim Ferriss’ “Hell Yes” policy. My wife already plans on cutting back her office hours in the coming months as well.
Have you made any major changes in your lifestyle or investments to accelerate your FI path?
It’s way too early to say whether our recent real estate investments have accelerated our FI path or not, but I’m happy to add a little diversification to our nest egg.
Are you facing any unique challenges making FI or RE more difficult?
We’ve been very fortunate and I don’t think our challenges are particularly unique. We have had a few health scares to deal with personally and with extended family.
My wife has a chronic health condition that has made her career longevity difficult to predict (and which I think led to our push to grow our wealth so quickly while our health allows it).
Her setbacks have led to a few short-term work gaps in the past, but her illness has been well controlled recently and it’s just another consideration going forward.
I also don’t know what, if any, financial support our parents may need from us in the future. How would our FI number change if we needed to assume the financial burden for a parent’s long-term care, etc…?
We would also like to help a nephew pay for college, but it is not necessarily a critical factor when contemplating RE.
Similarly, we currently contribute to charities and have a scholarship set up at our alma mater, but we would like to give even more and leave a legacy of abundant generosity.
What advice do you have for others who are seeking financial independence?
Don’t wait for some fictitious date in the future to start enjoying life. Try to take small steps towards your ideal life well before you reach FI, even if it extends the timeline until you reach full FI.
Finally, is there anything under the sun that you’d like some help with? The hive mind would be happy to weigh in.
Am I missing anything?! Are there glaring blind spots I haven’t considered? Is this just a matter of me saying “enough” and drawing a line in the sand to keep the goalposts from moving? How can I plan for an unknowable future, one with a possible 5-decade retirement?
What happens if I decide I want the Tesla Model S Plaid and want to get my wife a Bentley GT Continental convertible for her birthday?
All jokes aside, how have primary care physicians let go and left families they feel like they’ve become a part of? Any regrets? How have employed physicians in a small practice gone part time? Mentally, how do I leave millions on the table in future career income?
I knew we’d be fine financially; I just genuinely didn’t think we’d find ourselves in this position so quickly.
Thanks PoF for allowing me the platform!
PoF: Catch all the future interviews from those just getting started, at a crossroads, or at the end of their FI journey with a free subscription to Physician on FIRE.
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