FIRE Crossroads 030: A Physician and Pharmacist are Almost There!

A watched pot never boils. And a watched investment account never grows.

OK: that may be an overstatement, but today’s interviewee in this FIRE Crossroads installment is tantalizingly close to their self-stated financial independence number.

Of course, the recent volatility in the market and the swoon of all of the major indexes and equities of late is pushing that number a bit further and further away as each day passes. But our intrepid interviewee soldiers on in a job that’s requiring more of her than she’s willing to give lately.

Read on to see how things are slated to shake out for this physician and pharmacist couple–with kids, too!

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.

I wanted to contribute from the perspective of a female physician with a family, because those are under-represented in this series.

I do not fault PoF for this at all; I suspect most of us women MDs are too busy and/or too tired to take the time to fill out the interview form! (My absolute fave blog handle that I have seen out there is “The Tired Superheroine” which very well sums up the past 20 years of my life. Thank you TTS for putting a name to it!)

There are also not too many of us posting about the challenges of having teenage children; it seems most of the “Crossroads” folks have little kids, and the “Post-FI” crowd is either child-free or empty-nest. Adolescents, lemme tell ya, are their own thing. (Car insurance expenses, anyone?)

Anyway, so here we are! I hope my story is educational for your readers. Thank you for the opportunity to share.

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 well past the halfway point, although not as close as we were two months ago, given the stock market lately! Our net worth, not counting real estate, is about $2.4 million. I think we’re getting close.

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 husband and I are in our mid-fifties and live in a relatively high cost-of-living city. He works as a retail pharmacist after having gone back to pharmacy school in mid-life.

We have three children: One in college, one in high school, and one in middle school. We are not supporting anyone else.

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

I am an academic OB-GYN working in a county hospital. I have been quite happy with this career – I love teaching residents and working with our patients, who are mostly from poor and otherwise marginalized communities.

It is meaningful work on so many levels, and it nourishes the part of me that wanted to go into medicine to serve others. I enjoy mentoring the junior faculty in everything from academic pursuits to clinical skills. Because I am a salaried employee, I do not feel pressure to “produce” and can really focus on giving high-quality, evidence-based care.

On the other hand, the negatives are that I’ve definitely taken a pay cut to stay in academics my whole career. I am having a tougher time with night call, which is in-house, too frequent, and always very busy. It’s physically exhausting at my age. Although I survived an old-school residency with unlimited work hours, I now struggle to recover from even one 24-hour shift!

Sucks to get old…

I have a fair amount of inner conflict about retiring early, or even cutting back too much because I love my “work family” but frankly, I am getting really tired!

I also am not enjoying the administrative aspects of my job. I sit on too many committees, attend way too many meetings, Zoom and otherwise, and view my email inbox with fear and loathing!

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

Three years ago, I would have said I wanted to advance in my department. I’m currently at a second-tier leadership level. I’d want to really be a leader in my institution and retire at 65. But the pandemic totally changed my outlook.

My kids needed me to be home, supporting them through a ridiculous amount of change in their school and social lives, but I had to be at the hospital shaping our department’s response to the pandemic.

And in addition to the parental distress, my colleagues and I suffered a lot of moral injuries, especially in the early days when we had to suspend surgeries, stop seeing patients in the clinic, and even separate COVID-positive mothers from their newborns while we figured out how the virus worked.

Everything and everyone suffered: the department culture, the patients, my family. And now, as things should be getting back to “normal,” the aftermath has exposed and exacerbated so many societal problems, many of which affect me in my job: increased inequality, more homelessness and mental health problems in our patients, decreased resources at my hospital, and now a potential flood of patients from other states needing care for unwanted pregnancies.

I am disillusioned with institutions in general and health care in particular and worn out trying to make it work.

My husband, since COVID, does not enjoy his job – irate patients waiting in line at the pharmacy, not enough staff, an unsafe rate of incoming prescription requests and pressure to fill them on time, needing to give vaccines in the pharmacy without any up-staffing to cover it, and so on. He would love to stop work immediately.

I feel like I’m coming through a chaotic life phase full of family, work, and societal shifts, with some “loose ends” standing between me and financial independence.

My middle child will be graduating high school in a year. We are remodeling our retirement home which adds to our current expenses, but will eventually represent a down-sized, age-in-place refuge for us.

We hope that will be done in another three months or so. By this fall I will be in a position to relinquish many of my administrative duties at the hospital and hand them on to someone else.

I cut back to 80% FTE several months ago, and that helped a little. But the return on that investment is not anywhere near one-for-one.

When you come back to work after a day away, you have to spend an hour or two just catching up on what you missed and emptying your inbox.

I long for a future time when I do not feel obligated to put up an “out-of-office” notice on my email and an “out” designation in the electronic medical record, just to take my unpaid day off!

In addition, child-rearing has definitely not gotten easier, or cheaper, as the kids have gotten older. My oldest is doing fine in college, but the two younger kids have needed a ton of support through the pandemic, both academically and emotionally, which has placed additional stress on me and my husband.

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Investing

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

At my stage, I try to keep the overall investment portion of our “egg” about 75% stocks, the rest in bonds and fixed income. It takes a little attention because some of my pre-tax retirement money is in a target-date account, which rebalances itself, and some is from my first job in a few different index funds.

I need to call them and overhaul those accounts, which I’ve pretty much just “let ride” since leaving over a decade ago. And given the recent stock market drop, it is time for another rebalancing anyway!

On the whole, I am a pretty hands-off investor, which I know is not how a lot of the FIRE community works. But again, hearkening back to the tired superheroine theme, I just don’t have the time and energy to hover over my money like that.

We own a rental condominium, paid off, which represents about 8 percent of our net worth and brings in a small amount of passive income.

This is one of the things we’re considering unloading: the monthly rent is about 0.6% of the selling price in today’s real estate market, and after HOA and property management fees, I don’t think we’re getting great value from this investment. Plus it is one of many things preventing me from simplifying my life, which is becoming more of a priority all the time.

I don’t count our primary and secondary homes in our net worth. We have our “home” in the city and a vacation/retirement house, about a three-hour drive away.

The second home is paid off, too, and the remaining mortgage on the main house is about 25% of its current sale value, at a 3% interest rate. Although we could rent one of the houses if we really needed income, we have no plans to sell either of them any time soon.

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

Almost all of it is in tax-deferred accounts, and I know that sets us apart from many of your readers. However, I also have a shorter timeline until I can access those funds without penalty, so I am not too worried about my relative lack of post-tax money.

About 60% of my investments are in a 401(a) and 403(b) with my old employer, 30% in a target-date fund with my current job (401(a) and 457), and the remainder in a taxable brokerage account.

I also recently inherited an IRA from a parent who passed away last year, and that needs to be emptied and re-deployed over the next ten years.

Unfortunately, Roth IRAs were not really a thing until I was an attending, and then I always made more than the maximum income for contributions to a Roth and didn’t feel a pressing need to do the back-door conversions.

I just saw it as paying taxes now through a complex back-door process, vs. straightforward income taxes later. I intend to do some Roth conversions once I have cut back more and my lower income will allow that.

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

No HSA as I get very cheap and good health insurance from my work.

We have 529s for all three children and in fact we probably over-invested. My oldest ended up getting a lot of scholarships and we have barely put a dent in his college funds.

Unless someone ends up going to a really overpriced school or getting multiple degrees (and none of them, interestingly, wants to be a doctor), we’ll have quite a bit of college money left over.

Nice problem to have – I hear that there are several cooking schools in Europe that take 529 money so I’ll definitely be looking into that in a few years!

What has been your best investment?

Honestly, it has just been the automated contribution and dollar-cost averaging of my pre-tax investments through all of the up-and-down markets over the past 25 years.

I have been contributing to pre-tax accounts since the late 90s, and although it was really unnerving to watch the numbers in those accounts fall the first time during the dot-com bust, I knew I had a long time horizon and stayed the course. Same through the Great Recession.

Now that I’m closer to retirement the market dips are a little tougher to watch, but I remain committed to saving and investing per usual. I am here to say to younger FIRE devotees that it really does work over time!

My other “best investment” has to be buying a reasonably priced house in a decent neighborhood, 18 months after I graduated from residency. And then never moving – we are still there 24 years later!

I was single, and it seemed like way too much house, but it was close to work and had good public schools–again, a theoretical factor at the time, but it turned out to be important later. Soon I had filled that house with four more humans plus pets!

So the kids went to public school, eliminating a huge potential cost. And the house itself, after going through a remodel ten years ago, has increased in value about 5 times over.

We’ve leveraged it over the years, to acquire our vacation home and our rental condo, which both are paid off and the remaining mortgage on the first house is manageable while I am still working. Not a bad investment for what started out as a place to lay my single, new-attending head…

Your worst investment?

From a purely financial standpoint, it was paying for my husband’s pharmacy school. (If he reads this, he will be unhappy. But I am just speaking pragmatically, not about the intangible benefits of getting the education!)

He went back in his 40s after taking some time off work while I had children, and we paid $200,000 for that degree. When he graduated, finding a job was tough.

If you think women suffer from “mommy-tracking” – difficulty re-entering the workforce after taking time off to raise kids – the problem is just as bad for men, if not worse.

It may be getting better in 2022, but he really had to explain that gap in his resume back then. So far, we’ve made back the principal on that tuition bill but probably not the total opportunity cost of going to school. And now, being a pharmacist with all the post-pandemic dysphoria is so stressful that we are conflicted about whether it is even worth continuing.

INTO THE FIRE

Numerically, what is your FI goal?

I am going to say $2.5 million in today’s dollars. But it is a challenge for me to predict, from where we sit now, what our expenses will be even three years from now. Our expenses have been inflated over the last few years. We have a lot of kid-related things like sports, summer camp, and now car insurance, which will all go away or significantly decrease in the coming years. And then we are in the middle of a major remodel on our second home. That is a six-figure project which we are trying to cash flow, but like everywhere, the pandemic-related supply chain and labor issues have made us late, overbudget, and wondering when it will finally be done.

When I plot our likely expenses post-kids and post-remodel, I come out to around $100,000, which is where I get our FI number of $2.5 million, depending on what we decide for a safe withdrawal rate. But is my “ideal” budget actually going to be anything like the real one?

Our expenses over the last five years, which I track in Mint, have been remarkably stable at around $170,000 per year when you take out the current home improvement costs. About $36,000 of that is mortgage principal and interest, which we’d like to eliminate before we retire. (But…should we? The mortgage is fixed at 3% and interest rates are rising.)

And the remainder of the gap between current expenses and the $100,000 FIRE goal can probably be attributed to kid costs. I may be beating a dead horse, but have you seen a teenager eat? Or a high school girl go through clothes? If there is a “frugality gene,” it must be recessive!

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

Our goal is to be work-optional by January 2025. I think our current level of saving and investing will get us there if we can trim our expenses. I will be 58-½, one year away from accessing my pre-tax funds.

At that point, and maybe even sooner, my husband will stop working and I will shift into a purely clinical position, maybe two or three days per week, and NO NIGHTS, even if that means giving up a benefited position and becoming a contract worker.

I joke to the residents that I will be the crotchety attending in clinic, telling them stories about the bad old days. Again, I do like the clinical work,  so I don’t feel the need to be completely retired. Is that “Barista FIRE?” We will have plenty of “FU” money so if things go south for any reason I can walk away completely.

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

I will look forward to my time being my own. I never get bored on my days off and am not worried about “failing” in retirement!

I will exercise more, read books, spend more time in the garden, hike, camp, and ski, pay more attention to my husband, and probably nap a lot.

Then once our final child is launched, I want to travel–remember that European cooking school and that leftover 529 money. Maybe I’ll take my youngest on a “worldschooling” gap year when he graduates from high school.

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

Not really. We are pretty frugal by nature. Our cars are 17 and 19 years old and our college student has a relatively young 14-year-old Toyota which he drives in his college town.

Although we just bought a 2018 Honda for our high schooler. There was a recent post on the WCI forum saying the cheapest cars to drive are the middle-aged ones, so I’m keeping that in mind for the future.

All the cars were bought with cash, and we have no debt other than our primary mortgage. I cook most of our meals at home, although I am a foodie so our grocery budget could be a lot lower if we needed.

We live three miles from my work, and two miles from my spouse’s job, so commuting costs (and stress) are minimal. Our big splurge is the second home but my family says I’m like a different person there, less stressed. So that is worth it.

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

I just feel like we are in the “final push” to get to FI and sort out our affairs. The closer we get, the more slowly it seems to be going. Of course, the last couple of months of stock market volatility are probably making me feel more like that!

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

There is so much great advice out there in the FIRE community that it’s hard to pick! But I really love this WCI rule: “One job, one spouse, one house.” It’s a variation on the KISS principle -“keep it simple, stupid.”

I’ve stayed pretty close to that – we do have more than one house but have expanded our real estate intentionally and without taking on a lot of debt. And I’ve had two jobs, but over a 25-year career that’s pretty good.

And I’ve seen how financially and emotionally devastating divorce can be! I am so grateful to my husband for sticking it out with me! Obviously, this site is full of folks who are making FI work without following that rule at all, but it sure does simplify life when you do!

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

I would love advice on how to invest two upcoming boluses of money.

We are going to unload our rental condo in September when the lease is up. Real estate has gone bonkers in our area of the country and the condo has almost doubled in value, from $94,000 when we bought in 2018 to $170,000 now, judging by some comps our realtor ran for us. I think it is time to take some winnings off the table.

Then, I have an inherited IRA from my father which is worth $120,000. By IRS rules, that money must be spent within ten years – I can pull it out gradually or all in a lump sum, but it will be taxed as regular income.

I don’t think we should cash out the IRA in the same year as we sell the condo, for tax reasons. But more generally, where is the best place to put this amount of money in the current high-inflation environment?

I was planning to just pay off our mortgage (currently $380,000) but now that 3% fixed rate is looking pretty good. Should we plow it all into index funds?

I Bonds look great but the amount you can buy is limited, and we don’t have any businesses, trusts, or fancy ways to get more than $20,000 per year. Or, with Treasurys flirting with 3 percent yields and maybe going even higher, should we go full-on “Your Money or Your Life” and just lock it up at a guaranteed rate?

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I thank today’s interviewee for sharing their story, and I’ve shared my feedback privately with them. I wouldn’t want my opinions to influence yours. Please give your take and answer any questions they have had 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.