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Early Retirement Plans for Physicians

The landscape of early retirement, once perceived as a distant dream for many, is shifting, and physicians are no exception. But for the medical community, it seems there are layers to this conversation that remain unpeeled.

The fascinating world of “Physician Early Retirement” beckons – what does it take to hang up the stethoscope ahead of time? Can those who’ve devoted years to medical school and racked up extensive student loans actually take an early bow?

Intriguingly, while the medical community grapples with burnout and long hours, there’s a growing contingent advocating for Financial Independence Retire Early (FIRE). But with unique challenges such as delayed income starts and the weight of their profession’s responsibilities, how feasible is this audacious goal? FIphysician takes a look into the hurdles, the strategies, and most importantly, the math behind a doctor’s early retirement. As we look into these insights, you might just find the keys to redefining your retirement timeline.


Early Retirement Plans for Physicians

Physician early retirement is not a novel idea, but perhaps one that now has a more developed framework. It is an idea whose time has come: take back the keys to your j.o.b. and work because you want to, not because you have to!

So, how is physician early retirement done? What do you need to know to get the keys to the FIRE?


Can a Physician Early Retire?

Most anyone can early retire if made a priority. Physicians are not special, though there is a growing physician community preaching FIRE, perhaps as a backlash to the burnout epidemic. We understand now that the hospital won’t love us back.

In fact, there are a lot of features of being a physician that prevents us from considering early retirement.

What are the disadvantages physicians face trying to retire early:

  • Late Start at Income
  • High Educational Expenses
  • Student Loans
  • A Desire to Serve
  • A Sense of Guilt When Leaving the Calling
  • In General, Poor Financial Habits and Knowledge

So, can physicians retire early? Yes, but like most audacious goals, it takes planning and plenty of elbow grease.


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How Early Can Physicians Retire?

If you bother to go through medical school, and you can escape on the other side without a lot of student debt, it seems like a decade is a good goal for the earliest you might consider retirement.

How early can a physician retire? It depends on your savings rate. Savings rate is especially important since it has expenses as an integral part. An infinite savings rate means you can retire now, whereas the zero savings rate asymptotically approaches retire never. Remember that savings rate is more important than investment returns for most of your early retirement plan.

So, to put that in perspective: 4 years of college, four years of medical school, 3-8 years of residency, and ten years of working. This means at the earliest, a physician might be 42-47 before retirement. That is 32 years learning, 10 years working, and 60 years retired. Can you really make your money last that long?


Can a Doctor Retire Early at 45?

So, can a doctor retire early at 45? Sure!

By the time you are 45, you know your expenses and have had time to partake in the hedonic treadmill. Either you hit it, and you will retire at a regular time, or you were able to control expenses.

The hard part is not moving the goalposts: to find out what enough spending is and stick with that. Joy (utility) increases with increased income, but only to a point.

A physician can retire early by calculating yearly costs of living and then multiplying that number by 33.

That is, the magic number for physician early retirement is 33x your yearly expenses.


What is a Physician’s Early Retirement Number?

So, what is a physician’s early retirement number? Thirty-three times your yearly expenses.

What about the 4% Safe Withdrawal Rate? There is plenty written that the 4% rule no longer is true given high equity prices and low-interest rates, but people who spout that line don’t understand how the 4% rule was derived. (And as an aside, often use Monte Carlo projections which do not favor early retirement.)

I have done some modeling on the 3.33% Safe Withdrawal Rate for Early Retirement, and I’ll have you read that for background.

The traditional 4% Safe Withdrawal Rate is fine for a traditional retirement. Smart physicians who want to oversave for early retirement will be more comfortable at 3 and change.

In summary, a physician’s early retirement number is 33x yearly expenses.


7 Keys of Physicians Considering Early Retirement

Let’s get into the commonly asked questions of physicians considering early retirement and discuss 7 powerful strategies.


Health Care

Healthcare insurance is an expense. As feared as it is by the general public, it is just a line item on your retirement budget! At least physicians know how to navigate the system.

You can go for ACA Premium Tax Credits, or you can think about a few other options, such as health shares or catastrophic plans.

Another consideration: remember you can run your health insurance costs and a deductible business expense if you have 1099 income. A couple weeks of locum will go a long way in physician early retirement.


Access to Retirement Accounts

Access to retirement accounts is another “big problem” with easy solutions if you understand physician early retirement.


A Roth Ladder to Access Retirement Accounts without Penalty

Using 72t to Access Retirement Accounts

Remember that your withdrawal plan is a vital part of your early retirement plan.


Purpose In Early Retirement

Physicians have struggled through the educational system and overcame q3 call and 36-hour shifts. We can do whatever it is that is important to us.

For some, purpose in early retirement comes easy. Perhaps for others, early retirement is a cure to burnout.

As it is said: you do you. And don’t forget about the honeymoon phase of early retirement.


Asset Allocation and Investing

As you have a long-time horizon, it is best to keep an aggressive asset allocation. But not too aggressive!

It is best to be a DIY investor if you consider early retirement. Remember that the “average” fee is 1%. If you are trying to live off of 3.33% of your nest egg, you are losing 30% of your money to the financial advisor. Sit with that for a moment.

A simple three-fund portfolio is adequate if you consider asset location and understand that your stock/bond ratio provides you with 90% of the total returns. Understand your asset allocation and don’t feel the need to overcomplicate things.

There are bond alternatives you might consider for your safe money, but you must have bond in your portfolio as safe money to prevent Sequence of Returns Risk


Understand the Tax Code

If physicians plan to retire early, it is almost mandatory to understand the tax code! This is no joke. Taxes will be your largest expense in retirement, and there are ways to message taxes such that you pay less over your lifetime.

Some considerations:

Finally understand tax-efficient investing and withdrawal strategies and how the tax code works.


Advanced Strategies For Physician Early Retirement

What about using a 529 plan as a bonus retirement account? You already use a HSA and a backdoor Roth as a bonus retirement account. Why not a 529?

Asset Protection is important while you are working. Make sure you have good asset protection when you retire early as well!

Cancel life insurance, and when should I cancel my disability insurance?


Summary: Physician Early Retirement

Of course, “never retire” and “retire early” are actually sides of the same coin. Just one, you work for money, and one, you work for passion. Or maybe both are passions. Don’t fall for the false dichotomy of early retirement!

Physicians can reach early retirement. It takes commitment and hard work, but that is nothing to physicians. You have to have a plan, and it takes a ton of knowledge.


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3 thoughts on “Early Retirement Plans for Physicians”

  1. I’ve been thinking about this topic early…pharmacist, but similar issues are there. Is there (and at what point) does it make sense to slow down 401k savings and redirect more to brokerage savings?

    • Too many variables not provided that are required to be more specific such as: what is your current age and retirement age? What is your best guess life expectancy? How much do you have in taxable accounts vs retirement accounts? What is you annual spend? How long do plan to work? What is your asset allocation? Your current vs future tax brackets? What is your safety margin/cushion or your safe withdrawal rate?

      A very simplistic way to look at it is: Do you have enough savings in your taxable accounts to support you at least until you can tap into your retirement accounts? Do you have enough saved in both types of accounts to last you for the rest of your life?

      In short, there is no specific point. It depends on what your priorities are. Building a forward looking financial plan will help answer your question.

      • I understand the points made. It was more of a “philosophical” question vs a specific one on our specific situation. Good input! thanks


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