retirement
Early retirement is a goal for many, including physicians. However, the odds are stacked against early retirement. It isn’t that it is impossible to retire early, but it often simply isn’t worth the sacrifice.
While it is obviously true that the more you save, the earlier you can retire, to really retire early requires a savings rate that is too high for the comfort of all but the most frugal.
The early retiree gets slightly less Social Security when it finally does kick in because he paid into the system for less than 35 years.
Medicare doesn’t kick in until 65, and that age may go up as part of any kind of Medicare reform. If you stop working at 50, that means you need to cover 15+ years of health insurance premiums, and at a time of life when the policies are more expensive, if you can get them at all.
Immediate Annuities Shouldn’t Be Bought in Your 50s
An immediate annuity is a way to turn a lump sum of money into a guaranteed pension, essentially longevity insurance to ensure you don’t run out of money in retirement. Most experts recommend you buy it around age 70. Annuitizing a portion of your stash is a wise choice for most as it allows a much higher safe withdrawal rate.
Beginning at age 50, you can contribute an extra $1,000 to an IRA (for each spouse), an extra $6,000 to a 401K (for each spouse), and an extra $1,000 to an HSA (after age 55). The early retiree is more often forced to use a less-efficient taxable account to save.
Many of the people who graduated from medical school in the late 90s and early 2000s refinanced their medical school debt at a rate less than inflation. They’re planning to carry that debt out as long as possible. But no one in their right mind would carry student loan debt into retirement.
The early retiree, if she is planning to pay the tuition, not only has to save up for her retirement by age 50, she also has to save up the entire cost of college. A more traditional retiree can pay for at least part of college costs out of current earnings.