Overview of early retirement for Physicians

I get my post ideas usually in the shower or when I go for a walk. Some are fleeting ideas which I need to write down because I don’t really know what say about them. Others are more inspiring and I start seeing the outline in my head and look forward to sitting down with my coffee to write the post – such as this one about early retirement.

Physicians who have recently retired from residency have no desire to adopt a journey towards early retirement from being an attending. They are energized by the newfound independence and all the learning they are enjoying – oh and the income.

Once the early retirement option becomes an implanted seed however, many docs want that option – not knowing whether they would actually take it when it becomes a reality.

Tenants of early retirement

Here are the major bullet points of being able to successfully retire at an early age that I have identified so far:

• pay off debt
• gain financial literacy
• master budgeting
• have knowledgeable mentors
• create a diversified income stream
• find a passion outside of work/jobs

Let’s delve into each one of these briefly. Add your own in the comments.

Pay off debt

Get rid of debt, there are much better things you can do with your dollars than paying them towards debt. 

Some financial advisers don’t think it urgent to pay off your debt. However, when you are held hostage by debt it’s really tough to feel financially secure.

Debt which is used to make you money doesn’t fall into the category of household debt. This kind of debt can be dismissed easier (if needed) and pays for itself in terms of the return on investment.

Budgeting is critical in order to pay off debt. Without a plan, our income can disappear as quickly as it showed up in our accounts. Or, the dollars could go towards categories which don’t correspond to our priorities.

It’s certainly possible to retire early even with a hefty personal debt burden, however, that early retirement may never quite feel as secure or even worse, might be on unsteady grounds.

Financial literacy

Learn more about personal finances, there is always more we can learn about this and in the process, we can determine the options which fits us best on this path. 

The average doctor has far more expertise when it comes to personal finances because we were forced into it by high student loan debt and because we had to wrangle a high income.

Mastering financial literacy isn’t too hard. Though the topic is as broad as medicine, the aspects that pertain to us are much more bracketed.

A patient doesn’t have to know everything about medicine in order to achieve optimum health. However, they have to:

• understand their own body
• learn about nutrition
• balance out exercise
• learn about sleep hygiene, stress control and potential risks to their health

A physician needs to understand the deleterious effects of debt and how it can eat into the returns of their investments.

We have to determine our risk tolerance and decide which investments are best for us. Then we have to spend time learning about those investments.

We should learn how to design a financial goal and how to work towards it. It’s helpful to know the various market forces which could derail our plans and build in some redundancy and deviresificaton into our financial plans.

Master budgeting

Learn to budget effectively, it’s the cornerstone of having a healthy personal financial life and will help you achieve your financial goals much more efficiently. 

Writing out financial goals at 1-year, 5-year, 10 and 30-year increments is helpful because by reviewing these goals regularly, we can keep ourselves on track.

1-year: I want to stay the current course.
5-year: I want to have a virtual practice where I can see low-income patients and make some money.
10-year: Have 3 sources of income, from a business, intellectual property, consulting. 
30-year: Be a major financial and intellectual contributor to social causes.

In order to follow a financial plan, in order to meet these goals, we need to learn about budgeting. It connects the dots between our limited resources and our goals.

Budgeting involves self-control, planning, long-term thinking and factoring in risks. As YNAB says, give each dollar a task.

I firmly believe that I turned my disastrous personal financial life around by learning how to budget. It’s the one skill which I can always use to live the exact lifestyle I want, regardless of my income – that’s a big statement.

There is a huge difference between expense tracking – which traditional personal finance calls “budgeting” – as opposed to performing forward-looking budgeting, forensic accounting, and financial goal prioritization.

Secure a mentor

Find a good mentor, many others before us have successfully achieved financial independence early in life, there is a lot we can learn from them. 

My parents went broke back in 2001. And they went really broke in 2007. They haven’t and won’t recover from this. I can’t use my parents as mentors so it was important for me to find my own.

My financially successful friends are entrepreneurs and don’t hesitate to take on a calculated risk. I haven’t yet developed that skill of going on all in and rolling with the punches. Therefore, they won’t make for good mentors, yet.

I have since met a few early retirees who have chosen to live a similar lifestyle as myself. The problem is that all them have been naturally frugal ever since they came into money.

At heart, I am financially flagrant. Nothing would make me happier than to spend every last dollar I have and make it rain wherever I go. I have to curb this sadistic desire so much that I’m sure somewhere inside me there is a little oppressed guy who is gonna bust out one day and say fuck it, let’s buy an island!

My mentors are the blogs I follow, the books I read and most importantly, the financial advisor whom I work with to be at my side from now until money no longer will be a factor in my life. RIP Dr. Mo.

Creating diversified income streams

Create multiple sources of income, having this kind of redundancy will ensure a happy and sustainable retirement, sustaining decades of income. 

In order to be able to retire, we have to replace our necessary expenses. These are the expenses we have to cover in order to provide for:

• shelter
• food/water
• transportation
• health

There are so many ways to generate these incomes, it’s important to feel out your own comfort in order to decide what fits your personality and risk tolerance the most.

I am comfortable having some income from securities, some income from real estate, a little income from a business, income from intellectual property and an annuity.

Another level of diversification I add into my financial plan is maintaining income-generating skills, in case a time comes when all these various income sources temporarily fail – unlikely.

I’m a little paranoid, I know. It should make my financial advisor happy.

Find a passion

Find a passion, it’s a tough transition from a job to having unlimited free time. 

I get asked so many times whether I’m bored with all my free time. I understand what an important concern this is, certainly worth addressing in this blog.

At first, having all that free time will be overwhelming, depressing, anxiety-producing and you will likely feel as useful as a cat guarding a house.

If you’ve heard this statement before then you probably understand the idea “It’s important to retire into something instead of out of something.”

It’s so true. The best time to pull the plug on your job isn’t when your income streams surpass your expenses, but when you have found something you want to do more of than your job (oh, and when you have hit that retirement number!).

Sometimes there isn’t anything to be passionate about, or maybe you aren’t the passionate sort. You might already be loving the shit out of your life but would enjoy a little more time.

Add to that elective time incrementally. You like surfing but don’t want to have to rush out of the water. You enjoy cooking but wish you could create more meals. You love reading but don’t want to put down the book.

My Understanding of early retirement

Early retirement for most people means retiring in their 50’s. It also means going from a state of productivity to spending their times traveling and spending time on their couch or in their gardens.

I never understood this definition of retirement, imagine my surprise when I told people that I wanted to retire early. Starting in residency, I had so many interests outside of medicine that I just wanted to get through my workday to get to spend time doing what I was passionate about.

Early retirement is for the person who has gotten everything out of their medical career, they have conquered it, they are perhaps no longer challenged and have other interests they would like to spend more time on.

It’s also for the person who is trying to escape medicine. The word is harsh, but some of us didn’t see the writing on the wall – medicine may not have turned out to be the dream career we imagined it would be.

By retiring, we are no longer dependent on the income which our jobs generate. By shifting income from our jobs to our investments, we no longer need the job.

It doesn’t mean that you have to quit working, there are so many other things a person can do to generate income or feel productive. Retirement has nothing to do with your productivity.

Traditional retirement vs early retirement

Why not just work and wait until a traditional retirement age? After all, we would get to take advantage of social security and medicare. There would also be far fewer years to have to budget for in retirement.

I suppose this is a personal decision. Early retirement is appealing to maybe 20% of doctors, the rest can’t even comprehend the idea, they either love the work they do or have no desire to figure out a non-job way to spend the many awake hours in a day.

What I dislike about the traditional track is that I am not giving myself any options. If I am financially independent before age 40 and I still want to practice medicine, then great, medicine it is.

But as physicians we are blessed with earning this incredibly high income, why not use it to gain financial independence? The things you can do as a financially independent person are so amazing, it’s worth having that option, in my opinion.

What’s been great about early retirement

Freedom! The best thing about being financially independent and retiring is the sense of freedom.

I had a tough time “retiring” in the traditional sense, cutting back abruptly at a young age created fecal stains on the fan. I am still recovering from that move.

Nevertheless, I consider myself fully retired and can’t believe how fast the day goes by. I am still trying to slow my roll and I’m having an absolute blast with my daily routine.

I don’t have to rush when I’m at the gym. I can take friends up on last-minute plans and I can jump on new opportunities. It’s incredible.

I am reading so many amazing books, listening to great podcasts and learning so much about writing and marketing.

I am in better shape than I have been in a long time. I am biking and bouldering and lifting weights in the gym. It’s great to be able to spend this much time on sports.

What’s been tough about early retirement

The tough thing about being retired is being pensive about “the next thing”. Having spent years trying to get to the next step doesn’t make doctors good candidates for just enjoying their free time.

There is so much I want to do that I have to take a few minutes every day to slow myself down. It’s a great problem to have but it’s better to live in the moment and enjoy whatever it is I am doing now than what I want to accomplish in the future.

I am emotionally ready to completely let go of practicing medicine. It’s not that I don’t enjoy it, but if I didn’t do it anymore, it wouldn’t be the end of the world. At the same time, I don’t want to forget my skills. I still love clinical medicine which is far different from academic medicine.