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How Much Money Do You Need to Retire

Google: How Much Money Do I Need To Retire By Age 40?

In this post let’s talk a little about that dollar amount that many aim to save before considering themselves either financially independent or retired. As a doctor you have probably sat through presentations by greasy sales-type financial planners who have thrown out numbers in the 5-10 million dollar range. You have probably googled the topic and come across some fairly complicated online calculator or the dreaded 80%-rule.

For myself, I think more in terms of monthly/annual income as opposed to a specific sum saved in some investment vehicle or savings account. A well designed retirement plan should be well diversified, allow for access to a minimum steady income and access to cash as a backup in case of unpredictable economic changes. I don’t think it’s good to think only about wall street as an investment vehicle. I think percentages… real estate should get me around 10% rate of return, a retail business maybe 20%, wall street somewhere around 6%, and savings maybe 1%.

I want to add here that even though the numeric aspect of money is scientific and can be predicted and calculated, the global economy is not a science, nobody out there has any fucking clue what it’s exactly doing, what it will do or if any one sector is about to fail miserably. The reason for this is that humans, scientific minds cannot calculate outcomes after a handful of variables are involved… the possibilities become too numerous to account for.

Several times in our lifetime we may see the housing market crash, we may see the mortgage industry crumble and be replaced with something else altogether. There may be a new investment product (i.e. peer-to-peer lending) and some that we have depended on forever (i.e. index funds) may disappear. Inflation or deflation may force us to out of one position and favor another. On the more extreme side a dollar-bubble (Aftershock – David Wiedemer) may occur or a major natural or malevolent disaster take place. Quite likely these will be slow transitions… the sensationalists, of course, want you to think that you wake up one morning and a whole sector will stop existing.

Worrying about these extremes is as useful as worrying that you might develop MS or ALS. Possible, yes but detrimental to spend any energy worrying about them. An awareness of such a possibility, however, may encourage you to live a more fulfilled life now instead of waiting for a panacea in the future. I don’t know the kind of life my 64-yo patient lived up until the evening she came into my urgent care complaining of diarrhea and diaphoresis (…what a sweetheart she was). She was feeling unwell all day at work but decided to wait. Her EKG showed tombstones and she didn’t make it off the interventional cardiologist’s table that night.


So the relevant question is now how much income do you need in retirement, not so much how much money you need to save. If you have even the slightest bit of interest in medicine by the time you are retired then you may need to spend a little bit of effort and money maintaining your medical license and re-certifying for your boards every few years. This move is part of your diversification plan… sure having bonds, equities and REITs is a form of diversification but that’s not looking at the big picture. Income potential, flexible living expenses, social capital, a savings buffer are the big-picture diversification variables.

Non-job skills you have acquired over the years are also an important part of income diversification. You may know how to work on a car, fix plumbing, write well or review medical cases. Something as simple as being able to bake or preparing healthy foods are valuable skills that many take for granted. If I lose my medical license, or the field of medicine becomes a field that I just don’t care to practice in any longer, one of my skills will cover any income gap that I need to fill in my retirement plan.

“But I don’t want to work in retirement… what’s the point of being retired if I have to work?” This is a common sentiment for those who are working a full-time job and have designed their lifestyle around that job, the job-mentality. The reality is that you’re likely going to be busy doing some sort of activity, some sort of work, almost always something that you really enjoy doing, which likely can also generate income if you wanted it to.

Income can be generated through a job, by investing your money on wall street and taking advantage of appreciated funds and/or dividends, by running a business, or by investing in real estate. My goal is to diversify into as many of these as possible so that when I’m ready to pull the plug I have multiple income streams.


The next area of diversification, which also affects ‘what you need in retirement’, is how much money you need in order to live a life that you are comfortable with. This might sound obvious but in the US I believe doctors have the least flexibility in this category and it’s perhaps the most important of all the categories.

If you have student loans, mortgage or other personal debt that you cannot dismiss in a court then your overhead may not be very flexible to begin with. Let’s assume by the time you are retired you have all your debts paid off (except for debt that is making you money, totally different topic). Your expenses are made up of food, transportation, utilities, communication, entertainment and health.

It’s important to have flexibility in the outgoing dollars because in an unpredictable economy the dollars generated by your assets may be in the 8% range one year, down to 2% another year, or perhaps non-existent for a short period.

If you can drop down to non-organic groceries for a while, you will lower your dependability on your income. If cell phone service skyrockets and you can live without a phone then you will have an advantage over others. Transportation which averages to $750/mo for the average person in the US could be brought to nearly $0 or perhaps $70-100/mo if replaced with a bicycle, bus-pass.

I never thought I could live on $1,000/mo until I saw my mother doing it, and doing it with style. No doubt that the average doctor would have a hard time living on $1k a month. I have published my monthly expenses for the past few months… and even though I’m closer to $3k/mo, a lot of it is due to having a job and some expenses are associated with moving into a new condo.

Social Dividend

I was always aware of this concept. In my family we always depended on each other to obtain help physical, emotionally or financially. My sister and I did our own things, and when shit hit the fan her husband would help me out or I would help her out with something.

At some point in my life when I was in college we couldn’t afford paying for my semester in school and I couldn’t obtain loans. We didn’t have any family nearby, so we went to a close family friend, nope – no help there. It was a big wake-up call that self-reliance was a critical skill to develop. I probably went too far with that concept, emotionally shutting myself off and thinking it’s me against the world. Since then I have made such amazing friends, met such wonderful people, and I have made it a habit to stay in touch with them. They can depend on me and I believe I can depend on them.

I am trying to phrase this right because I definitely don’t want it to sound like I am maintaining friendships in hopes of being able to get help when I need it. I guess I should say that I have learned how important friendships are over the years… for their social dividend as well the tangible help I’ve enjoyed from friends.

If your friends can depend on you to be reliable, honest and strong then they will likely support you if you ever need the help. It may not be help you need, you may want to put a deal together instead and need a larger capital to get it off the ground, those qualities I mentioned above are what would help you attain those funds.

Geographic Diversification

This may seem extreme but it’s definitely a large part of my plan. I’ve spent a good amount of time researching international regulations regarding citizenship/permanent residency. I love living in the US, there are a lot of advantages to this, but I am not so myopic to think that the US will remain a dominant nation forever.

If you have some sort of heritage that you can capitalize on then the time to do it is when you are young, have money and time. Italy and Ireland will grant you some sort of permanent residency status if you meet their ancestorship criteria and after you jump through various other bureaucratic hoops.

Of course, since you’re a doctor, you’re probably an immigrant so you may already have dual citizenship. And I think that’s a fantastic advantage. I am not saying that if/when the US economy crashes you should move to another country. However, sometimes a specific sociopolitical turmoil here may make it the perfect time for you to move away for a while and return when things settle down, and possibly capitalize on the ensuing economic downturn.

I’ve talked about how inflation could hurt you especially if you are living off of fixed income or have the majority of your assets in cash. Even though inflation will affect you regardless where you go in the world, the nature of our current world economy is such that in less developed nations you will get a bigger bang for your dollar regardless of how little value your US dollars may have.

Cash Savings

I think this topic is overlooked a lot by us doctors. Income comes easy for us… yes, I know many doctors think they are underpaid, they believe they work super hard for their money. I’ll stir that pot of shit in another post… for now we can all agree that we are one of the highest paid professionals with one of the highest job securities around. Due to this many doctors don’t keep enough cash around.

Cash savings is money which  you keep under your yellowing mattress, in that safe in the basement, in a Ziploc bag behind your sink pedestal or inside the toilet bowl – damn, you’re paranoid! It’s also the money you keep in a savings/checking account.  This includes money that you keep in cash-equivalent funds in your 401(k) or IRA falls. Let’s just say that cash is any money that won’t get nibbled at by a crashing economy.

Cash savings however can be hurt by inflation. This is the main reason I don’t want to keep too much in cash. I am increasing my cash savings now because I am seeing an economy that’s headed for a bit of a downturn. No, I’m not trying to make a prediction. Economies ALWAYS go down and up… I just think that the next down is a little closer now. And a down economy is when I can capitalize on things being cheaper, including investments. It’s a time when a steady income is more valuable than gold.

In Summary

I know, this one got lengthy. Here is my final word. My long term plan is to invest enough money on wall street that it will cover my very basic overhead, that’s about $850/mo for me using a passive income percentage of 3-4%/yr. I’m also only investing a sum that I am willing to see drop by more than 50% in value at any given time.

The rest of my money I will invest in some sort of business(es). I will also invest in real estate in some form… not sure if I will flip properties, purchase rentals or become basically a private bank for those who already invest in real estate.

I will keep up my medical license and skills by renewing my license and volunteering to get the work hours I need in order to be allowed to practice according my  Specialty Boards’ rules. I will hone my writing skills so that I can capitalize on it in some way in the future. I will develop an expertise in a different field that’s the polar opposite of medicine just in case I lose my ability to practice medicine (manual labor).

I will establish an overseas presence somewhere in the world. I could combine that with my business goals and either buy a property overseas or build a business in another country.

I will always keep around 3-5 years of base expenses in a cash account – at all times. The rest of the cash I will use to invest in the various business ideas I have or income opportunities that may come my way.

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