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Early vs. Traditional Retiree Net Worth Difference

What would be the net worth difference for 2 high earning healthcare professionals if one were to call it quits early and the other continued to save and invest well into their 60s?

Let’s assume that both doctors would come out with $300,000 in student loan debt and both would always live comfy upper middle class lives.

What I am curious to answer is if the difference in net worth would allow one to live a better lifestyle than the other. I was curious to know the results and it surprised me quite a bit.

At the end of this post I also discuss the various assumptions and why they would greatly tilt the favor in one direction.


Quitting After 5 Years

This example is for the early retiree doctor that calls it quits after 5 years. By ‘quits’ I don’t mean they quit medicine; just that they would exit the rat race; they would stop working full-time.

I’ll use a family doctor as an example. A $300k/year salary right after residency is incredibly easy to achieve and to me that’s on the lower end of the spectrum. It would include a few extra shifts a month but that’s fairly common for doctors these days.

For this early retiree it might make sense to buy a home in the right market but for most it will be better to rent. He can eventually buy after he’s saved up his stash. And if he’s willing to work a few hours a month to cover the mortgage, then great – otherwise save enough and buy cash.

The student loan debt can be paid off within 2 years. During this time this  physician will likely accumulate zero in their savings. So by the start of year-3 he would have a net worth of zero! Now that’s how you get them ladies!

Working another 3 years means another $150,000 saved for every year. With the investment returns and savings that should be close to $700,000.


Quitting Around Age 70

For this second doctor we’re going to assume that she continued working full-time up until age 70.

She would start off with $300k in student loan debt and pay it off in 2 years. Then save some cash for the next year and buy an upper middle class home which will likely cost in the $800,000 range.

This physician will likely save around $50k a year after paying off the student loans and put the rest of the money towards the mortgage which should be another $50,000/year.

Remember, both docs will be living the same caliber lifestyle until they hit retirement.

By her traditional retirement age she should have somewhere around $6,300,000. The house will be paid off and she can then call it quits and start traveling and enjoying more of her free time.


The Net Worth Difference

The elephant in the room is the net worth difference at the time of cutting back on full-time work.

  • Early retiree: $700,000 at time of retirement
  • Traditional retiree: $6,300,000 at time of retirement


But let’s not forget that the first doctor’s net worth will continue to grow. After all, the $700k is still invested.

The early retiree doctor should have around $6,300,000 by age 70 – yeap, almost the exact amount as the traditional retiree. I didn’t cook the numbers, that’s how they came out.

So they both ended up with identical net worths.

The early retiree doctor achieved the same net worth and had 35 years of more free time.

The second doctor has her home’s equity to account for as well which could be another $1-1.5 million. But overall, these are incredibly similar values.


Compounding Interest Rates

Compound interest is the main reason that the first doctor who quit medicine 35 years ahead of the 2nd doctor was able to achieve nearly the same net worth.

When you start out with more money then you have a much stronger compounding power. This should really drive the point home about how disadvantaged many healthcare professionals are who start out with a negative net worth.

These professionals then lose years of compounding to paying off that student loan. By the time they can really save they are in their mid 40’s.


My Assumptions

I have made a few assumptions which I think are far more conservative than what they would be in real life. Let me address them below.

If I were to calculate the “value” of all these assumptions then I believe the liquid net worth of the early retiree will be far higher than that of the traditionally employed physician.

Savings Rate

I assume that the early retiree doctor will continue to generate some income and probably set aside at least $12k/year in their investment account. This would give him a tax deduction, if nothing else.

I am assuming that the traditional career doctor will max out their retirement accounts every single year until retirement. They will both spend the rest of their money to take upper middle class trips and upkeep their homes and cars.


Both doctors paid off their student loans quite early. However, each can go on to accumulate more debt. Most will choose to do so in order to buy a home and afford nicer cars.

The farce of an upper middle class lifestyle is that it’s not affordable through our incomes. Only with the help of the banks are we able to afford such lifestyles.

The early retiree won’t take on debt unless they can pay it off very quickly or if the terms are spectacular. They are more likely to live within their means because they value free time over objects and financed experiences.


I am assuming that both doctors will max out their tax-deferred retirement accounts which is somewhere around $54,000 in 2017. I used $50,000 to keep the math simple.

The early retiree will likely continue saving their money in more liquid accounts such as a private brokerage while the traditional doctor will invest most of their money in traditional retirement accounts.


Traditional pensions rarely exist anymore for healthcare professionals and I don’t consider a cash balance plan to be a real pension.

I am assuming that the 2nd doctor will have the opportunity of vesting fully in her work CBP. This doesn’t have a face-value that I can calculate into the net worth calculation but it would be extra income for that physician in her later years.

I am also assuming that the 1st doctor who was able to divorce himself from a traditional job early, won’t have a need for steady external income and would place little value on a pension or a CBP.

Risk & Opportunity

Jobs are plentiful in the health industry so I don’t believe that either is taking a risk by exiting their job early or vice versa.

I am assuming that a person who is job-dependent for 4 decades will be less adaptable. They will be more reliant on a steady paycheck and they will be more likely to financially stretch themselves since they rely on a steady paycheck every month.

The early retiree will decrease their risk because they will be able to make job changes much easier. Their antenna will be more fine tuned to market changes and job opportunities.

Risk can be a 4-letter word but in fact it’s a good thing. The more risk you can take in a calculated fashion, the higher the potential rewards. I am assuming the early retiree doctor will start taking more calculated risk as they get more comfortable with their independent career choice.


Difference in Lifestyles

Aside from the traditional retiree buying their home earlier on, there doesn’t seem to be much of a difference in lifestyles.

Both have enough in their budget to enjoy upper middle class lifestyles. The traditional retiree will continue working to accumulate more wealth and the early retiree will continue working only to make enough income to cover his overhead.

In the end I have to side with the early retiree. I find that the 35 years of extra free time are hard to pass up on. However, in the end they will both be wealthy as fuck and be financially set.

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