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Retiring Late In Life is a Financial Risk

If you had decided to retire in 2009, right when you turned 65, you would have had to drastically sacrifice your retirement lifestyle. The stock market was down drastically. And even if you had switched into more bonds as you were nearing your retirement age you would have been in just as much trouble because the bond market had been flat and actually has stayed flat for quite some time into 2016. Flat means that it hasn’t even kept up with inflation. Let’s say you were in real estate, well, if you were into flipping properties you likely got destroyed in 2008 and if you owned rental properties then your vacancy rate would have been quite high.

We all remember the news of people committing suicide, likely from the desperate thought of having worked for several decades just to end up broke in retirement. I recall one doctor who had come out of retirement because of how poorly his investments were doing and another nurse who delayed her retirement for another 2-3 years for the same reason. Our medical group decided to lay off 500 nurses nationwide by end of 2009.

More than a 50% drop in March 2009.

It’s safe to say that the markets have finally recovered and even made up a little for inflation as of this writing, 2016. The important point here is that you cannot predict what kind of economy you will retire in, a bear market, a bull market or even a depression. These are all normal fluctuations of a market. Precious metals, businesses and real estate suffer from such fluctuations in similar ways. Even if you have all your money in cash when you retire you are at great risk if the economy goes through a high inflation period. This is exactly why there is no one right answer to “How and where should I invest my money?”.


Some will rebut with “I’ll just save a ton for retirement, that way even if my investments are down I’ll have plenty of money.” Let’s break this plan down. Most docs are salaried and have a cap on their income due to the nature of their job. There are only so many patients you can see, only so many surgeries you can do, unless of course you have built a business around your expertise and have been able to scale up your services. Therefore, the only way you are going to save a ton more than the average retired doctor by age 65 is either by saving a lot more, spending a lot less or by working a lot more. Neither of these appeals to me, especially if I have to do so for nearly 30+ years.

The chance that your investments will be completely wiped out is very low. However, the chance that your $3 million dollar portfolio will drop down to $1.5 million is quite possible. At $3 million all you had to do is to take a little off of the top, namely from the earning of your investments and you probably would have been set. At $1.5 million you now need to eat into your actual investments to support your lifestyle. Imagine doing that at $100k/yr for 10 years, in a weak economy. Sure, you may be able to go back to work and pick up some extra work but don’t forget, you will have a ton of competition at age 65. And who is to say that demand for per diem docs is going to remain as high as it is now? And what if you have already moved to your retirement home into some hand-carved cave in Spain?

The point about the demand for doctors deserves a few more words. Physicians have had fairly high incomes, in comparison to the rest of the population, for quiet a long time – and not just high income but high income with job stability. Sure, the computer nerds made fat cash in the 90’s and in the early 2000’s but then there was the tech crash (bubble). And now they are enjoying a resurgence again. You might think that medicine is different and that it will never see a bubble or a crash or a decrease in demand, what about an increase in supply? What would it take? Technological advances… new discoveries… easier admission into medical school etc. I’m sure the newspaper industry never, ever thought that the internet would destroy their sales. I say that as long as there is a lot of money to be made in your industry take advantage of it. I make an incredible salary for being a salaried family medicine doctor, practicing urgent care and not having to worry about running a business.

Back to your 65-year-old ass and that shitty retirement situation. By the time the markets recover it may be 5 years or a decade. Sure, if you could keep that original $1.5 million and it had that 5-10 years to grow then your investments may be just fine. If you used that money to live off of instead, then it’s quite unlikely that you will see any recovery in your portfolio. You might think that your pension or social security will save you and that is partially true. Quite a few doctors will retire with pensions despite all the fear that their company will go under etc, after all, pensions are protected under ERISA. However, very few pensions are adjusted for inflation upon their payout, therefore their value may be quite low if at the time of your retirement the economy is highly inflated.

Instead, if you retire at an earlier age, such as 40, you may risk running out of money during your many years spent in retirement. But, if you retire at an earlier age you are more likely to be active doing some sort of work, pursuing a passion perhaps. Work inevitably leads to income and if you need the income then you can harbor your immigrant mentality and generate an income doing something you already love. Furthermore, if you retire and the economy is sucking ass then you can always resume a few years of urgent care work or whatever kind of medicine you practice. And even better you can capitalize on a down market where real estate and stocks are practically on sale. Since you can continue working due to your youth, energy and marketability then you can use that income to turn a profit and further ensure a secure retirement portfolio.

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