Why every doctor needs to think about early retirement

While there’s no strict definition on what constitutes “early retirement” (FIRE, or financially independent, retiring early), those in the non-medical field who can enter the workforce in their early twenties can potentially build enough savings to retire with less than ten years of “working”.  Obviously this calculation is dependent upon many assumptions on savings rate and expenses, but since the term came into use I don’t recall anyone publicly announcing that their early retirement experiment actually failed. Only time will tell perhaps.

Doctors, by nature of their protracted education duration, are typically a decade behind in earnings compared to their peers in other professions.  Many doctors are also burdened by educational debt, which averaged around $200,000 for graduates in 2018.  Fortunately our profession can still overcome these financial disadvantages and still sustain a relatively good living in the long run [for now].  If doctors can’t “retire by 30”, then is it possible for them to retire in a similar amount of time once they obtain “real jobs”?

Doctors can definitely opt to retire “early”.
The rate at which we can build our nest egg is directly proportional to the amount that we can save.  Non-doctors with six-figure salaries can FIRE within a decade of work.  Doctors, if maintaining a comparable standard of living other “FIREee’s”, can potentially retire early within their first fifteen years of medical practice even if they have to pay off a six-figure educational debt.  There are definitely doctors and other high-earning individuals who have opted to retire before the expected age to hang up their hats, but that is not the norm. 

Why?

That’d be bucking the trend.  Most of the time it’s not practical to give up on a stable profession that pays well. Why would you want to spend your twenties studying and working off your tail to become a doctor and then quit?   The other problem involves lifestyle creep.  As we all know, it’s easy growing into your income.  Sometimes it’s no fault of our [mostly] own, but rather the environment where we live.  It’s normal that people would opt to live in more affluent neighborhood to raise their children.  These areas not only have more expensive homes but also have higher association fees and requirements to keep your front lawn green and manicured.  I have a friend whose lawn bill costs $800 a month!  I know doctors who maintain a professional clothing budget of $250 a month.  Most of these doctors opted to live in the neighborhoods attached to the most desirable school systems yet still send their kids to private secondary schools.  These recurring expenses certainly make it difficult to scale back without having to relocate.

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The evolving medical landscape
Those of us in medicine know that regulatory changes (for the worse), reimbursement cutbacks, and increasing physician responsibilities can turn the most visionary of doctors into cynics.  The worst part about being in the healthcare industry is that it is constantly an uphill battle for doctors.  

You might also like: Can the health system afford to give doctors raises?

With a fixed or diminishing amount of funds in our existing healthcare system, most of us are aware that it is only a matter of time that new unfavorable rules to doctors are passed.  Not a day goes by in the hospital that I don’t see some doctor griping about some change that puts doctors at a disadvantage:

  • Anesthesiologists losing a hospital contract to another group predominantly staffed by midlevels.
  • Nocturnist shifts that pay the same as a daytime Hospitalist shift.
  • No more bottled sodas in the doctor’s lounge.
  • Revised RVU bonus compensation schedule that is unachievable.
  • Emergency room doctors getting fired and replaced by midlevels due to lower costs at the expense of training.

As most things in life you can complain about anything and everything, but most of the gripes we hear are well-warranted.  I’ve met too many doctors who are simply stuck in their jobs because it helps them pay the bills.  

If you grow your own oranges, you will be less susceptible to fluctuations in the produce market!

Break the cycle
The strongest negotiating chip one can have is the ability to walk away from the deal if the other party doesn’t agree to favorable terms.  The only real way to do that is if your livelihood doesn’t depend on the job itself.  The same analogy goes for several of my colleagues in academic medicine—some of them with independent family wealth opted to take a significantly lower paying university-based job in order to practice medicine without dealing with the insurance hassles (epilogue: they still deal with insurance hassles).

So aiming to reach early financial independence even though you have no intention of quitting medicine early may serve as a buffer to any changes in medicine that are out of your control.  If your working conditions end up become intolerable, you have more freedom to walk away.  Most doctors won’t have to use their exit strategies but having one might be the most foolproof option not to lock yourself into golden handcuffs.

Does your financial strategy involve aiming to reach financial independence early?

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