How physicians can retire early: 7 steps to follow

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Retiring early as a doctor is surprisingly difficult given the typical doctor income. There are four main reasons for this – the heavy debt load to enter the career, the very late start to earning a significant salary (most physicians leave residency at an age older than some FIRE bloggers retire at), the temptation of a high income, and the “doctor factor” I’ll get into later. Despite those challenges, it is still possible if it is something you would like to do. In this post, I’m going to tell you how to become a “Doctor on FIRE” (FIRE = Financially Independent, Retire Early) in seven not-so-easy steps.

#1 Join a community

The vast majority of doctors are never going to FIRE. They aren’t even interested in FIREing. Even if they wanted to, and occasionally dream about it, most of them blew it in their first five years out of residency. They didn’t take care of business (retire debt quickly, save a bunch of money up) and they got used to spending that physician income. It is so painful to cut back on spending that few will be willing, or maybe even able, to do so sufficiently enough to FIRE. So you’re not going to get any encouragement at the hospital. In fact, you will likely be DISCOURAGED by your colleagues because your retirement means more work for them (or worse, they have to go out and hire someone else.) So you’re going to need to “get your lovin’ at home.” My suggestion? Join a community. We have three or four communities here at The White Coat Investor including this blog, the WCI Forum hosted right here on the site, the Facebook Group, and over at Reddit.

But there is a community even more focused on physicians who want to FIRE. Join the community at Physician on FIRE! This anesthesiologist on the verge of retirement in his early 40s has built an impressive community of like-minded docs at his blog and his two Facebook groups, Physicians on FIRE and FatFIRE. There you will receive not only “how-to” knowledge, but more importantly the encouragement and camaraderie to be successful.

#2 Get rid of your debt

By the time they leave medical or dental school, most doctors are debt-numb after living on Monopoly money for years. Then it becomes worse. Physicians don’t bother making significant payments on their student loans for 3-7 more years. Dentistsborrow another half million for a practice. However, I know lots of docs that have or will FIRE. Very few of them have significant debt. The two just don’t go together. Crushing your debt quickly improves your cash flow, reduces your fixed expenses, allows you to use your income to build wealth instead of service debt, and strengthens your “financial muscles” enough to allow you to do the next couple of critical steps. Is it possible to FIRE while carrying debt, or even while using debt as your ally? Sure, but I just don’t see it happening very often. Almost everyone I know on the verge of FIREing or who has already done it is debt-free. You might want to think about why that is. I mean, correlation is not causation, but it’s hard to argue against at least some element of causation here.

#3 Save a bunch of money

I’m amazed to see people advocating financial plans that don’t require saving a bunch of money. These get-rich-quick, no-money-down schemes are exactly that. Within a few years, most who try them end up right back where they started if they’re lucky. The unlucky ones go bankrupt. You don’t borrow your way to wealth. It takes a lot of money for a very early retirement. At a minimum a few hundred thousand. For most doctors? At least a couple of million bucks. Given that an early retiree (who also got a late start) won’t have as many years for compound interest to do its thing, the majority of that nest egg is going to come from brute force saving–you’re going to have to carve it out of your income. Luckily, you’ve got a lot more income than the typical American, much less the typical citizen of this planet, so it’s not THAT hard of a task. But saving money is like being physically fit–it doesn’t look that hard until you actually try it. Then you realize those habits are actually kind of tough to establish and maintain.

#4 Cut expenses

If it sounds like I’m beating the same drum with each of these points, that’s because retiring debt, saving money, and spending less are all very closely related. However, I distinguish between them to make some important points. When you spend less and save more, you’re winning on both sides of the ball.  You’re burning the candle at both ends. When you spend less, not only do you have more, but you NEED LESS. I know of no better explanation of this point than the popular Mr. Money Mustache post entitled The Shockingly Simple Math Behind Early Retirement. I reproduce his very reasonable data here:

[Correction: The 10% line should read 51 years, not 31.] As a general rule, a typical doctor doesn’t retire early AND spend like a typical doctor, either before or after retirement. Maybe if you have a high earning spouse, are a genius investor, or had a big inheritance. But for most, you’ve got to be comfortable living on less than half of a typical doctor income. The higher your income during your working career, the easier this whole process is, but only if spending is held constant.

#5 Lose your identity as a doctor

This one might be the most difficult for many docs. Certainly, it is hard for me. A typical doctor decides she is going to be a doctor sometime around 8th grade. For two decades, from middle school until the completion of fellowship, this has been her dream. Her family has referred to her as “the doctor” in the family for as long as she can remember. The neighbors bring their kids over to be checked out. She likes being the expert. She likes saving lives and stamping out disease. It’s even flattering when the emergency doctor calls needing her expertise, at least when it’s before 10 p.m. Doctoring isn’t just what she does, it’s who she is. In order to FIRE, that has to be turned off. This is harder than those in other careers can possibly understand.

In my case, we’ve got enough money to not doctor anymore. In fact, we would probably have a higher income if I would quit practicing and spend more time on this crazy “side hustle.” But it turns out I actually like doctoring after all. I have dreams of volunteering internationally. I’m curious to see what else I can accomplish in medicine. Not to mention that it probably makes WCI a little more authentic if I’m still a practicing physician. Certainly, it keeps me in touch with my readers.

So how do you step away from medicine? I think it helps to do so gradually. It’s just easier to go from 1/4 or 1/2 time to not practicing at all than to go from 60 mph to a dead stop in 2.3 seconds. It also helps if you don’t actually like practicing or if there are a lot of things about it that you dislike. But mostly, there just needs to be something else you’d rather spend your time doing. Speaking of which …

#6 Find something to retire to

The unhappiest retirees I know, of any age, are those who retired FROM something rather than TO something. We all know someone who was vibrant and healthy, retired, and then became depressed, sick, and maybe even dead within just a few years. I’m convinced that this isn’t just a matter of health and good luck. To be happy, we need a purpose. That purpose is often related to our paid work but doesn’t have to be. Exhibit A? Look at all those happy stay-at-home parents.

If you want to retire early, you’d darn well better find a new purpose either before retiring or shortly afterward. I think it’s easier to retire at retirement age because there are many others your age doing the same thing (not to mention your remaining life is much shorter.) The earlier you retire, the more lonely the experience is likely to be. What will your purpose be? I think it’s different for every early retiree, but here are some suggestions:

  • Paid work (a career change to another profession or an encore/passion career – as a rafting guide or artist)
  • Volunteer work (perhaps even as a physician)
  • Raising kids
  • Caring for elderly parents
  • Recreational pursuits

#7 Slow your roll

As physicians, we start charging hard at least by the time we’re sophomores in college, perhaps earlier. We endlessly seek to become more and more productive each year. Wasting time is a major sin. Guess what? The rest of the world doesn’t roll like that. They’re perfectly fine with spending two hours on breakfast and the newspaper. I know a successful businessman who watches a half hour of TV with his wife each night. I had no idea that such things were possible. I cut sitting down for breakfast out of my life a long time ago! I mean, you can eat, listen to a podcast, and commute all at the same time, no?

Many docs haven’t even seen a 40 hour work week during their entire career. So retiring early is probably going to involve cutting back a bit on how much time we spend being productive. Yup, waste some time. It’ll be good for you. Interestingly, I’m amazed at how much more I can accomplish in less time when I waste some time each week. Imagine if I wasted some each day!

There you go — seven key steps to not only becoming financially independent but retiring early.

James M. Dahle is the author of The White Coat Investor: A Doctor’s Guide To Personal Finance And Investing and blogs at the White Coat Investor. He is the creator of Fire Your Financial Advisor!, a high-quality 12 module course with a little over 7 hours of videos and screencasts, a pre-test, section quizzes with answer explanations, and a final exam. The goal is to take a high income professional from square one, teach them financial literacy and help them write their own financial plan.

Image credit: Shutterstock.com

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