A quick analysis can help you project your financial independence, and small tweaks can vastly improve the picture
Practicing emergency medicine isn’t always fun. Many physicians have a certain passion for what they do, but they’re not exactly jumping for joy at the beginning of an ED shift. Burnout is a reality faced by many docs – and not just those going gray. If that is where you find yourself, you might be looking at your bank account and wondering if/when you’ll ever be able to step away from the ED, or at least reduce your shift load. In the spirit of July 4th, let’s talk about financial independence and what it takes to get there.
The graph below is a simplistic analysis and it doesn’t factor in everything, but at least it’s a start.
The point is, no matter what age you are now, if you’re itching to know when you can hang up the stethoscope, you or your financial advisor need to do this analysis regularly. To make it more robust and meaningful, add other variables (for example a stock market crash) and do this analysis in a more dynamic way.
Here’s to your financial independence!
You are a 60 year old emergency physician, want to retire at age 65, live to 90, have a $2.5 million investment portfolio in a tax deferred retirement account, achieve an average 6% annual rate of return, and have no debt. You make $300,000 annual income, save $50,000 into your retirement account, and want to spend $100,000 annually in today’s dollars when you retire at age 65.
Keep Working Till 65
After factoring inflation and taxes here’s what your projected portfolio value looks like for the rest of your life: That result might excite you. “I can stop working now!” you might exclaim. Not so fast.
Stop Working at 60
This means you will no longer have any income and will not contribute any money to your portfolio –the results don’t look so good. See scenario 2 on the graph.
Spend a Little Less
If you make an adjustment such as spending $20,000 less annually – probably not too uncomfortable of a change – then voila, you may just have achieved what almost every physician desires . . . the financially freedom to retire sooner.