Working part time vs full retirement in this situation?

[ChooseToBeHappy]

I (40 yo) am married (wife 37 yo) with 2 small kids (7 and 5) and am thinking about retiring early in the next 1-5 years. One option is to work part time after retirement however I'm running the numbers and it does not seem to be worth it? What do you think?

Assets (3M total investible):
-1200k after tax brokerage account (holding VTI)
-1100k 401k
-450k Roth IRA (off which 112k is Roth IRA conversion and already seasoned for 5 years thus ready to be drawn anytime)
-100k HSA
-100k 529 plan
-House worth 280k (paid off)

Liabilities/loans: none

Budget: 65k per year before healthcare expenses.

If fully retired today the plan is to convert Roth up to standard deduction ($24k) which with dividends thrown off in taxable account (2% * 1200k = $24k) would be $48k in reportable income. I would put the kids on CHIP health insurance (state income limit is $52k) and cover the rest of the spending with paying health care cost from HSA, selling more taxable, and take some of the $112k conversion in Roth that is already seasoned for 5 years. Being on CHIP dramatically decreases healthcare expenses. My wife has a health condition and will likely max out on deductible/max out of pocket every year.

Thus my tax and healthcare expenses in a fully retired situation would be:
$0 income tax
$0 capital gains tax
$5000 for ACA plan (assuming maxed out deductibles) for the 2 adults. The kids are on CHIP.
Total: $5000

I work ER and do not want to work nights if doing part time. With my current group there is no option to work only day shifts. I estimate it will cost me $1000 per shift to pay someone to take my night shifts. I estimate (based on current people who are working part time) I will be assigned 2 night shifts per month out of 6-7 total shifts.

So working part time the finances would be the following:

$100,000 total income (working 4-5 shifts a month)with $24k in dividends thrown off by taxable account per year:
-8,600 income tax (tax calculated here: https://engaging-data.com/tax-bracke...00000&cg=24000)
-2,800 capital gains tax
-$20,000 ACA plan for family of 4 (assuming maxed out deductibles), kids no longer qualify for CHIP.
-$24,000 cost to pay someone else to work my 2 night shifts per month.
= $44,000 left over (total cost of $56,000)

So if I fully retire early I would save $56,000 - $5,000 = $51,000 per year in tax, additional health care cost, and cost to pay someone to work my nights vs working part time. This makes working part time a terrible deal or am I missing something?

[VagabondMD]

Two questions:

1. What are you going to do with your time when you are retired? It is not a financial question, but it is an important one.

2. Are you sure that you will be satisfied with Medicaid care for your children?

I am assuming that the math works, but life is not lived on a spreadsheet. $65k is pretty lean for a family of four, IMO. A health emergency or other unexpected expense or market swoon could destabilize your plan.

[Hatton]

Congrats on the assets you have accumulated so far. I went part time in my early 50s and completely retired at 62. I could have retired earlier but I was very worried about healthcare costs. I personally would not want CHIP for my kids or ACA for myself. Your nest egg s admirable for your age but does not allow for any extreme emergency or a 2008 type market crash. I would wait for a few more years.

[Tim]

Living lean is obviously to your advantage. You have substantial savings as the result.
My concern is the future for a wife and two kids. I would not feel comfortable planning limiting them to a lean budget relying on medicaid etc. Just me, if I have the ability to provide creature comforts and buffer setbacks, that is a personal choice.

[JBME]

just curious to know what your wife thinks about this plan?

[Sampter]

If your wife is fully on-board and your 65K budget could be decreased if market tanks then you will be fine without working part-time. If 65K is barebones with no wiggle room I would continue to work. I would also post at Mr. Money Moustache.

I disagree with not wanting Medicaid for children, they get better care IMO than commercial insurance where I practice. Reasons are they are not restricted on who they can see typically and parents are willing to do what is needed without worrying about how much it will cost.

Now, taking advantage of a program that was designed for the poor and disabled.....that is a different question entirely.

[Nysoz]

Two questions:

1. What are you going to do with your time when you are retired? It is not a financial question, but it is an important one.

2. Are you sure that you will be satisfied with Medicaid care for your children?

I am assuming that the math works, but life is not lived on a spreadsheet. $65k is pretty lean for a family of four, IMO. A health emergency or other unexpected expense or market swoon could destabilize your plan.

I'll just mention that we're skewed in the forum with salaries and net worth. $65k a year is about the median American family income ($68.7k). But yeah, any wrenches thrown in the plan could be disastrous.

To the OP, you don't want to work nights, but what about working part time at an urgent care or something similar? That could help significantly.

[VagabondMD]

I'll just mention that we're skewed in the forum with salaries and net worth. $65k a year is about the median American family income ($68.7k). But yeah, any wrenches thrown in the plan could be disastrous.

To the OP, you don't want to work nights, but what about working part time at an urgent care or something similar? That could help significantly.

I recognize this and agree with the skew, but from my perspective, why spend all of that tuition money and give up your 20's to live on $65k/year? It is not for me. YMMV

[ChooseToBeHappy]

Thank you for all the replies.

I guess there is a mathematical side and then a human side.

Mathematically a withdraw rate of 3%-4% of 3M is $90k - $120k. I feel my budget of $65k + healthcare expenses (currently $5k [with CHIP] to $10k [scenario if MAGI is above required for CHIP]) is under 3% which is pretty safe. I can’t find a safe withdraw calculator that fails at 3% with any type of reasonable stock/bond allocation. There is a much higher chance I’ll end up in the grave with way more money than I started even at 4%: https://www.whitecoatinvestor.com/ho...ably-die-with/ . As far as spending just running numbers for the last 12 month my actual spending is $50k before healthcare expenses. This is not taking into consideration that we would go down to 1 car once I retire. I added $15k per year on average for periodic lump sum items/unexpected things to come up with $65k budget. I live in a LCOL area with no state income tax. As a reference this guy has a $71k budget with a mortgage and 5 kids: https://frugalprofessor.com/financial-update-july-2021/

Medicaid/CHIP should be more than fine for the kids. They would get on the local children's hospital version of CHIP which means access to any specialist available. I don't feel bad about taking medicaid/CHIP just like I don't feel bad about legally minimizing my taxes.

Now the human side:
I agree the spouse is the ultimate wild factor in any planning. Obviously my plan falls apart if we get a divorce. My wife and I both grew up in fairly frugal households. We actually spend way more than our parents did when we were kids. She seems to be onboard with whatever I decide.

Nights is what is going to cause me to stop working full time in ER. I don’t know how people work nights consistently when they are 50+ since I’m already feeling it at 40. There is also the part about working nights causing earlier death due to increased health issues. I have not looked into urgent care and have no idea what that is like vs the ER.

After retirement I plan on reading, gardening, taking care of elderly parents (very likely one of them will need help at some point), some traveling, and spending time with kids. Obviously all of these could be done now as well and I am already doing some of them. I try to enjoy each day as they come.

[VentAlarm]

I think EM is the worlds best part time job. I’d do a handful of shifts a month while dropping DI and life insurance. This also acts an an insurance policy for your nest egg - fewer years draw down, more time to compound, more time to invest.

[afan]

I don't do EM, but how about working ONLY nights? No challenges of shifting sleep to be prepared for working other shifts?

I would not consider retiring from the only high income job I could get at this age, or anything close to it. Those SWR studies are focused on far shorter retirements. Thirty years, not 60. This plan leaves huge gaps in your margin for error. At this age there are all sorts of things that could blow up your plan. What are the provisions for education for the kids? Many docs want to help with or pay for college.
What about long term care when OP and spouse are old? The plan does not set aside savings to cover that.
Any kind of injury or disability could require more spending on the home or help at home, not in the budget and no room to find more money to cover it.
In my area, many good hospitals take Medicaid, but there is a lot that simply is not covered. And there are some good hospitals and many good practices that will not see a Medicaid patient.

Find a better EM job.

Find a shift rotation that suits you. Limit the rotating shifts.
If you are that unhappy with your current situation and are convinced there are no EM jobs that would be better, get counseling about possible depression before you make any decisions.

If you are OK on the mental health front and the job you have is typical of the field, unlikely to find something better in EM, then consider retraining in something else that has characteristics more to your liking. Depending on the medical climate in your part of the country, someone with training and experience as an EM doc might be able to go into primary care without needing to do a second residency.

But even a second residency would be better than retiring at this age.

Not many people in the US have the capacity to be docs and few of those who could do it get a chance.
Don't give up a career that the vast majority of people in the US would kill for.

[Lithium]

I would read the Early retirement now blog. I am not sure why you are only budgeting $65k when you are still working part time, and that is under 3% of your net worth. Even if your income dropped to zero you should be able to manage on close to six figure spending.

if you keep working part time and keep your medical license active that gives you a lot more flexibility to spend.

don’t work nights. Your health comes first.

[coastal]

Night shifts are deadly, literally. “Why We Sleep” by Matthew Walker. Just as good as reading the book is the three part interview on Peter Attia’s podcast, The Drive. Slow talker, 1.5 speed recommended. It’ll change your life. Not saying book is bad, just that it’s too long - one of those “need to stretch this out to book size” tho NT s.

What are you going to do after, is always the question. I’m about your age, kids 5 years older each. I like my job and don’t have enough to retire yet anyways. If I retired I would go surfing every morning, come home and read for a few hours, maybe have a nap after lunch. Might write in the afternoon if enough energy, learn a language , workout late afternoon, and then spend time with my kids/family after school/evening. Social stuff as it comes, not a lot of other retired 40 somethings…. Would this be “enough”? Not sure. As I continuously battle injuries I realize a life focused on the physical can get derailed pretty quickly as we get older. I always used to say I’d slow travel as we have a few 2-4 month trips under our belt (long ago prior to med school) but my kids love their sports and are really good at them - wouldn’t really want to take that away from them.

I read your post with interest though. My kids will be out of the house at 50, we will probably have “enough” and it will be an interesting thing to ponder, what to do.

I would decrease the amount that you are working to allow you to do more of the things you want to do and spend more time with your family. I’d do that sooner rather than later. I think a slow glide into retirement is probably the right answer if doing so is feasible. Let’s you figure out what to do with the time - if you find a passion it’s an easier decision to pull the plug. If not, keep looking. Retraining in another area of medicine is interesting, but I wouldn’t tolerate the BS at this point personally. Urgent care is a really interesting idea - get some benefits, get paid, never work overnight, similar to emergency medicine.

As a sub speciality surgeon taking care of complex kids, at least where I have worked (a red state and a blue) Medicaid kids got the exact same care, so not sure I would factor that in. Most folks taking care of kids are less mercenary than the average doc…just an aside given some of the other posters’ comments

Good luck!

[Tangler]

Suck it up for a few more years

[Tim]

I recognize this and agree with the skew, but from my perspective, why spend all of that tuition money and give up your 20's to live on $65k/year? It is not for me. YMMV

Medicaid seems to be funneling into the public health (County) facilities and hospitals. It is not the quality of care, it is they tend to be the "under served" pockets that have a shortage of service. Translation is longer wait times for service and possibly wait times for needed services as well subject to needed reductions.
Certainly you can survive on the average income. When on you move to one car with four drivers this will be interesting to say the least.

It seems like the problem is "nights". I would think solving the "nights" would allow you to continue with two cars and still travel. The more the kids grow the less they will need you. They are at a point of declining interaction and more independence. You are the parents, not the friends. Your life may be better plotting a way out of nights, both with the kids and the wife.