Getting started at 53 and want to retire at 65

[The White Coat Investor]

I received an email today that I thought the community could help with. I've changed enough details in it that no one is going to recognize this person but the emailer, who received a link to it and hopefully will sign up for the forum for follow-up questions.

Good Afternoon!

I was lucky coming out of Med school as my debt load was relatively
low— about $25,000 in the late 80s. However, I married someone who had no
savings coming in— and was not a great saver earlier in our
marriage.
I went into practice with a family member for a while— no benefits there, though it
allowed me to spend more time with my children. Taking over the
practice, as was the expectation, was not a positive proposition for
me. After working for the buyer for a couple of years and already
suffering from burnout, I left at the end of 2001 and started locums
in 2002.
Following 9/11 our stocks plummeted and eventually we had to sell in
order to survive— and had to get into my partner’s retirement and
take the penalty. We were around 40 years old and back to zero
savings. I continued to work locums on an intermittent basis while raising
my children.
Saving was a challenge , especially when my partner was not working
for about a year and I was working intermittently.
When the children went off to college, I was able to work more regularly,
but still as an independent contractor. We assisted our children in
college. But between their hard work and jobs they held, they came out
debt free. Our assistance did not break the bank for us.

My partner has done pretty well with his 401k in that he has been
almost maxed for the last 4 years . He has maxed what the corporate
match would be. It’s only been the last 3 years that I've been able
to save the entirety of allowed limits in an IRA.

I am FINALLY going to work full time as an employed physician for the
first time since my residency. I’m 53. My hospital employment plan
will have a 403b and a 457b. They offer no matching contributions.

Any recommendations for how best to save at this late date? It’s my
understanding that I can max $24,000 in each plan. I’d like to save
an additional $30,000 per year toward retirement. And we will now max
my husbands 401k .
I hope to work another 12 years. My partner another 6.
Oh, and did I mention that I’ve had a disability this past year? A
foot injury while running in March. Now a hand injury while biking
in August. I’ve made it work on just $4000 per month from a small
disability policy I took out in 1992. And that didn’t kick in til
90 days in. So if I can make a recommendation, it is that all docs
take out such a policy and KEEP IT because they may change jobs or go
out on their own. The policy cost me $125 per month.

 

[The White Coat Investor]

My response:

I'm going to cross-post this to the WCI forum where you can get advice from more than just me. I would suggest signing up and participating, but you can follow along even if you don't. Don't worry, I'll remove/mask any identifying information. Here's a link:

https://www.whitecoatinvestor.com/forums/topic/getting-started-at-53-and-want-to-retire-at-65/

Now, some advice perhaps worth exactly what you paid for it. I can't quite tell if you're currently disabled, but it sounds like you're back working, so I'll assume you are.

You're not starting that late. I mean, sure, it's not 33, but it's hardly the end of the world. Think of it this way- no doctor is ever really more than 10 years away from financial independence. Combining a physician income with an average ($55K) lifestyle allows you to build wealth very quickly. My wife and I became millionaires within 7 years out of residency on a combined average income of only $180K. Plus your partner is working and contributing too. And you're surely starting with a lot more wealth than we started with coming out of residency (<$30K). You're hardly too late. I know you only WANT to work another 12 years, but I would take a careful look at your work and see if you can figure out a way to extend your career to age 70. That gives you 5 more years to save, 5 fewer years to support in retirement, 5 more years for your investments to compound, and allows you to delay Social Security another 5 years. Combining all of those could make a HUGE difference in your retirement lifestyle. Like double or triple it. So if you're not where you want to be at 65, keep that in mind.

So how do you get there? You need to do some serious financial planning. If you don't feel qualified to do that yourself (and I suspect you're not yet qualified given your financial story) then hire somebody to give you good advice at a fair price. You can find a list of such people here: https://www.whitecoatinvestor.com/financial-advisors/

But the bottom line is that you need to boost earnings, cut spending, max out your retirement accounts, invest even more into taxable accounts, and make sure your money works as hard as you do with a reasonable investing plan.

You can do it and The White Coat Investor community will be with you every step of the way.

[Hatton]

No time like the present to get really serious about retirement planning.  It sounds like your kids are educated and out of the house. A true fiduciary planner would be useful.  Max out all your tax protected accounts and start a taxable account.  Start reading.  Ask questions on this forum. I would try to work until 70 to keep saving and to delay social security.  Start tracking your expenses on mint or personal capital.

[CM]

.

[Lithium]

The writer doesn't say what her annual spending is or where she lives, but cost of living and taxes are incredibly important in a scenario like this.  If I only had 12 years for my savings to compound, I'd be very averse to doing that in California or anywhere along the NE I-95 corridor.

[Kamban]

The White Coat Investor wrote:

Any recommendations for how best to save at this late date? It’s my understanding that I can max $24,000 in each plan. I’d like to save an additional $30,000 per year toward retirement. And we will now max my husbands 401k .

Click to expand...

She is likely to save $78K per year for 12 years. $936K in total. That has to keep up with inflation and earn some more by the time she turns 65.

What is left out are

1. How much is in her husband's 401K worth.

2. How much SS are they expecting to get at, and is it at 65 or 67 years of age.

3. What are their expenses at present and what do they expect it to be when they retire.

[q-school]

Spend as little as possible. Save. Rest up to Jesus, as the local surgeon says.

I am not sure the goal is realistic, with the caveat that lifestyle in retirement will drive whether it is or is not feasible. A lot depends on what happens in the market over next ten years. Generally speaking, many here are worried about long tail possibilities. You need to establish your foundation first. If it were me, I would calculate what I needed to feel comfortable spending in retirement and then work backwards to get the magic retirement net worth number. I add some fudge factor and see where I am at 65. I wouldn’t plan on retiring at 65 however unless I hit that number. I would focus on doing my best to cut spending and increase savings rate. Probably three fund vanguard is your friend. I would stay away from exotic investments.

Good luck.

I’m glad you are turning your focus to yourselves!

[ifonlyFI]

I'm looking forward to this thread.  WCI emphasizes the 40 yo financially independent physician when in reality, there are so few.  I want to see this family succeed as to inspire the rest of us.

[jfoxcpacfp]

I would beg you to schedule 2 or 3 free initial consults with fee-only CFPs. Even if you don't decide to hire a planner, you'll be able to share specifics and will almost certainly learn some valuable takeaways.

Good luck and keep sharing with our community. You've gotten some very helpful advice already and the more you can share with us on the forum, the more we'll be able to help.

[Craigy]

I would probably tone down the running and the biking to ensure you'll actually be able to produce that next 12 years' income.

[RogueDadMD]

Interesting that everyone assumes OP is female.  No gender pronouns in WCI's post or the email.  The person mentions a "husband" and a "partner" (though no idea if WCI changed some words).

Could be two guys.

Regardless, must've been a major foot injury from running to require use of a disability policy.  Hard to tell someone to stop running unless you're doing Marathon's and Ironman's that have more chance of some overuse injury.

My only advice if you really want to meet those goals and have a high standard of living is to go read Mr. Money Mustache or some early FIRE blogs.  Live incredibly cheaply, save everything, avoid debt like the plague.

Other option is to take a job that pays more and has better benefits, if that's an option.  There aren't going to be any shortcuts or super easy ways to go from broke to retired in 12 years, when those 12 years are the final ones of your career.

Your partner could work more than 6 years so you could work less than 12, but that's a relationship issue as much as it is a financial one.

Also I do think Johanna is right -- this situation absolutely begs for you to use a CFP.  And I'm one that actively tells people not to use one.  Even though I have an advertisement from a good one on my own site, I want people to do more on their own to save the $.  But this is not a typical scenario for that advice.

 

[pdoc]

I’ve made it work on just $4000 per month from a small
disability policy I took out in 1992.

If you have been managing to keep your expenses low as you mention, you should be able to save a lot. Two people contributing to 401k/403 b (hopefully maxing out plus employer match) + backdoor Roth's + 457 b along with a taxable account could add up quickly. Hopefully, you stay healthy and don't have a lot of healthcare expenditure and I think getting to FI by 65 is realistically possible  (especially if expenses in retirement remain low). Do you own the place you live in currently?

[Craigy]

Rogue Dad, M.D. wrote:

Interesting that everyone assumes OP is female.  No gender pronouns in WCI’s post or the email.  The person mentions a “husband” and a “partner” (though no idea if WCI changed some words).

Could be two guys.

Click to expand...

Pretty nebulous, but it sounds like he or she was married in the late 80s, early 90s.  I don't know if gay marriage was legal in many/any jurisdictions back then.  But again, it's a nebulous post, they could have been married just a few years ago.  For that matter, the partners could have changed somewhere along the way.

The term "partner" tends to be used by women referring to their spouse or significant other of either sex, and by men referring to a male spouse or significant other, but not usually by a man referring to his wife.  Also, these days it seems more men are willing to call another man their husband, or perhaps spouse, and not their partner, unless they are not married.  And then of course partner can refer to business partners.  There's some confusing mention of a practice with a family member, taking over the practice, working for the buyer, etc.  Again, really hazy.

Working less and spending more time with children would be stereotypically female, and multiple children sounds more like a traditional family in the 80s-90s.  Making claims on a disability policy also probably tilts female.  Working 6 years longer than the spouse sounds more male, but he or she could have married an older man.

You're right, we don't know for sure, but I'm going to put my bets on this being a woman.     I've made assumptions on this forum based on limited facts before and been proven wrong several times.

Of course none of this matters but I am too intrigued by these mundane mysteries.   :lol:

[Kamban]

Rogue Dad, M.D. wrote:

Interesting that everyone assumes OP is female. No gender pronouns in WCI’s post or the email. The person mentions a “husband” and a “partner” (though no idea if WCI changed some words). Could be two guys.

Click to expand...

The possibility of it being 2 guys is highly unlikely given that the person graduated in 80's, had children and is now 53. The partner is a he based on this paragraph and the most likely possibility is that the writer is a she

 

My partner has done pretty well with his 401k in that he has been
almost maxed for the last 4 years . He has maxed what the corporate
match would be. It’s only been the last 3 years that I’ve been able
to save the entirety of allowed limits in an IRA.

[Kamban]

Craigy wrote:

I would probably tone down the running and the biking to ensure you’ll actually be able to produce that next 12 years’ income.

Click to expand...

I was about to say the same thing. Keep fit so that there are no medical problems like heart disease but not do exercises that puts one at high risk for disability.