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What's your FI/RE Target?

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    smartmoneymd
    Member

  • smartmoneymd
    replied



     


    Taking a simple example of an annual salary of $200k/yr at 3% growth each year for 30yrs will be $485k/yr. Guess it’s debatable if doctor salaries will increase to match inflation but if you’re W2 employed by a major group it would usually be. Now inflation is not always 3%, last few years it’s been very low. But in general salaries are to keep in step with inflation to workers happy
    Click to expand…


    I am going to dispute this point. I see lots of examples of docs getting paid less on a year-over-year basis, let alone an inflation adjustment. The masters who pay us do not care. In general, reimbursement is stable, at best, and you can make a little more if you can work a little more.

    Click to expand...


    I definitely agree that most docs I know are getting paid less each year or the same for a similar amount of work. If you adjust for inflation, then absolutely no way. Our staff/MA's/techs/nurses actually do get raises every year, so that eats into take-home too if you run your own practice.

    Leave a comment:

  • DarrVao777
    Member

  • DarrVao777
    replied


    This does bring up an interesting question how much are people actually saving per year (in dollars not percentage of income).

    For us we’re dual income so our goal is to live off one salary and save the rest so that comes out to be ~$200k (not including the 401ks) trying to save each year.

    Be interested to know what others are saving each year to hit their FI number.
    Click to expand...


    As of now, I don't plan on retiring early. So to hit my FI number, my spouse and I would just need to max out my tax advantaged accounts every year from now until the time we are 67 (2 401Ks + 2 Backdoor Roths = 47000).

    That number is low because of a combo of a low FI number, heavily frontloaded savings, anticipation of a 30+ year working career, and (while I don't factor it into our calculations) an anticipated substantial inheritance from my spouse's side (only child).

    That being said, earning potential and job satisfaction can change quickly in medicine so we continue to be aggressive with loading our taxable account / real estate portfolio in the event things change.

    Aiming for 300000 - 500000 / year. I am happy to report we beat that goal last year (great year financially for us)

    Leave a comment:

  • DarrVao777
    Member

  • DarrVao777
    replied




    And not just 4% being reasonable (it may actually be an overestimation – see another thread by CM) but again who HOW many are saving 120k a year?? What about your pediatricians FP psychs etc? 200k gross income after tax, property tax, insurance etc etc you’re left with what 125k before expenses ?

    Thus not many reach this 7 million figure. Again something to think about.

    what is apparent to me are:
    – live like a resident like forever
    – then once you do that when you are in retirement, love like a resident some more

    Forget this. I am following the earn more yearly then Nicole and dime your way to saving more pressuring your family/yourself. Keeping cost low is fine but I simply am focusing on increasing income, NOT relying on some safe withdrawal rate etc because without high income ain’t reaching lofty goal which really @ 7 mill is giving you 200k a year in retirement (which at that time would feel like 100k)
    Click to expand...


    I'm just skimming into the thread but why the fixation on 7 million in retirement?

    If you are talking about some of the lower paid specialties, you already mentioned they are pulling in 200K gross. I don't think they'll be needing 200K a year in retirement then. I don't think 7 million is a necessary or realistic target if you are making 200K gross with a heavy student debt burden.

    I view it more along the lines of:

    - live like a resident until you can get your student loans paid off, have enough to put down 20% for your dream home (if it is a goal to be a homeowner) so that the remainder can be financed at a low rate, and then ensure that 20%+ of your gross paycheck continues to go towards retirement. The rest you can spend to your heart's content

    - the pursestrings can be loosened up even further as you progress (I know WCI has mentioned an author who stated that when the mortgage is paid off and you have $1 million in the bank, to loosen the pursestrings if desired). Obviously if your goal is early retirement than you'll have to be more selective with how much those pursestrings are loosened.

    I also subscribe to the theory of making as much as possible while the sun is shining. I do find that there is a level where earning more doesn't necessarily make me happier. The lower you can keep your expenditures, the less pressure there is to need to hit that FI/RE target #

    Leave a comment:

  • PenguinMD
    Member

  • PenguinMD
    replied
    Agree, real returns of 4% are reasonable. S&P 500 average of 7% (minus 3% inflation).

    The example I gave is using actual annual returns of 4.5% to get to $7M at 120k/yr starting at zero for 30yrs. The $7M is the inflation adjusted amount to generate the same purchasing power of $120k/yr in today's dollar assuming a 4% SWR.

    Sorry, the point I was trying to make is you shouldn't need to save $120k/yr to get to the $7M mark in 30yrs. If instead you use a return rate of 7% (S&P 500) you can get there with only doing a more digestible saving of $75k/yr which is a much less scary number for a new attending.

    I'm not sure how many newly minted docs are socking away $120k/yr yet alone even seasoned docs. Also this is assuming a 30yr time frame so you're talking about at least 3-4x going through boards again and if you're a specialist that gets multiplied -- ack!!!

    The whole point of this forum is to retire/reach FI EARLY right? So hope that's not 30yrs out ...

    This does bring up an interesting question how much are people actually saving per year (in dollars not percentage of income).

    For us we're dual income so our goal is to live off one salary and save the rest so that comes out to be ~$200k (not including the 401ks) trying to save each year.

    Be interested to know what others are saving each year to hit their FI number.

    Leave a comment:

  • Complete_newbie
    Member

  • Complete_newbie
    replied
    And not just 4% being reasonable (it may actually be an overestimation - see another thread by CM) but again who HOW many are saving 120k a year?? What about your pediatricians FP psychs etc? 200k gross income after tax, property tax, insurance etc etc you're left with what 125k before expenses ?

    Thus not many reach this 7 million figure. Again something to think about.

    what is apparent to me are:
    - live like a resident like forever
    - then once you do that when you are in retirement, love like a resident some more

    Forget this. I am following the earn more yearly then Nicole and dime your way to saving more pressuring your family/yourself. Keeping cost low is fine but I simply am focusing on increasing income, NOT relying on some safe withdrawal rate etc because without high income ain't reaching lofty goal which really @ 7 mill is giving you 200k a year in retirement (which at that time would feel like 100k)

    Leave a comment:

  • VagabondMD
    Radiologist (retired)

  • VagabondMD
    replied
     


    Taking a simple example of an annual salary of $200k/yr at 3% growth each year for 30yrs will be $485k/yr. Guess it’s debatable if doctor salaries will increase to match inflation but if you’re W2 employed by a major group it would usually be. Now inflation is not always 3%, last few years it’s been very low. But in general salaries are to keep in step with inflation to workers happy .
    Click to expand...


    I am going to dispute this point. I see lots of examples of docs getting paid less on a year-over-year basis, let alone an inflation adjustment. The masters who pay us do not care. In general, reimbursement is stable, at best, and you can make a little more if you can work a little more.

    Leave a comment:

  • Complete_newbie
    Member

  • Complete_newbie
    replied
    Penguin - getting 4% real returns is reasonable not underestimating it. Please advise how you can be "more" aggressive than that ??

    Leave a comment:

  • PenguinMD
    Member

  • PenguinMD
    replied
    Taking a simple example of an annual salary of $200k/yr at 3% growth each year for 30yrs will be $485k/yr. Guess it's debatable if doctor salaries will increase to match inflation but if you're W2 employed by a major group it would usually be. Now inflation is not always 3%, last few years it's been very low. But in general salaries are to keep in step with inflation to workers happy .

    Also at a savings of 120k/yr for 30 yrs you're roughly factoring in a modest 4.5% annual return and also assuming you're starting from zero to hit the $7M mark at the end.

    Hopefully, you're being much more aggressive for better returns, especially if your time horizon is so far out. Even just using the S&P 500 would be better.

    In short if the return is higher then the amount to save can go lower (if 120k is a stretch to save each year which starting out might be!). Although, ironically been "living" off the previous years at almost $40k/yr and in one year become an attending and shoot up to 4x your previous salary so saving $120k may seem "impossible".

    This is why the best advice for the first few years of attending is to STILL "live" like a resident. But human nature is always instant gratification so harder to do then say .



    Leave a comment:

  • VagabondMD
    Radiologist (retired)

  • VagabondMD
    replied









    Click to expand…


    So lets say you reach your 30 year, 7 mill goal. Assuming 4% withdrawl rate and 4% real growth of that month, your portfolio is pretty much a static portfolio then? growth balances out with withdrawl. What am I missing?
    Click to expand…


    Exactly. Not missing anything on that.  Once hitting the retirement, the principle is static and assumption of living solely on the interest 4% at a very conservative rate that has no draw on the basis.  = $3M inheritance to your kids with that no draw.

    We live in SoCal with one of the highest property tax and income taxes outside SanFran and NY.   Our yearly nondiscretionary (tax, insurance, utilities) is south of $25,000.  Take that out of 120-25 = 95 and then 25% marginal tax  leaves 71.5k for complete discretionary spending without impacting the principle.

    That’s  $195 a day spend and still quite a lot of discretionary spending for two every single day of the year.  With that budget, we can LIVE on a cruise ship.
    Click to expand...


    Does that $25k include health insurance and copays? Home and car maintenance? Kids calling with this emergency or that? Dental work as you get older? Eating healthy foods? Etc. My back of the envelope calculation of the basic costs of living in retirement (in a MCOL Midwestern city) is quite a bit north of $25k.

    Leave a comment:

  • Complete_newbie
    Member

  • Complete_newbie
    replied
    Except when a few days ago I posted how doctor salaries should increase some member said WHAT? doesn't make sense.

    Also 7 million is 120k invested everyyear for 30 years. It is doable for well paying specialist but not EVERY doctor.

    Leave a comment:

  • PenguinMD
    Member

  • PenguinMD
    replied
    This is why people recommend saving based on a percentage of your income.

    So the idea is that your salary also increases with the rate of inflation and with raises you're actually BEATING inflation.

    Just like the 401k limits are indexed to inflation yearly you should also be adjusting your savings accordingly (if you're saving a fix amount each year).

    Leave a comment:

  • StarTrekDoc
    Member

  • StarTrekDoc
    replied






    Click to expand…


    So lets say you reach your 30 year, 7 mill goal. Assuming 4% withdrawl rate and 4% real growth of that month, your portfolio is pretty much a static portfolio then? growth balances out with withdrawl. What am I missing?
    Click to expand...


    Exactly. Not missing anything on that.  Once hitting the retirement, the principle is static and assumption of living solely on the interest 4% at a very conservative rate that has no draw on the basis.  = $3M inheritance to your kids with that no draw.

    We live in SoCal with one of the highest property tax and income taxes outside SanFran and NY.   Our yearly nondiscretionary (tax, insurance, utilities) is south of $25,000.  Take that out of 120-25 = 95 and then 25% marginal tax  leaves 71.5k for complete discretionary spending without impacting the principle.

    That's  $195 a day spend and still quite a lot of discretionary spending for two every single day of the year.  With that budget, we can LIVE on a cruise ship.

    Leave a comment:

  • Complete_newbie
    Member

  • Complete_newbie
    replied










    So for $120k per year you’re looking at a nest egg target of $3M (@ 4% SWR).

    But that’s in TODAY’S dollars if you assume 3% inflation rate you’re looking at.

    Today (2017) – $3M
    10yrs out – $4M
    20yrs out – $5.4M
    30yrs out – $7.3M

    To get the same purchasing power as of today for $120k/yr.

    So yeah, you need to figure out what is your target time frame and what yearly income you want in today’s dollar and then calculate it out.

    $120k/yr may seem high but if you factor in health care cost, property tax/housing, insurance, income tax (that amount is not all tax free), emergencies plus buffer for peace of mind it quickly gets eaten up!

    Personally, aspiring to target 10yrs as that’s when the next round of boards come due . It’ll be a HUGE motivator to try to hit FI by then!
    Click to expand…


    I wonder if people are even including 3% inflation in their calculations. Because lets be real, your real returns are like 4% in the market.

    How many doctors are going to reach 7+ million in nest egg? I am thinking NOT many.

    Something to think about.
    Click to expand…


    The more important issue is that its close to max suggested withdrawal rate, which I’d rather not do, at least the first several years. Not a lot of margin for error in addition to all the above points.
    Click to expand...


    So lets say you reach your 30 year, 7 mill goal. Assuming 4% withdrawl rate and 4% real growth of that month, your portfolio is pretty much a static portfolio then? growth balances out with withdrawl. What am I missing?

    Leave a comment:

  • Zaphod
    Physician

  • Zaphod
    replied







    So for $120k per year you’re looking at a nest egg target of $3M (@ 4% SWR).

    But that’s in TODAY’S dollars if you assume 3% inflation rate you’re looking at.

    Today (2017) – $3M
    10yrs out – $4M
    20yrs out – $5.4M
    30yrs out – $7.3M

    To get the same purchasing power as of today for $120k/yr.

    So yeah, you need to figure out what is your target time frame and what yearly income you want in today’s dollar and then calculate it out.

    $120k/yr may seem high but if you factor in health care cost, property tax/housing, insurance, income tax (that amount is not all tax free), emergencies plus buffer for peace of mind it quickly gets eaten up!

    Personally, aspiring to target 10yrs as that’s when the next round of boards come due . It’ll be a HUGE motivator to try to hit FI by then!
    Click to expand…


    I wonder if people are even including 3% inflation in their calculations. Because lets be real, your real returns are like 4% in the market.

    How many doctors are going to reach 7+ million in nest egg? I am thinking NOT many.

    Something to think about.
    Click to expand...


    The more important issue is that its close to max suggested withdrawal rate, which I'd rather not do, at least the first several years. Not a lot of margin for error in addition to all the above points.

    Leave a comment:

  • Complete_newbie
    Member

  • Complete_newbie
    replied




    So for $120k per year you’re looking at a nest egg target of $3M (@ 4% SWR).

    But that’s in TODAY’S dollars if you assume 3% inflation rate you’re looking at.

    Today (2017) – $3M
    10yrs out – $4M
    20yrs out – $5.4M
    30yrs out – $7.3M

    To get the same purchasing power as of today for $120k/yr.

    So yeah, you need to figure out what is your target time frame and what yearly income you want in today’s dollar and then calculate it out.

    $120k/yr may seem high but if you factor in health care cost, property tax/housing, insurance, income tax (that amount is not all tax free), emergencies plus buffer for peace of mind it quickly gets eaten up!

    Personally, aspiring to target 10yrs as that’s when the next round of boards come due . It’ll be a HUGE motivator to try to hit FI by then!
    Click to expand...


    I wonder if people are even including 3% inflation in their calculations. Because lets be real, your real returns are like 4% in the market.

    How many doctors are going to reach 7+ million in nest egg? I am thinking NOT many.

    Something to think about.

    Leave a comment:

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