Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
My questions are in bold italics and his responses follow in black.
Let’s get started…
OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 56 years old and my life partner is 58.
We have been living together for 17 years.
Do you have kids/family (if so, how old are they)?
We have no children.
What area of the country do you live in (and urban or rural)?
We live in an urban area in the southern part of the United States.
What is your current net worth?
Our current net worth is approximately $12.7M.
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
- Taxable investment accounts: $7.8M
- Retirement accounts (401k & IRA): $2.2M
- Rental properties: $1.1M
- Primary residence: $600K
- Company stock: $500K
- Operating accounts (cash): $500K
Apart from credit cards, which we pay in full every month, we have no debt.
EARN
What is your job?
I am an anesthesiologist, and I work in several hospitals and surgery centers.
What is your annual income?
My income is around $500K/year.
Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?
My starting salary as a military officer was around $21K/year.
My income increased to $50K/year after I graduated from medical school, and increased to $110K/year after I finished my specialty training and achieved board certification. Income stayed at about that level until I left active duty service.
My income has been around $500K/year since 2004.
What tips do you have for others who want to grow their career-related income?
Get as much education and training as possible, as early as possible in your career.
After that, try to get a job with the highest possible salary, in an area with the lowest possible cost of living.
Do not be a fool:
- Degrees from expensive universities are likely to increase your debt level more than they will boost your eventual income.
- Prestigious academic positions are almost always accompanied by low salaries.
What’s your work-life balance look like?
I work six months per year. The odd months are for paid work, and the even months are for travel and charity work.
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
Our investment accounts generate around $160K/year in dividends.
We own a few rental properties; these generate around $70K/year after expenses.
SAVE
What is your annual spending?
$165K/year, after all taxes have been paid.
What are the main categories (expenses) this spending breaks into?
- Discretionary (travel, recreation, restaurants, hobbies): $52K
- Gifts & charitable donations: $46K
- Household (groceries, clothes, utilities, etc.): $37K
- Insurance (home/auto/umbrella/health/malpractice): $20K
- Automobile (fuel/maintenance/registration x 2 cars): $10K
Do you have a budget? If so, how do you implement it?
Nope.
We have always followed Warren Buffett’s advice: “Do not save what is left after spending; instead spend what is left after saving.”
We spend whatever it takes to maintain the lifestyle to which we have grown accustomed.
Fortunately, our appetite for expensive things that depreciate in value (like jewelry, cars, boats, horses, and aircraft) is quite low.
What percentage of your gross income do you save and how has that changed over time?
After federal taxes, we save 100% of our earned income.
We spend nearly 75% of our dividend income and rental property income.
Early in our careers, we didn’t have the rental properties or dividend income, so we obviously spent more of our earned income. But we found that as we saved and invested our earned income, eventually that small trickle of dividend income began to grow into a significant stream. After a couple of decades, we got to the point where we no longer needed the earned income at all.
What is your favorite thing to spend money on/your secret splurge?
Travel. This is the best education anyone can get.
INVEST
What is your investment philosophy/plan?
1. We avoid financial advisors, stockbrokers and insurance salespeople like the plague.
2. We ignore recent trends in the stock and bond markets, and we resist any attempts to time the market.
3. We try to keep our investment expenses low—we pay about 0.05% in annual management fees for our mutual funds. We could probably shave off a couple of basis points here and there, but we don’t feel like this would be worth the trouble.
4. We subscribe to the theory that once you have won the game, you should stop playing — or at least play less aggressively. How stupid would we be if we were to risk losing an 8-figure nest egg?
Consequently, as we become older and wealthier, we become more risk-averse. This is reflected by our investment portfolio, which many would consider quite timid. Our targets are 55% in stock index mutual funds, 30% bond index mutual funds, 14% real estate, and 1% cash.
Astute readers will note that we are currently at 4% in cash at the moment, but this is a short-term anomaly which will be rectified very soon, once our mutual funds go ex-dividend (yes, I know this behavior could be construed as market timing).
5. We typically rebalance our portfolio whenever the actual percentages deviate by more than 2% from targets. This usually ends up being around twice per year.
6. Our retirement accounts are tax-efficient, as they are 100% bond index and municipal bond index funds. Our taxable accounts are not as tax-efficient as we would like, because they contain a significant percentage of bond index funds, as well as stock index funds which pay significant dividends. However, we don’t see any way to avoid this without increasing our stock holdings beyond our risk tolerance.
What has been your best investment?
Index funds. Nothing could be easier, and we sleep well at night.
What has been your worst investment?
Boston Beer (SAM), back in 1996 when I was buying individual stocks through an online brokerage. I bought the stock around $20/share and doubled down on it three times as the value of its shares declined. I finally sold it for around $10/share, a year or so later.
Compared with mutual funds, owning rental properties has been an extremely high maintenance investment. Even with a property management company, there is always some kind of nuisance. In fairness, the main purpose of our real estate holdings is diversification of our portfolio and asset protection, rather than income and growth.
What’s been your overall return?
Our mutual funds have generated an 8.7% average rate of return over the past 10 years. We recognize that this has been a 10-year bull market, and such returns will likely not last for much longer.
Average returns from our real estate holdings are much more difficult to measure, but we guess around 5%.
How often do you monitor/review your portfolio?
We do a detailed analysis and rebalance the portfolio about twice yearly.
NET WORTH
How did you accumulate your net worth?
Simple: we earned a lot, we saved as much as possible (while taking care to smell the roses along the way), and we invested as best we could. We wish we could make it sound more complicated.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
Like the proverbial three-legged stool, all of these elements are interdependent and probably equally important. I INVESTED heavily in my career when I was young (more than a decade of education and training to become a board-certified anesthesiologist). The return on that investment was a huge boost in my EARNING potential, far higher than I ever imagined. I then SAVED and INVESTED as much of those earnings as possible.
The above notwithstanding, I would have to say SAVING (living well below my means) is our greatest strength. I say this because so many of my colleagues have invested as much time and earned as much money as myself, but they have failed to save their money. They consequently have a low net worth.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
My divorce was a huge financial setback, erasing most of my net worth at the time.
I sold all of my individual stock holdings and closed my brokerage account.
From that point forward, I have invested only in index mutual funds and to a much lesser extent, real estate.
What are you currently doing to maintain/grow your net worth?
My peak earning years are behind me now, and I will probably leave the traditional work force soon. After that, our income will consist mainly of dividends from our mutual funds, plus a small stream of income from our real estate holdings.
This income will still exceed our expenses, so we will continue to invest. Factoring in capital appreciation of our portfolio, we expect to see continued growth in our net worth.
Do you have a target net worth you are trying to attain?
Not really, but we might pop a bottle of champagne if/when we cross the $20 million mark.
How old were you when you made your first million and have you had any significant behavior shifts since then?
We crossed the million dollar mark just before my 40th birthday. It was nice to achieve these two milestones at the same time.
Our behavior has remained pretty much the same, except we contribute more to charitable institutions as our wealth grows.
What money mistakes have you made along the way that others can learn from?
I have made a great many mistakes along the way, which have cost me many millions of dollars. Mine is a cautionary tale, rather than an example to be followed. Following are some of my biggest mistakes.
1. Market timing.
By September of 1987, I had paid off all of the debt I had accumulated while at university, and my net worth had increased to $10K. I became nervous at the dizzying heights of the DJIA at that time, and I felt the market was overvalued. I recklessly liquidated all of my mutual funds in early October.
The market suffered its biggest ever one-day loss a couple of weeks later (1987 Black Monday). I waited for one month to avoid a wash sale, and then reinvested all of the money back into the same exact fund. This was the stupidest move of my investing career.
Yes, I got lucky and timed the market successfully on this one occasion, but this experience had the potential to set me up for life as one of those stock traders who never really seem to get ahead because they think they are smarter than everybody else.
2. I bought too much house (considerably more than 5000 square feet), at precisely the worst time (2008).
This was not an accident, but rather an experiment. I have always believed that owning expensive things would not add to my happiness. But we had the money, and I simply had to test my hypothesis to know for sure.
After living for more than ten years in this ridiculously oversized house, we can say with absolute certainty that we are not somehow depriving ourselves when we forgo additional luxury items.
3. I converted the entire balance of my traditional IRA account to a Roth IRA in 2010.
This was a taxable event, costing me $64K at that time. As of this writing, I remain uncertain as to whether this was a wise move, or a colossal mistake.
Eager for feedback from your readers about this decision.
4. I have purchased 7 houses over the years, 5 of which we still own.
Apart from the first house I purchased, I have paid off every mortgage I have ever held—usually within a few months or years.
I have long been aware of the conventional wisdom that paying off mortgages is a bad investment (opportunity cost of capital tied up in an illiquid asset). I also understand that emotions have no logical place in money management, but this is one rule that I have consistently broken. We just sleep better at night, knowing that we have no debt.
We are very interested to hear the opinions of your readers about this controversial topic. Flame away!
So you can see that our wealth has been achieved despite many costly mistakes. We hope people take some comfort in the knowledge that one can make lots of mistakes and still achieve good results. Things will turn out differently however if you make ALL the mistakes, all the time.
What advice do you have for ESI Money readers on how to become wealthy?
Read about what I did, and then do the exact opposite!
All kidding aside, I do not feel like I have any unique or original insight. Everything we have to say has been said more articulately by someone else. But here goes:
Earn: Do whatever it takes to maximize your earned income, as early as possible in your career. For most people, this means lots of education and training. Studying and adopting the habits of respected people in your field of expertise usually pays off as well.
Save: Always live beneath your means! Once you have paid for your living expenses, you must aggressively pay off all debt while optimizing your emergency fund (6 or more months living expenses). Never miss an opportunity to maximize your tax-free and tax-deferred accounts, especially any matching funds from your employer. Having accomplished this, you then pump as much money as you can into your taxable investment accounts. Anything left over after that is disposable income.
Invest: Apart from occasionally rebalancing our portfolio, we try to ignore current trends in the stock and bond markets. There is an urban legend that Fidelity studied the performance of their clients a few years back, and discovered that their best-performing clients were the ones who were dead, while the second best performing set of clients were those who simply forgot they had Fidelity accounts. I don’t know if this is true, but I like it. I have seen charts which demonstrate that the average investor is so bad, that we even underperform inflation!
Sometimes, just for a laugh, we watch a few minutes of one of those TV shows with all the experts, like “Mad Money”. This reminds us that what works for others does not necessarily work best for us.
My final piece of advice is a quote from Joseph Kennedy, shortly before the 1929 stock market crash: “You know it’s time to sell when shoeshine boys give you stock tips. This bull market is over.”
FUTURE
What are your plans for the future regarding lifestyle?
Fortune has smiled upon us, and we are in a position where we no longer need to work to earn a living. However, it seems we need to continue to work to remain useful to society, and to remain relevant. Most importantly, to do what we can to improve the lives of others who may be less fortunate than ourselves.
My goal has always been to gradually do less work for pay, and more work for charitable causes. We plan to continue our participation in overseas medical work as long as possible; this work is much more fulfilling in so many ways than what we do at home.
We also plan to increase our charitable contributions through our donor advised fund.
What are your retirement plans?
We hope to take some continuing education courses to help maintain our mental fitness, and lots of exercise to help maintain our physical fitness.
And of course, we hope to continue learning about our world and its inhabitants through travel.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
The cost of healthcare is probably most annoying. Sure, we can afford health insurance, but what really irks us is that healthcare in the United States is such a terrible value (the highest cost in the world, with outcomes not significantly better than countries which spend a fraction of what we spend).
I suppose we will just grin and bear it, like most other Americans.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
When I was in my twenties, I thought I was pretty smart. Timing the market, etc. Three decades and several million dollars later, I now realize that my intelligence is average, but I have just been incredibly lucky.
I did a lot of reading to increase my financial literacy from about 1986 until 2000, but I eventually came to the conclusion that one does not really need to have a great deal of knowledge to get this stuff right. I chose a long time ago to focus on the basics and ignore all the noise.
I have long since forgotten everything I ever knew about call and put options, commodities, margin trading, and technical analysis. This body of knowledge is completely irrelevant to us because we do not engage in these activities, nor do we recommend them for anyone else.
I paid very little attention to financial education from 2000 until about a year ago. It was at that point we realized that our base of financial knowledge had eroded significantly. Knowledge, it seems, is a perishable thing. So about a year ago, we started refreshing our knowledge with books and articles and some of the higher quality investment blogs.
Who inspired you to excel in life? Who are your heroes?
Armand Hammer, John Muir, Vince Neil, Colin Powell, John D. Rockefeller, Theodore Roosevelt.
Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?
- John Kenneth Galbraith (1994): A Short History of Financial Euphoria
— Taught me about how fear and greed cause speculative bubbles (tulip bulbs, beanie babies and now cryptocurrencies) in the stock market. These bubbles will always ultimately burst, leading to crashes and economic recessions. Further reinforced the concept that human psychology does not change, and therefore this phenomenon occurs in predictable cycles, more or less once every generation. - Michael Mihalik (2007): Debt is Slavery — You can never be free, unless you are free from debt.
- Thomas J. Stanley and William D. Danko (1996): The Millionaire Next Door — Emphasizes the principles of frugality and stealth wealth, and that buying depreciating assets and status symbols is for fools.
— Taught me about how fear and greed cause speculative bubbles (tulip bulbs, beanie babies and now cryptocurrencies) in the stock market. These bubbles will always ultimately burst, leading to crashes and economic recessions. Further reinforced the concept that human psychology does not change, and therefore this phenomenon occurs in predictable cycles, more or less once every generation.
— You can never be free, unless you are free from debt.
— Emphasizes the principles of frugality and stealth wealth, and that buying depreciating assets and status symbols is for fools.Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
I participate in overseas surgical charity missions. Since 1997, this has amounted to anywhere from 10 to 30 days of volunteer work per year.
Our charitable giving has grown along with our wealth, and we opened a Donor-Advised Fund a couple of years ago. We contribute around 10% of our after-tax income to the DAF.
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
Apart from our last will and testaments, our estate plan consists mainly of our Donor Advised Fund.
We are proponents of the “Earning to Give” movement. As such, we intend to give nearly all of our wealth to charitable causes when we die.
However—apart from the DAF—we have yet to develop a specific plan.
Is there anything else you would like to share with us?
Yes, just one last quote: “It is one of the most beautiful compensations of this life that no man can sincerely try to help another without helping himself.” – Ralph Waldo Emerson
Great work with accumulating a healthy net worth! I had a question–you mentioned rebalancing your portfolio if you shift more than 2% from your targets within your index funds. What targets are you aiming for? Thanks for sharing your story!
I believe they mentioned this in the interview:
“Our targets are 55% in stock index mutual funds, 30% bond index mutual funds, 14% real estate, and 1% cash.”
Thanks!
Thank you for sharing. Impressive net worth and savings. Only question I have is why do you have muni bonds in a retirement account? Muni bonds pay federal and sometimes state tax free dividends. They are more tax efficient outside retirement accounts.
Great question! That was an error on my part; I do not hold muni bonds in my retirement account. I have one muni bond index fund (VWIUX), held in a taxable account.
My retirement accounts are:
401K = 100% VBTIX; Roth IRA = 100% VTABX; Trad IRA = 100% VBTLX
Fortunately, I am more careful in my investing than my writing.
…Vince Neil…👍🏻
Well done, enjoyed the story! Sincerely appreciate your dedication to giving. That’s a trait / practice we share.
Thank you for your kind words! Vince Neil is obviously a controversial figure, and certainly no angel. I find inspiration in people from all walks of life. The people who impress me most are those who have overcome great obstacles, such as MI 168 and MI 172.
Kudos to your charitable giving aspirations and your overseas medical work. Nevertheless, the irony of your comments – from someone making $500K/yr working in healthcare only 6 months/yr – about the cost effectiveness of U.S. healthcare and the cost of your own health insurance – is really hard to miss.
Yes, it is ironic, and thank you for raising this important point. This will be a long answer, and I will try to stay out of politics (which I believe has no place on this forum).
Aside from the United States, I have practiced medicine in 18 countries (nearly all of them low and middle-income countries). The care we provide and receive in the United States is equal to and sometimes better than what I have observed in those countries. But it is not worth the exorbitant premiums that we pay here as consumers. Many people with far greater intelligence than myself have examined this problem with an intent to solve it, thus far without success. Like other social problems such as student and consumer debt, this is a problem of our own creation. And it is up to you and me as citizens to fix it.
A bit of background: the first 11 years of my career as a physician was spent as an active duty military officer (branch withheld for anonymity purposes). That was no picnic, but though I often left work exhausted and sweaty and sometimes bloody, I always felt proud of my contributions in that role.
For me, the best part about being a doctor is being able to alleviate pain, anxiety, and suffering. The fact that I am now part of a system that replaces physical suffering with financial suffering has been a tremendous source of internal angst and discord for me, almost since the day I joined the civilian sector. I feel powerless to fix it from within, and so my conscience tells me — even though our nation already faces a shortage of physicians — my only choice is to leave the practice of medicine. Believe me when I say I am not the only American physician who feels this way.
Hello. I am also in the health care field but on a much lower economic level. I can’t set the amount I charge for my services for instance. Can’t most physicians choose to charge less for services for pts who are more financially challenged? Why does it always have to be the same as Dr Jones or Dr Smith charge? I hope you the best of luck in all the charity work you do. Thank you
Thanks for your questions, Jennifer! Believe it or not, I decide neither the fees nor the payments for my services. Wherever possible and legally allowable, I give my patients a break. I am in-network with every major health insurance company in my service area, and this means I am legally obligated to charge the fees set by my contract. Waiving or reducing a medical bill would violate the terms of my contract with my employer, which would result in my termination. More importantly, I would be fined by certain government entities, sued by the insurance company, and censured by the Medical Board of the state in which I live.
Thank you for your thoughtful reply. Very sincerely, my comment was not intended to be a personal attack. I sure I’d be very happy to have you as my anaesthesiologist, should I’d ever need one, and I’m sure your motives for practising medicine are as genuine as mine would be, should I have chosen a similar career path. And, finally, thank you for your service.
I, too, have worked and lived in many countries, including many of the ones to which the U.S. is compared when it comes to medical cost vs. outcomes – including UK, Canada, Australia, the Scandinavian countries – in fact, I’m in Finland right now.
No doubt, to bring the U.S.’s medical costs in line with these other countries, many simultaneous reforms would be required: certainly less ‘admin’ costs (as pointed out in another comment), but also tort reform, insurance reform (perhaps, but not necessarily, a ‘single payer’ system), and, yes, compensation reform. In all of these countries, medical specialists are not paid $500K for 6 months work and the gap between general practitioner and specialist compensation is a fraction of what it is in the U.S. (I have close friends in both camps).
Does that mean you shouldn’t have taken the compensation the ‘market’ offered you? Of course not – I would have done the same in your shoes. Nevertheless, math is math – the current medical compensation scheme in the U.S. is a key reason our countries medical costs are what they are.
Thank you again for your comments, Russ! I do not view any of your comments as a personal attack. Rather, I am happy that you have given me an opportunity to explain my situation in a bit more depth.
Specialist physicians in the United States earn higher salaries than those from any other nation, except for Australia and the Netherlands. I will not attempt to defend the bloated medical-industrial complex of the United States. On the contrary, I feel it is a mark of shame upon our nation, and I know we can do better.
As individuals, we try to maximize the compensation we receive in exchange for the work that we do. As members of a society on the other hand, we collectively decide how goods and services are valued (some people feel a mortgage broker should earn a 7-figure annual salary, for example). Provided it is obtained and used through Right Livelihood (i.e., without violence, stealing or deception), wealth is not considered a transgression against the universal cosmic law or dhamma. For example, the possession of wealth allows us to practice the virtue of generosity, and to support charitable causes, to engage in activities which help people who are less fortunate than ourselves, and to contribute to the general welfare of society.
But in the modern world, is there really any such thing as Right Livelihood?
Nowadays, it is virtually impossible to live and work without causing harm to someone, somewhere, in some way. For example, in most cases our food and clothing and cellphones are produced by people who live far below the poverty line. Indeed, our very existence is causing harm to our planet. By no means do I claim to be blameless. We physicians of course help sick and injured people, but in the process we also line our own pockets as well as those of insurance companies, and manufacturers of medical devices and pharmaceuticals. These corporations in turn funnel money to lobbyists who put pressure on politicians to write legislation that sometimes harms people. This is indeed a complicated problem, and far beyond the scope of this forum.
Upon understanding these truths, it should be easy for anyone to see why I am choosing to discontinue the practice of medicine in exchange for money.
We should all make decisions that are consistent with our morals. Though we have dedicated a great deal of time and energy and wealth for the benefit of others — and though we intend to donate nearly all of our wealth to charitable causes upon our deaths — I feel like we can and must do more.
Strong reply. Since I am a–and possibly the–mortgage broker earning a seven figure salary that you reference, I’ll add this to the conversation. Neither I nor any mortgage broker I know earns any salary. It’s all commission, based on how many units we close. Close more, earn more, as in any sales position. Also, neither I nor any highly compensated mortgage broker I know hypocritically bemoans the cost of the product we sell while raking in the profits from selling it. my point re your complaining about the cost of us healthcare while clocking in 500k parttime is more a statement about the complaining than the money. Anyone who has ever been under any sort of anesthesia understands how bright and precise the anesthesiologist needs to be to do it right. I begrudge you not a dime of the money you make. But understand, it is part of why our costs are so high, just as part of a mortgage’s costs are the commission the salesperson makes. We’re into complain about that, someone could rightly point out the irony. God bless amigo. And congrats on that impressive net worth. You’ve earned every dime.
It is not always easy to follow the principle of Right Speech. I had not intended my comment to be divisive, but yet now when I read it, I can see how it could be interpreted that way. I also see I have become caught up in discussing health care finance, despite earlier saying this not the proper forum for such a discussion. My apologies for both of these transgressions. I wish you well!
M-174 and M-126 – I agree with you both.
M-174, I agree that individuals should play their own personal ‘career’ games (ethically) to the best of their ability and then decide what to do with the rewards (including helping those less fortunate) AND that individuals aren’t responsible when those rules aren’t always in society’s best interests AND that these same individuals, as members of society, should do what they can to improve society overall, which might include accepting less favourable rules going forward for their particular career game.
M-126, it was M-174’s ironic comments about the cost of healthcare in the U.S. that prompted my original comment. Perhaps that I seem to have a high sensitivity to irony isn’t good for my participation in forums like this – or for the forums themselves – is something I need to work on. 🙂
I’ll now congratulate you both on your personal ESI journeys, wish you all the best, and do my part to return this forum to its core topic by concluding my part of this discussion. (And, one of these days, I’ll finally get around to becoming M-something myself, by submitting my own answers. I haven’t done quite as well as either of you, but I have still been abundantly blessed, financially and otherwise, for which I am most thankful.)
Very impressive, great job, enjoyed reading your success. Thank you
Thank you for sharing your story! Kudos to you and your partner for the commitment to giving back!
To answer your question: I believe you made a wise choice with the Roth conversion. You aren’t subjecting yourself to RMD’s in the future and the tax implications.
3. I converted the entire balance of my traditional IRA account to a Roth IRA in 2010.
This was a taxable event, costing me $64K at that time. As of this writing, I remain uncertain as to whether this was a wise move, or a colossal mistake.
Eager for feedback from your readers about this decision.
I very much appreciate your assessment of my decision, MI 81. The absence of RMD’s was the primary rationale behind my decision; only time will tell if it was worth $64K. I certainly welcome any dissenting/alternate opinions.
Dr who makes 500k/year complaining about cost of American healthcare. Adorable.
I’m curious….approximately what percentage of the combined net worth have each of you contributed? Impressive that you’re saving 100% of the 500k income per year. So that’s approximately 300k after federal and state taxes? Are benefits like 401K (individual and employer contributions) and HSA included in that figure?
Thank you for your questions, Dr. GFG. As to the question of which of us contributed how much: the answer to this question would fall into the category of divisive speech (possibly creating a rift between my partner and myself), so I must respectfully decline to answer. To answer your other questions, I can provide the following data (these are 2018 figures, as I have not yet looked at 2019):
AGI = $567,850
Fed tax = $148,617
401K = $61,000 (employee + employer match + age 50 catchup)
DAF contrib = $40,000 (donor-advised fund)
IRA contrib = $6,500
HSA contrib = $4,450
This leaves $307,283 (+ probably another $50K from rental income) invested in our taxable investment account.
Doctors absolutely deserve to make the kind of money they make given the amount of time and resources they spend studying. Cost of American health care is high due to unnecessary exorbitant administration costs, drug prices and laws that encourage defensive medicine and legal threats. How much doctors make has nothing to do with it!
Today a lot of young kids in technology, c-suite leaders, small business owners and start up
Founders riding on vc money are making that kind of a income. If they can make it, then why not a doctor who has dedicated his life to providing medical care to those in need?!
Well said!
“How much doctors make has nothing to do with it.”
This is simply untrue. Here’s one of many articles – this one from the AMA and from Harvard’s website (https://news.harvard.edu/gazette/story/2018/03/u-s-pays-more-for-health-care-with-worse-population-health-outcomes/) – that show average physician compensation is one of the 3 biggest contributors to higher U.S. healthcare costs – and the authors of this article were comparing general practitioner salaries. The larger gap in the U.S. vs. other countries between GP and specialist compensation simply exacerbates the problem.
See my direct reply to M 174 – I’m sure he’s a great doctor and he simply took what the ‘market’ gave him, which we’d all do in his shoes. The same goes for kids in tech, movie stars, sports stars, c-suite execs, etc. Nevertheless, how much U.S. doctors (especially specialists) has a lot to do with it.
I appreciate your comments, M-121. I try to observe the dhamma, part of which includes the practice of Right Speech. I certainly appreciate and share your concerns about the cost of American healthcare, however (please see my reply to Russ in the preceding comments).
Blaming physicians for the cost of medicine is a little like blaming airline pilots for the cost of airfare, in my opinion. Yes, we play an important role in the system, but the people who determine the cost of healthcare in the United States are way above our pay grade (insurance companies and government regulators or lack thereof). This is not the proper forum to engage in a discussion on health care finance and reform in the United States.
I’ve had my mortgage paid off for over 15 years. Could have leveraged a no fee 3.25% APR 15 year fixed mortgage at the time, put it in an index EFT and made a killing during that time. No regrets. We still have enough and had much less stress during those 15 years. Enjoying life and minimizing stress along the way to FI makes more sense to me.
I am happy to see that I am not the only one, Phillip. I am sure you and I have both taken a lot of flack for paying off our mortgages early. Maximizing returns is important, but so is minimizing stress and sleeping well at night. I believe that following the Middle Way will lead us to financial tranquility and peace.
I am also in the paying off the mortgage early camp. Life is not lived on a balance sheet. If it was, we would all live in a cardboard box, and eat top ramen 3 times a day. To me, the security of not having a mortgage Payment due Every month is worth sacrificing the “potential” gains that investing the Money may have brought.
Great job on accumulating an eight figure nest egg. Having an excellent income compensates for a lot of financial sins, especially for a prodigious saver.
I also converted all of my traditional IRA of about $20K to Roth IRA in 2010. Since my retirement in 2018 I converted additional $200K to top off the 24% federal income tax bracket. I plan to continue doing that until I have to withdraw RMDs in ten years. The reasoning is that if I do nothing, the RMDs on my roughly $3M IRA (rolled over from 401k) will place me into the 35% federal income tax bracket, assuming the tax rates remain the same. Also, Roth money will be more valuable to my high earner daughter as an inheritance, especially now that stretch IRAs have been killed off.
Can you share what you consider to be “higher quality investment blogs”, beside the superlative ESI Money?
Thanks for your comments, M169! Your comment brings to mind my favorite blog post from ESI Money: “How to Ignore the Basics of Personal Finance and Still Become Rich”.
Smart move on the post-retirement federal income tax arbitrage! I will try to remember that when the time comes for me.
Apart from ESI Money, the only personal finance blogs I read with any regularity are “White Coat Investor,” and “Physician on Fire”. Both of these are oriented towards physicians, who have traditionally been notorious for our naivete when it comes to investing. The authors of these blogs have done a tremendous service for our community through their work.
Good job. Really a testament that the ESI strategy works when you see people who have an event (like divorce) that resets them to zero NW, and they still reach astronomical heights!
I gotta know why Vince Neil is your hero?!?!
I wrote the answers to my interview answers somewhat hastily, and just put down the first names that came to mind. I think I was listening to a Motley Crue song at the time. Vince Neil has led an interesting life, marked by successes and failures, a few good choices and many not so good. He does however have a charitable foundation, the Skylar Neil Memorial Foundation, that has contributed millions of dollars toward cancer research.
Somehow I left out the man who is by far my greatest hero — Siddhartha Gautama, better known as the Buddha. The Buddhist law of cause and effect tells us that we should practice the virtues of charity and generosity “confidently & without embarrassment”. Though doing so may reduce our overt wealth, we will always gain far more than what we have given (suttas AN 5:34, AN 5:148, AN 7:49 of the Anguttara Nikaya). We would all do well to heed this advice.
Congratulations MI-174! I especially enjoyed reading your story as I am on a similar financial trajectory, but about 10 years younger.
What age did you realize that you had achieved financial freedom? Is that when you switched to part time practice? What will be the reason for you to retire altogether?
Are there any books or other guides that your have used as you have transitioned to your non-medical life? Anything else you’d tell your 45 year old self on things you did or wish you had done after achieving financial freedom to live your “best life?”
Thanks for sharing your story!
Thanks for your questions, gs! I will do my best to answer them here.
**What age did you realize that you had achieved financial freedom?
We crossed the $6 million dollar mark 6 years ago. That was when we finally felt confident that our passive income would be enough to sustain us indefinitely.
**Is that when you switched to part-time practice?
We increased our vacation time steadily, beginning in 2005. We are now at 6 months vacation per year, and it appears the next logical step would be to quit altogether.
**What will be the reason for you to retire altogether?
Please see my reply to Russ in the preceding comments.
**Are there any books or other guides that you have used as you have transitioned to your non-medical life?
I am sure there are many excellent books and websites available, but we haven’t looked into these yet.
**Anything else you’d tell your 45-year-old self on things you did or wish you had done after achieving financial freedom to live your “best life?”
Actually, we are happy with how we have lived our lives since we have achieved financial freedom. We cannot think of anything we would change. I believe the really difficult questions come AFTER we have achieved FI. What do we do now? Do we live a life of excess and debauchery? Endless travel and amusement? What about so-called constructive activities, like studying and taking continuing education classes, and physical fitness, and volunteer work? Will we be able to scrape together enough of these activities, and stick to a routine long enough for it to become a “second act”? Or will it all collapse, and we find ourselves sitting around the house slowly disintegrating? We are still struggling to find answers to these questions.
I hope these answers are helpful, and I wish you peace and prosperity as you travel along your own path. Please remember to try and keep everything in perspective, and never lose sight of what is truly important in this life!
Thank you MI 174 for your response!
Your last paragraph on “how to live your best life after achieving financial freedom” describes exactly where I am and what I am trying to figure out.
We have children, the last of whom will be off to college in 5 years. What I do is either “all in or all out” so cutting hours isn’t a realistic option. Even if I retire, we are locked into school schedules and school mode til then.
The finances have become a non issue, so now what? I 80% love what I do, especially the impact I have on patient’s lives. But the 20% is getting worse and increasingly bothering me more. Maybe it’s all in my head, because I know I no longer have to put up with it. But if I hang up the white coat, what to do next? For me, that’s the million dollar question!
Many people do not understand why there is a physician shortage in the United States, despite the widely held perception that we are overpaid. I don’t know your specific situation, but I suspect the 20% that bothers you involves a combination of stressors, such as:
**long hours at work (including night and weekend call), followed by extra hours performing work-related tasks at home
**loss of autonomy and decreased control within your work environment
**pressure to see more patients in less time
**computerized physician order entry, and electronic medical records in general
**how to pay your office staff in the face of bundled and capitated payments from insurers and CMS
**risk of malpractice suits
I assume you are in private practice, with fixed office expenses that would not decrease if you went part-time. One option is to find and partner with
another physician in your specialty who is competent, reliable, like-minded, not greedy or deceitful, and willing and able to split your practice 50/50. Yes, I am talking about a unicorn! Another option is to join the dark side and become a hospital employee. Then there is always locum tenens, and at least a few other viable options.
For me, working in a volunteer capacity outside the United States is physically more demanding but emotionally far more gratifying than what I do at home. It is perhaps the most important reason for me to continue the practice of medicine. If this sort of thing interests you, and when you come to a point in your life where it might fit into your schedule, I highly encourage you to give it a try. Whatever you choose, I certainly wish you and your family lasting happiness, which can really only be found by looking within ourselves.
Great work dusting yourself off after a divorce AND still reaching new highs!
Too often I see people ruined and dejected after that happens.
Inspirational!
Thank you for your comments, MI 162. Along with not having children, I consider the divorce to be my greatest failure. But we must not allow the failures of our past to get in the way of future success. Living in the past results in depression, while living in the future causes anxiety. We will only find peace by living in the present.
Why would you say divorce was your greatest failure? I was recently divorced, and I think I dodged a bullet! Now I have achieved a new high in my net worth, and sky is the limit. Better off single or with someone that’s more compatible. Congrats on your on going and future success Mi-174!
Mi-77
https://esimoney.com/millionaire-interview-77/
Great question! That was an error on my part; I do not hold muni bonds in my retirement account. I have one muni bond index fund (VWIUX), held in a taxable account.
My retirement accounts are:
401K = 100% VBTIX; Roth IRA = 100% VTABX; Trad IRA = 100% VBTLX
Fortunately, I am more careful in my investing than my writing.
I am just curious to know how after a divorce that wiped out so much of your net worth you achieved taxable assets of almost $8 million in taxable assets in such a short time. Was your group purchased with a resulting windfall?
Excellent observation and question, Ronald! Our taxable assets dwarf our tax-deferred accounts. No, there was no inheritance or any other windfall. It is really just a combination of high income + high rate of savings. We simply max out all of our contributions to tax-deferred accounts by February each year and then start socking the rest away in the taxable accounts after that. While we do not hesitate to spend freely on the things that please us, we are good at stealth wealth and keeping our expenses low. Arguably, not having children gives us a HUGE boost in our ability to save. I am pretty sure we are not very good at investing, because on the rare occasions when we discuss investing among our colleagues, we are ridiculed for our very conservative and very boring strategy.
I am just curious to know how after a divorce that wiped out so much of your net worth you achieved taxable assets of almost $8 million in such a short time. Was your group purchased with a resulting windfall?
Awesome achievement! Would you mind sharing your dividend investment strategy?
What are the funds have you invested in, which pays for your living expenses? I would like to retire in the next few years but am struggling with how I will generate income in my retirement. My 401k is in index funds and the little I have outside is in a brokerage account. Any advice would help.
**Would you mind sharing your dividend investment strategy?
Up until the past couple of years, we totally ignored dividends, and simply had them automatically reinvested in the funds from which they were paid. But a couple of years ago, we started having the dividends automatically deposited into our checking account. After all, we have already been taxed on them, so why not make better use of them? This achieved two purposes:
1. so we could see, real-time, what our income stream would look like in a retirement scenario. Seeing those monthly and quarterly deposits gave us a sense of confidence that yes, there will be plenty of income even in the absence of a paycheck.
2. With the combination of a continued paycheck and all this dividend income pouring into the checking account, we then turn around and reinvest whatever we do not spend (which is nearly all of it) back into the mutual funds. But not necessarily the funds that paid the dividends. Instead, we invest in such a way as to more precisely maintain our desired asset allocation. This strategy results in less volatility in our portfolio, again contributing to our sense of well-being.
**What are the funds have you invested in, which pays for your living expenses?
I drank the Vanguard Koolaid 25 years ago, and have never looked back. Mainly VFIAX, VFWAX, VTABX, VWIUX. Boring index funds with ultra-low expense ratios.
**Any advice would help.
Despite our apparent success, I do not feel qualified to give advice to anyone. All I can say is what has worked for us. We developed a well-informed personal investment plan (the easy part). We are not afraid to modify that plan if our life circumstances change, but apart from that, we adhere tenaciously to it. Admittedly, ignoring the noise can be difficult at times, but it seems to have worked well for us.
I am sure if you put your mind to it, you will come up with an excellent strategy that will allow you to meet all of your goals. Have confidence in yourself, and faith in your plan!
Great story! Hope you reach your 20M goal quickly. Totally agree that market timing has been my most costly lesson. Best wishes to you guys, love the charity work you’re so dedicated to. Wish we could setup some type of system that would focus more on our own problems here in the US, but totally get it and totally respect what you do. Very inspirational!! Keep up the awesome work and thanks for sharing.
Thank you for your kind words, Jim! I agree that we have some pretty significant social and environmental problems in the United States. Habitat for Humanity is one among hundreds of excellent NGO’s that operate within our nation. I am generally wary of government “workfare” programs, but some have been effective and produced lasting results (Works Progress Administration, Civilian Conservation Corps). I would like to see programs that would allow people to reduce their student debt in exchange for the meaningful reconstruction of public infrastructure, environmental cleanup, law enforcement, and military service, etc. As Ronald Reagan once said: “We cannot help everyone, but everyone can help someone.”
Funny how us physicians seem to make the same mistakes.
10-15 years ago, in my foolish early 30’s I purchased (and still own) the 7500 sq ft home, the 4 vehicles including a $200K exotic. Like you said, it’s not so much a financial mistake on our 7 figure take home, but an unnecessary hassle that detracts from our free time. We are in a low COLA suburban South anyway.
We too have diversified investments into commercial RE (approx. $4M) and retain full ownership of my medical practice with 3 providers and a pharmacy/pharmacist.
It looks like you don’t plan on working to full retirement age. Perhaps assisted by the fact you don’t have children to support. Despite being in my mid-late 40’s, I still have to support my two through college and likely medical/graduate school, necessitating at least another 12 years to my working career until they are both out putting me at close to 60. Then you think about wedding costs, first homes for them, etc. Never ends! I love them both though, and wouldn’t trade them for the world. Since I love the work as well, I can manage.
Life sure is what you make it out to be, and attitude is critical. Congratulations on your success and hope it continues!
I’m in early 40s and my Net worth is approaching 8mm through the same basic concepts as you have espoused. Aggressive savings and investing. I however wonder why you would be planning on working in your late fifties especially with no kids to support.
Thanks for your observations, Pangolin! I often find myself wondering the same thing, especially when I am up to my ears with a victim of a gunshot wound, a motor vehicle accident — or worst of all — some hospital administrator trying to tell me how to do my job.
In many ways, what we do is what defines who we are. We have to have a purpose in life (in my case, the need to continue helping other people, and to be a useful member of society). There is also a certain fear of the unknown. After decades of following any routine, we often become institutionalized, like the elderly prison librarian in “The Shawshank Redemption”. That is the best I can do to answer your excellent but difficult question. Sounds like you are absolutely killing it from a financial perspective, and I hope you achieve all of your goals as soon as possible!
Thanks for sharing your story and congratulations on what you have achieved. I know that some readers are not fans of the higher net worth articles on higher earners but I really enjoy them.
M73
https://esimoney.com/millionaire-interview-73/
I actually love the stories of people with super high net worth. I always wonder what they do differently than millionaire with just 1-2m, since my next goal is to achieve 10+ mil shortly. Thanks for sharing Mi-174!
Mi-77
https://esimoney.com/millionaire-interview-77/
What company do you volunteer with overseas? What type of specialties do they need?
Duke
I must respectfully decline to answer that question, as this might compromise my anonymity. If you are a physician — regardless of your specialty — there are dozens of NGO’s that could use your services; just look around on the internet. I would however encourage you to:
1. find one whose mission and values are consistent with your own, and is well-respected in the international community
2. remember that good intentions are not enough; do not fall into the trap of becoming a “voluntourist”
3. avoid getting into any situations where your presence undermines the public health infrastructure of the host community, even if inadvertently
Kudos to you! I am a physician for 40 years this year. You exemplify the true meaning of earn. I think your choice of medical specialty was the most important wealth factor. I also applaud that you continue to work when it is not financially necessary and you are a medical volunteer. Did your service in the military pay for your medical education? Is your partner a physician?
Thank you so much for your kind words, MI 172! Yes, my choice of medical specialty certainly helped by increasing my earning potential. This was pure dumb luck because the 25-year-old me was not aware of or concerned with financial compensation when I decided to undertake a residency in anesthesiology. It just seemed interesting to me, and something I could possibly see myself doing for a couple of decades. And yes, my medical education and residency training were paid for by many years of service as a military officer. It seems that in this life, we pay with some combination of time and money. No such thing as a free lunch. I decline to comment on my partner’s profession, except to say that she is not a physician.
I believe you have faced and overcome more hardships than I have, and I am truly humbled by your accomplishments, which are so much greater than mine. Especially how you navigated your children to success as a single mother, and how you cared for your mother and more recently your husband through the final chapters of their lives. The fact that you do so much charitable work — over and above all that you have already contributed — is an inspiration and a challenge to us all! May the saddest day of your future be no worse than the happiest day of your past!
You mention your life partner of 17 years and your salary and investments, but no mention of them or their contribution to your net worth over this period of time. As a fellow high earner with a similar net worth who got married after achieving this level of wealth, I’m just curious if you have some sort of agreement if you were to part ways as I assume the majority of your net worth has occurred since you were together? Obviously having somebody special in your life is always a great benefit to both parties, and I can totally understand the reluctance to marry again after being wiped out the first time. Personally my now wife and I discussed finances very openly and have a pre-nup in place that’s fair to both. Hopefully this question doesn’t come across as rude or a little too personal, but I can see were a life partner could be a little nervous of their financial future no matter how strong the relationship.
Thanks for your comments, ol1970; yours is an excellent question! I suppose the lion’s share of our wealth comes from the sweat of my brow, but without her constant and unwavering support I would be weak as a kitten. Yes, my divorce and the financial ruin which accompanied it have influenced my approach to subsequent relationships, but I believe we are both in a good place and each of us sees the other as a partner for life.
You are right however to observe the possibility of an uncertain financial future for my partner, in the event of the dissolution of our relationship. If she were to become especially nervous about the permanence of our relationship, all options remain on the table, including marriage. This is a subject we address quite openly and honestly, from time to time. For wealthy people considering marriage later in life, a properly executed pre-nup provides excellent protection for both parties. Though we lack any legal documents, we have taken strong measures (which I prefer not to discuss in this space) to mitigate those concerns. Whatever the future holds for us — together or apart — I am certain that neither of us will ever have to worry about our financial security.
Thanks for the response! It is a subject that I spent a considerable amount of time contemplating personally as like you all of the assets that now provide us a great lifestyle were off the sweat of my brow as well. Having “retired” and single at 43 with no desire to go back to a full time gig like before can be challenging when asking somebody who isn’t financially independent on their own two feet to join you in a lifestyle that doesn’t revolve around jobs or set schedules. There is definitely a balance and open conversation is an absolute must, putting yourself in the other person’s shoes is a good exercise. I’m glad to hear you’ve got a great gal to share your wealth with, I know my happiness increased by an order of magnitude once I found the right partner!
Interesting read, despite this great sinking feeling that modern US healthcare is a black hole. Borderline AMA here . . . way too much guesswork, insurance fraud and generalized mediocrity for my blood. Last physical I had featured this morbidly obese redneck ‘physician’ of sorts, thoroughly hung up on the fact I knew medical terminology A to Z with no further need for clarification. Same problem with the occasional lawyer, tossing around Latin-waxed legalese like a common jacka*s. Speak simply, clearly, or stick to the maxims, boss; no time for their silly ‘magical’ crap, likewise pretty offensive to see compensation completely over the moon. Who am I to judge, some might say. I will take that job, no problem. I’ve always judged humanity at face value for the animals they really are, and would only love to toss the entire industry out the window, right, including the sick joke that is now Medicare, except there’s too much money being made to stop any of it. Full-tilt insanity, then, just like Congress. My premiums are fully paid, a sky-high deductible of course, but their services never get fully used. Rarely or virtually none, actually. Cash only, here and there at choice clinics and then self-care within reason. I lie about my income, sometimes, without guilt. Finally, one surgical tool, kept around the house for all serious problems: my beloved Mossberg.
HL, tip of the hat to old Hippocrates.
Thank you for your observations, Vigaro. I try my best to avoid medical jargon (know your audience). And like you, I love my Mossberg! Stay safe out there, my friend!