Why Doctors Should Retire As Multi-Millionaires

A doctor who does not retire like many millionaires has failed. There, I said it. Hot take. Tweet it out. Maybe it will make some people feel bad, but I don’t care anymore. Because I think those doctors who are not on the road to multi-millionaires need to be shocked because of their dissatisfaction, and maybe this “hot take” will help to do it.

One of the worst statistics out there is presented by a chart comparing the total number of doctors at different ages. Unfortunately, Medscape apparently stopped collecting (or at least publishing) the “years” of this data a few years ago. The last survey was done in 2019, and it looked like this.

One-third of doctors in their 60s are not even millionaires. The previous year’s chart was even more surprising, as it showed that 11%-12% of doctors in their 60s didn’t even have a net worth of more than $500,000, and only 48% of doctors over the age of 65 had multi-millions. This is shocking. Net worth – everything you own minus everything you owe. We’re not just talking about your retirement nest egg. We’re talking about everything—your bank account, your investments, your retirement accounts, your home equity, your cars, clothes, jewelry, everything. Less than half a million dollars after 30+ years of paying doctors.

Hopefully, given recent investment returns and home appreciation, these numbers look better today than ever in 2019. But they need to look their best for me to feel confident. I mean, bad things happen to people, right? Perhaps the doctor had many divorces, dividing his wealth and income in half each time. Even if they were disabled early but could not get disability insurance due to health problems. Or they were defrauded of a large sum of money.

But that doesn’t happen on the part of doctors, sorry. The reason doctors don’t build wealth is because they don’t do steps 2 and 3 of this very complicated wealth building formula:

1. Make more money
2. Don’t spend a lot of money
3. Take the difference between what you make and what you spend and invest it in some meaningful way

Yes, it’s that simple.

How Much Should Doctors Retire?

So, how much money should a doctor have in retirement? In 2023, the average physician earned $363,000. The average doctor is out of practice in his early 30s. Let’s say a mid-30 year career. If you start saving 20% ​​of $363,000 ($72,600) for retirement that first year without living and earning 5% real (after inflation) on it, you should, after 30 years, have

=FV(5%,30,-72600) = $4.8 million

in your nest egg. Also, the value of your house and all your belongings. It should probably be $6 million anyway, right? You get to use 80% of the doctor’s income ($290,400 per year or $8.7 million total), and at the end, you have $6 million left over. That’s how it should work. That’s what financial success looks like. Even if you don’t start saving anything for retirement for the first five years, you should end up with a nest egg.

=FV(5%,25,-72600) = $3.5 million.

That is in the case of many millionaires. And these are all real numbers. I mean, if you start today, the amount of money you end up with in your nest egg will be much higher. It will be eight figures at least. So yes, if you end up with six figures, you really hit the ground running.

How does that usually happen? It happens because the doctors keep their mouths shut. I know it’s hard for the average American even a medical student or resident to imagine that a doctor can spend all of his $400,000 income—or even $200,000 income. But I can assure you that it happens all the time. It’s not that hard. It actually takes a little discipline to save, regardless of your income. You have to tell the “Present You” that the “Future You” will need some of that money.

More info here:

Real-Life Examples of How WCIers Live, Worry, and Cash Out in Retirement

How Much Money Do Doctors Need to Retire?

Compound Interest Opportunities

Albert Einstein is said to have said that compound interest is the eighth wonder of the world. It can certainly work some magic over the years. Check your household income and expected career length on this chart and compare how you’re doing.

For most of the money a doctor’s house earns, multi-millionairehood (in today’s dollars) should be achieved within 10-30 years. If you’re not on track to do that, it’s time to make some changes so you can. Here are some possible changes you need to make.

#1 Negotiate a better salary, change jobs, or streamline your practice: Income is important, and it is easy to build wealth with a high income.

#2 Get a written spending plan: Know exactly where your money is going, make sure the money is spent in accordance with your values, and set aside 20% of your net income for retirement.

#3 Make your money work harder as you: Do you use tax-sheltered savings accounts like 401(k)s, 457(b)s, Backdoor Roth IRAs, and HSAs? Are your investments smart (cheap, highly diversified index funds or well-managed real estate)? Are you taking a fair amount of risk, or is it all cash or bonds? Are you receiving unreasonable advice or unreasonable fees?

You can do this. Hundreds of thousands of doctors before you do, and they are no smarter or work harder than you. A combination of a little financial knowledge and a little financial discipline goes a long way when combined with a doctor’s salary.

WHAT DO YOU THINK? Are you ahead or behind where that chart says you should be? Will you retire as a millionaire? Why or why not?