Author Topic: Incredible Salary: helpful or hindrance to an early retirement?  (Read 14468 times)

PhysicianOnFIRE

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Incredible Salary: helpful or hindrance to an early retirement?
« on: February 25, 2016, 07:36:33 AM »
It's quite obvious that a high salary can accelerate the time to Financial Independence. The higher the income, the higher the potential savings rate, the quicker FI is attained.  For me, it happened 9 years into my career as a medical doctor, at age 39.

I haven't retired and don't have any plans to do so in the next 5 years.  I put in many years of hard work for low and no pay to have the privilege of practicing as a physician, and I can't imagine walking away just as I cross the 25x expenses threshold.  In 5 to 7 years, I could have double.  Will I need it?  Doubtful.  But I could do a lot of good with the extra, and have a comfortable cushion as well.  I also like to get a good return on investment.  12 years of rigorous education and training for a 9 year career isn't such a great ROI.

I'm interested in hearing other perspectives. If you are close to FI, and find a job that doubles or triples your pay, would it alter your plans for an early retirement?  Would One More Year (or more) be more worthwhile if your workdays became much more valuable? 

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #1 on: February 25, 2016, 08:07:04 AM »
I would say hindrance.

I was getting a regular salary (research type software) when I went over to the dark side ( Wall St.).
It is so hard to let go of the much higher salary...

I am FI but not RE  (too old to call it RE).

JLee

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #2 on: February 25, 2016, 08:09:21 AM »
I would say hindrance.

I was getting a regular salary (research type software) when I went over to the dark side ( Wall St.).
It is so hard to let go of the much higher salary...

I am FI but not RE  (too old to call it RE).

By 'regular salary' do you mean U.S. median household income, or not Wall St. levels of high?

nereo

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #3 on: February 25, 2016, 08:13:02 AM »
It's absolutely helpful, but only if you let it be a help.  There's absolutely no income level where a person can't spend themselves into bankruptcy.  Just look at the long list of celebs, rockers and athletes who used to be multimillionaires.

But if you think it's any different towards the lower end of the spectrum, take a look at the indebtedness of those earning less than the median ~$52k median family income.  Something like 90% carry more non-mortgage debt than savings.

Ultimately it's about how much you can save on an absolute basis and how much you spend.  A very high income is definitely an asset (though one that can be squandered quite easily).

Vilgan

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #4 on: February 25, 2016, 08:22:35 AM »
Personally, a huge help. I make 2-3x what I was making when I was a W-2 employee and will have the freedom to choose way earlier. Before I was on a 10 year plan. Now I'm on a 5 year plan. I don't know that I'll quit cold turkey the instant I hit FI amounts since starting a business was always one of my ambitions, but I certainly won't grind away for the 10 years I was originally planning.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #5 on: February 25, 2016, 08:32:38 AM »

It's absolutely helpful, but only if you let it be a help. 

+1.

I also like to get a good return on investment.  12 years of rigorous education and training for a 9 year career isn't such a great ROI.

This attitude I don't understand. Who cares how long you trained?

What's the ROI on years of your life?  How much would you pay for extra years when you're old?

The only thing that should matter once you're FI is how do you want to spend your time?  You're completely free. Beholden to nothing. If work sounds good, and is literally the thing you'd pick most out of everything in the world, do it!

But to continue to work because of some weird thought about how long it took you to train for the job?  Read about the sunk cost fallacy, and then move on, cause those years of training are down the drain, so throwing more good years after them in the career seems like the opposite of logical to me.

The amount of training is not relevant. What do you want to do is. That's it. If you want to work, work. If there's something you can think of that's better, do that.  But don't talk about the years of training either way. It's irrelevant.  :)

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Would One More Year (or more) be more worthwhile if your workdays became much more valuable?

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aFrugalFather

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #6 on: February 25, 2016, 08:36:48 AM »
I think most people that find themselves in a high paying job don't get there by accident, they get there through hard work and an (arguably) innate drive to improve their lot in life.  Typically these (type A?) personalities have a hard time "leaning out" as they say.

Escalation of commitment
From Wikipedia, the free encyclopedia
Escalation of commitment refers to a pattern of behavior in which an individual or group will continue to rationalize their decisions, actions, and investments when faced with increasingly negative outcomes rather than alter their course. The related term sunk cost fallacy has been used by economists and behavioral scientists to describe the phenomenon where people justify increased investment of money, time, lives, etc. in a decision, based on the cumulative prior investment ("sunk costs"), despite new evidence suggesting that the cost, beginning immediately, of continuing the decision outweighs the expected benefit. These decisions are irrational in their current context but in alignment with decisions and actions previously made, and they can be influenced by a variety of determinants and contexts. The dilemmas leading up to such decisions usually involve the prior choices no longer working or causing personal or group losses. While there are options to either cease current actions or continue on with them, neither has clear outcomes or is the obvious choice.[1] Escalation of commitment then occurs when persistence is chosen over withdrawal.

The term describes poor decision-making in business, politics, and gambling and is frequently used in psychology and sociology. In the latter, it is also referred to as "irrational escalation", "irrational escalation of commitment" or "commitment bias". Examples of this are frequently seen when parties engage in a bidding war; the bidders can end up paying much more than the object is worth to justify the initial expenses associated with bidding (such as research), as well as part of a competitive instinct. The phenomenon and the sentiment underlying it are reflected in such proverbial images as "Throwing good money after bad" or "In for a penny, out for a pound".

The term has also been used to describe the United States commitment to military conflicts including Vietnam in the 1960s and 1970s and in Iraq in the 2000s, where sunk costs in terms of dollars spent and lives lost were used to justify continued involvement.[2]

CowboyAndIndian

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #7 on: February 25, 2016, 08:39:42 AM »
I would say hindrance.

I was getting a regular salary (research type software) when I went over to the dark side ( Wall St.).
It is so hard to let go of the much higher salary...

I am FI but not RE  (too old to call it RE).

By 'regular salary' do you mean U.S. median household income, or not Wall St. levels of high?

Yup.
The salary matched industry standards, just not Wall St. standards.

Nowadays, the gap has gotten a little less.

For example one of the guys I know used to charge $300/hour in 1996 (C++ and Sybase were very coveted skills in Wall St. in those days. For the record, I have never made and will never make anywhere near those astronomical rates). 

Nowadays, unless you have a great mix of business and technology, you can only get about $100 per hour. Also, in the last 10 years, the companies pay you by the "professional day" (ie 8 hours, even if you worked 16), while previously you billed for the actual number of hours you worked.

JLee

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #8 on: February 25, 2016, 08:47:10 AM »
I would say hindrance.

I was getting a regular salary (research type software) when I went over to the dark side ( Wall St.).
It is so hard to let go of the much higher salary...

I am FI but not RE  (too old to call it RE).

By 'regular salary' do you mean U.S. median household income, or not Wall St. levels of high?

Yup.
The salary matched industry standards, just not Wall St. standards.

Nowadays, the gap has gotten a little less.

For example one of the guys I know used to charge $300/hour in 1996 (C++ and Sybase were very coveted skills in Wall St. in those days. For the record, I have never made and will never make anywhere near those astronomical rates). 

Nowadays, unless you have a great mix of business and technology, you can only get about $100 per hour. Also, in the last 10 years, the companies pay you by the "professional day" (ie 8 hours, even if you worked 16), while previously you billed for the actual number of hours you worked.

"Only" $100/hr is nearly 8 times the hourly rate of the median per-capita income level in the US.  I am curious how many people thinking it's harder on high income would change their mind if they were making $13/hr. :)

Fishindude

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #9 on: February 25, 2016, 08:48:25 AM »
I would think that anyone committed enough to get a medical education sincerely enjoys that line of work.  With that being said, what's the hurry to FIRE?
Enjoy the work, enjoy the income and have some fun with it, while still stashing plenty away for eventual retirement.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #10 on: February 25, 2016, 08:57:28 AM »
Seems a little too black and white for me.  Are you suggesting you are going to work until you retire and then are done forever? 

If you are clearly worth that higher salary in the marketplace, I might consider slowing down or consulting if possible once you reach your target.

I am also having a hard time with where you are placing value.  Can't really tell what your speciality is, or if you have your own practice, but if you don't need the cash, you could travel and give back in different ways that would allow you to make use of your education and do some great stuff in the world - there are some great examples of physicians who have made cash and then traveled to developing countries to practice medicine for those less fortunate.  Doing something like this would allow you to make use of degree, but in a different way. 

Guses

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #11 on: February 25, 2016, 08:59:10 AM »
12 years of rigorous education and training for a 9 year career isn't such a great ROI.

Another way to look at it is that you have worked for 21 years and now have saved 25 times your expenses. This is not any different from the other Joe Blow working for 20 years in a menial/normal job and saving for an earlier retirement.

So to answer the initial question,  yes, having more money makes it easier to retire early.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #12 on: February 25, 2016, 09:18:45 AM »
Seems a little too black and white for me.  Are you suggesting you are going to work until you retire and then are done forever? 

If you are clearly worth that higher salary in the marketplace, I might consider slowing down or consulting if possible once you reach your target.
 

Why?  Isn't this just One More Year (OMY) syndrome?  If you've "won the game" why would you keep doing something unless you'd also be willing to do it for free?  Your life is finite.

2buttons

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #13 on: February 25, 2016, 09:42:38 AM »
You don't have to, but even MMM has projects he does.  Personally, I would do whatever I wanted and would "work"  as much or as little as  I want and try to somehow monetize it if possible, but if its not possible, who cares. 

spud1987

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #14 on: February 25, 2016, 09:45:41 AM »
For me a high salary is helpful in the sense that I am still able to have a high savings rate without worrying about spending too much. For example, our household spending was around 70k last year and our savings rate was 65-70%. This is obviously helpful because we can achieve FI in a few more years by spending at pretty normal levels.

That being said, the high salary is a hindrance in my case because it doesn't force us to cut spending as much as we could. Spending an additional 20k/year doesn't move the needle that much for our savings rate and only puts off FI by an additional two years or so. It makes it hard to justify avoiding restaurants/bars/vacations/etc. This is a minor problem to worry about though and I would much rather have the high salary.


JLee

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #15 on: February 25, 2016, 09:53:54 AM »
For me a high salary is helpful in the sense that I am still able to have a high savings rate without worrying about spending too much. For example, our household spending was around 70k last year and our savings rate was 65-70%. This is obviously helpful because we can achieve FI in a few more years by spending at pretty normal levels.

That being said, the high salary is a hindrance in my case because it doesn't force us to cut spending as much as we could. Spending an additional 20k/year doesn't move the needle that much for our savings rate and only puts off FI by an additional two years or so. It makes it hard to justify avoiding restaurants/bars/vacations/etc. This is a minor problem to worry about though and I would much rather have the high salary.

Did you factor in the reduced amount you would need if you were to cut your spending? $70k requires a 1.75mil 'stache while $50k requires a 1.25mil 'stache.  Granted, if you're saving $200k+/yr, that doesn't matter all that much...

Now, if your spending was $25k/yr (MMM levels), you'd be saving roughly $250k/yr and would be 2.5 years from FI starting from 0.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #16 on: February 25, 2016, 09:57:53 AM »
For me a high salary is helpful in the sense that I am still able to have a high savings rate without worrying about spending too much. For example, our household spending was around 70k last year and our savings rate was 65-70%. This is obviously helpful because we can achieve FI in a few more years by spending at pretty normal levels.

That being said, the high salary is a hindrance in my case because it doesn't force us to cut spending as much as we could. Spending an additional 20k/year doesn't move the needle that much for our savings rate and only puts off FI by an additional two years or so. It makes it hard to justify avoiding restaurants/bars/vacations/etc. This is a minor problem to worry about though and I would much rather have the high salary.

Right, but imagine those of us who are earning in the $35k range.  To achieve a 70% savings rate we'd need to live on just $10,500.  It can be done but it's not even the same ballpark in terms of financial liquidity.  Spending an extra $20k/year for us is literally the difference between financial bankruptcy and working till we die or retiring in just over a decade.

jms493

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #17 on: February 25, 2016, 10:00:25 AM »
Take the money away...do you enjoy being a Doctor???  If so keeping doing it until you don't enjoy it anymore.

The high salary is a nice bonus to a great and fulfilling career.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #18 on: February 25, 2016, 10:05:50 AM »
Take the money away...do you enjoy being a Doctor???  If so keeping doing it until you don't enjoy it anymore.

The high salary is a nice bonus to a great and fulfilling career.
Pretty much exactly what my dad did.  Could have retired a decade sooner and adjusted his work somewhat to eliminate the BS and do what he loved.  What drove him to retire wasn't his savings or the job, but simply that his body couldn't keep at it.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #19 on: February 25, 2016, 10:10:54 AM »
You also don't have to squirrel that extra money away.  Put it to work doing good.  There's a very interesting thread going on right now about giving back.  Alternately, if you hit your number, but want to be a doctor and don't need money, you probably have great volunteer opportunities!  You are extremely lucky!

Spitfire

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #20 on: February 25, 2016, 10:12:36 AM »
If you are making, say, $500k a year for 9 years the 12 year grind is still worth it ($4.5 mil over 21 years is still > $200k a year).

There is also nothing wrong with continuing to work if you enjoy being a doctor, not everyone has to hate their job and get out ASAP.

ChaseJuggler

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #21 on: February 25, 2016, 10:24:22 AM »
As one of the lower income earners on this forum, I plan on quitting my job a nanosecond after hitting my number. There's no need for me to be conservative, since I could get my salary back in a heartbeat if I needed to return to work (I teach high school math & science.)

The low pay kind of sucks, the the higher job security allows me to be far less conservative when it's time to pull the trigger.

brandino29

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #22 on: February 25, 2016, 10:28:44 AM »
As a soon to be MD myself, I am looking forward to the higher income in helping my family secure total financial independence early, but even more than that I am excited about doing what I have always wanted to do for as long as I am enjoying it.  The years you put into training should be irrelevant. 

TheAnonOne

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #23 on: February 25, 2016, 10:31:02 AM »
If you are making, say, $500k a year for 9 years the 12 year grind is still worth it ($4.5 mil over 21 years is still > $200k a year).

There is also nothing wrong with continuing to work if you enjoy being a doctor, not everyone has to hate their job and get out ASAP.

Yea, no reason to leave if you like what you do.

I write software and we make north of 200 combined but almost all of it is my job. I still have probably 10ish years to go, because I want a lot of travel in retirement. This will put me @ 35 years old, so the rush is a bit less than someone who is currently 35 looking @ 45....

Also, views change overtime. I may get to the 8th year and get out, or switch to part-time. It is hard to say what my 33 year old self will do.

TheAnonOne

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #24 on: February 25, 2016, 10:32:42 AM »
As a soon to be MD myself, I am looking forward to the higher income in helping my family secure total financial independence early, but even more than that I am excited about doing what I have always wanted to do for as long as I am enjoying it.  The years you put into training should be irrelevant.

They might be irrelevant for the math, though, I think mentally they probably play a bigger role than one would admit.


spud1987

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #25 on: February 25, 2016, 10:37:12 AM »

Did you factor in the reduced amount you would need if you were to cut your spending? $70k requires a 1.75mil 'stache while $50k requires a 1.25mil 'stache.  Granted, if you're saving $200k+/yr, that doesn't matter all that much...

Now, if your spending was $25k/yr (MMM levels), you'd be saving roughly $250k/yr and would be 2.5 years from FI starting from 0.

Yes, we could be FI at spending 50k/year in the next two years. It will take over 4 years if we keep spending at 70k/year. I realize that two years is a long time. However, I consider myself quite lucky that I have got my wife on board with the FIRE plan as it currently stands. We have cut most of the easy expenses from our budget (cars, cable, etc.). 37k of that 70k constitutes our mortgage, which is about as best we can do in the bay area. Our expenses aren't much higher than MMMs if you take out housing (as he does).


Right, but imagine those of us who are earning in the $35k range.  To achieve a 70% savings rate we'd need to live on just $10,500.  It can be done but it's not even the same ballpark in terms of financial liquidity.  Spending an extra $20k/year for us is literally the difference between financial bankruptcy and working till we die or retiring in just over a decade.

I agree that having a high salary makes things much easier. That is why I would never complain about it, other than to point out that it makes it harder to actively think about saving. I readily admit it is a nice problem to have.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #26 on: February 25, 2016, 12:18:52 PM »
My answer, who cares! I think the ultimate goal is financial independence, not necessarily retiring early. It will certainly lead to financial independence sooner. High salary gives you options. You can decide to retire early, or continue to work but at least you know the decision is in your hands not in the size of your stache.

brandino29

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #27 on: February 25, 2016, 12:54:10 PM »
My answer, who cares! I think the ultimate goal is financial independence, not necessarily retiring early. It will certainly lead to financial independence sooner. High salary gives you options. You can decide to retire early, or continue to work but at least you know the decision is in your hands not in the size of your stache.

I completely agree.  The way the OP posed the question, however, I read it along the lines of "should I continue working to earn even more financial security just because I am currently earning a really high salary?" 

Almost everyone on this forum would answer that particular question - "No, absolutely don't work more for money's sake, but if you are FI and enjoy doing the work you are doing, then as you wish."

Chasing money simply to have more money than you need is a fool's errand. 

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #28 on: February 25, 2016, 02:25:08 PM »
As a soon to be MD myself, I am looking forward to the higher income in helping my family secure total financial independence early, but even more than that I am excited about doing what I have always wanted to do for as long as I am enjoying it.  The years you put into training should be irrelevant.

It should be irrelevant, but it isn't. At least for me. Spending 10 years in school earning so little - it's almost like I enjoy the overcompensation now to make up for what I didn't have then. Or, on the other side, I know what it's like to have so little money, the fact that money comes easily and quickly now is hard to turn away. Or, as an analogy, I'm like my rescue dogs- they've known hunger and it doesn't matter how many years I fill their bellies, they are ALWAYS hungry.

Altons Bobs

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #29 on: February 25, 2016, 02:30:30 PM »
It would be helpful, not hindrance to me.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #30 on: February 25, 2016, 02:46:10 PM »
I would definitely classify income above current levels (~105k self, ~145k joint) as diminishing returns. Taxes go up and spending temptations do too. As is, just a few years of really trying and we'll be coasting for the rest of our lives.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #31 on: February 25, 2016, 02:50:13 PM »
I don't think it's ever a hindrance - most people who make a lot of money somehow end up with home equity and a pension, pay more into and can collect more from government pensions - usually some mutual fund salesman convinces them to at least put something aside. They end up OK in spite of themselves for the most part when they make a few hundred thousand plus a year.

You cant always say the same for people on the other end of the spectrum.

That being said starting on a low salary and escalating to a big one over time would seem to be the optimal recipe for a big saver.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #32 on: February 25, 2016, 02:57:50 PM »
I spent 8 years in school for an MS - doesn't really enter into the calculation for me.  IMO the more relevant questions are 1) do you feel good about and enjoy your job? 2) Does it feel like you are making a contribution? and 3) Does it provide you enough free time to enjoy things you like outside of work?

If yes - I could see why you would want to continue to work for a bit.  Same with me.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #33 on: February 25, 2016, 03:14:09 PM »
I think it depends on your relationship with money and where you are in your life. If you are a spender and want to spend more on a fancy car, house, new gadgets, clothes, and other status symbols, it can be a hindrance. If you have reached the point where you know you want to retire early, it would be a huge help. I don't make a ton of money, but an extra 10-15k would make a huge difference in how quickly I could retire. When I was younger and more concerned about status objects and convinced I couldn't retire at all, it would have been a hindrance.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #34 on: February 25, 2016, 04:36:36 PM »
First of all, most people live beyond their means, so their income makes no difference.  Actually some with very high incomes think they can take on even more debt than a lower income person which puts them in a deeper hole.  Sine this is the MMM forum, that example does not apply to us.

Like you, I am a physician, and I too have a hard time retiring early.  Realistically if we downsized our home, and cut our vacation fund a little we can retire today. But, my wife and I really enjoy our fancier vacations and we want to continue them well into retirement.  Also, I have recently taken up a relatively expensive hobby.  Plus, my work is fulfilling.  I see absolutely no reason to stop just yet.  After all, work funds a whole lot of entertainment and experiences for myself and my family.  We do not spend our cash on useless trinkets and baubles or status symbols like Mies puts it.  All this extra cash is spent on experiences. What I did accomplish is to cut how much I work so that I enjoy the time a work much more as well as have more free time to enjoy those hobbies. 

Realistically if I made less money I would already be retired today.  It is my high income with the increased lifestyle that keeps me working.  I did tell myself and my wife that the minute work starts interfering with the overall joy of my/our life, or even worse cuts into my ability to eat healthy and exercise,  I will keep cutting shifts until I am enjoying my lifestyle or become retired. Honestly I am in a very lucky position.  Therefor yes, my high income keeps me from retiring sooner.

PhysicianOnFire, please forgive me for the following criticism.  I believe one reason you are still working is because of fear.  The fear that you don't have enough.  I say this because your goal is not 25x, correct me if I am wrong but closer to 50x.  Although I empathize with it, I believe this fear is irrational. 

tobitonic

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #35 on: February 25, 2016, 04:51:47 PM »
It's quite obvious that a high salary can accelerate the time to Financial Independence. The higher the income, the higher the potential savings rate, the quicker FI is attained.  For me, it happened 9 years into my career as a medical doctor, at age 39.

I haven't retired and don't have any plans to do so in the next 5 years.  I put in many years of hard work for low and no pay to have the privilege of practicing as a physician, and I can't imagine walking away just as I cross the 25x expenses threshold.  In 5 to 7 years, I could have double.  Will I need it?  Doubtful.  But I could do a lot of good with the extra, and have a comfortable cushion as well.  I also like to get a good return on investment.  12 years of rigorous education and training for a 9 year career isn't such a great ROI.

I'm interested in hearing other perspectives. If you are close to FI, and find a job that doubles or triples your pay, would it alter your plans for an early retirement?  Would One More Year (or more) be more worthwhile if your workdays became much more valuable?

To answer the question you posed in the title, I see it as an incredible help, not hindrance, to an early retirement. Calling it a hindrance is the kind of stuff the blog founder gives facepunches for; it's somewhat like a CEO saying s/he can't retire because it would mean driving used cars instead of buying new ones. :^)

To answer the question you posed at the end of your post, I reached the point where I made more from personal work at home than I do from showing up to work every day more than a year ago, so I've been "day job FI" for a while now. So why do I keep showing up to work?

Because I find it very purposeful. I'm a preschool teacher; it makes an incredible difference in the lives of the kids I work with if I'm there or not. As an aside, working further pads our finances, provides cheap health insurance, and allows us to justify donating a good amount to charity each month. I sometimes see my job as volunteering as a teacher for 40h a week while receiving a check for doing so. I love being able to make a tangible difference with my time and skills locally, and with the finances we obtain globally.

So no, a bigger salary wouldn't change my plans because I'm not just working for the money. I see a lot of parallels between medicine and education, in that the people who do it the longest and find the greatest satisfaction from it aren't doing it for the money, but for the people they serve. If your salary is what's primarily keeping you in the profession, it sounds like you aren't finding purpose in it any more, which, for me, would be a sign that it were time to leave, especially once FI.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #36 on: February 25, 2016, 05:34:45 PM »
It's quite obvious that a high salary can accelerate the time to Financial Independence. The higher the income, the higher the potential savings rate, the quicker FI is attained.  For me, it happened 9 years into my career as a medical doctor, at age 39.

I haven't retired and don't have any plans to do so in the next 5 years.  I put in many years of hard work for low and no pay to have the privilege of practicing as a physician, and I can't imagine walking away just as I cross the 25x expenses threshold.  In 5 to 7 years, I could have double.  Will I need it?  Doubtful.  But I could do a lot of good with the extra, and have a comfortable cushion as well.  I also like to get a good return on investment.  12 years of rigorous education and training for a 9 year career isn't such a great ROI.

I'm interested in hearing other perspectives. If you are close to FI, and find a job that doubles or triples your pay, would it alter your plans for an early retirement?  Would One More Year (or more) be more worthwhile if your workdays became much more valuable?

To answer the question you posed in the title, I see it as an incredible help, not hindrance, to an early retirement. Calling it a hindrance is the kind of stuff the blog founder gives facepunches for; it's somewhat like a CEO saying s/he can't retire because it would mean driving used cars instead of buying new ones. :^)

I understood the initial question differently, and I get why it matters, even though rationally it doesn't make sense.

It's easy to say that the second you get to FI, you're golden, the sooner the better.  And there's certainly the one more year syndrome, where you're not quite sure you have enough.

But this is a little different.  This is the concern that maybe this whole early retirement thing isn't the perfect answer that solves all one's problems.  And maybe 5 or 10 years hence, you'll regret having pulled the plug and then can't really go back (at least easily).

I get it.  Although I don't make anywhere near what the doctor makes (probably), I have a government law job that is effectively guaranteed for as long as I want it.  It pays well, it's reasonably enjoyable, and if I leave, I'm not getting it back, or anything remotely close in the legal profession.

So the decision is not whether I've done the math right.  It's whether I'm sure about this whole early retirement thing, and whether I'm going to seriously regret it a few years down the road and then can't go back.

That's what OP's post struck me as.  It's all fine and good rationally to say you've got enough, but what if you later decide that this whole live frugally thing was for the birds, how bad are you going to feel now that you can't go back.

I get the point that it's easy while you're still saving towards FI to say that you'll make the purely rational decision when you hit your number.  But determining that you're truly on board with the early retirement/enough model suddenly gets a lot more real when you hit that number, and I can see questioning how committed you really are.  If you're not making much, maybe you feel like no big deal, you just go back to something comparable if you decide you didn't like early retirement.  But the doctor making the high salary or the person with the guaranteed job may not feel the same way, so it can make the decision harder--not rationally, but emotionally.

Abe

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #37 on: February 25, 2016, 06:57:14 PM »
I'm in a similar boat - my wife has finished residency and I have another 2 years. We currently live on my salary and save hers. We will be FI in our late 30s assuming I have an average-paying academic surgical position. I think that we will both continue working but either not take call or try to reduce our workloads in other ways. That's not necessarily because of all the effort we've put in, but because we do enjoy our professions. If our groups aren't flexible with us taking long periods off, then we may have to retire after all. Our ultimate goal is setting up scholarships with the extra money; if you have a specific reason to work other than making more money, than enjoy that time working. Otherwise, don't keep at it just because you spent so much time training. The past and its trials have gone by, nothing you do in the future changes that.

PhysicianOnFIRE

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #38 on: February 25, 2016, 08:12:31 PM »
OP here. 

So many great responses!  Thank you all for taking the time to consider the question and reply.  I'll take some time to digest all the feedback, sleep on it, and respond to some of the key questions and statements tomorrow. 

Sol's OMY thread describes my line of thinking in a more grandiose way.  I'm on a 5MY plan that isn't chiseled in stone, but I'm pretty comfortable with it.  If I become uncomfortable with it, I've got a bottle of liquid paper I can employ to alter that plan. 

Thanks again, Mustachians. Cheers!
-PoF


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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #39 on: February 25, 2016, 11:24:43 PM »
I think it's probably a U-shaped curve.  Up to a point, increasing income is helpful.  Above a certain point, it becomes harmful, especially if you're working too many extra hours or otherwise neglecting other important areas of your life in order to pursue a higher income.  Where that inflection point lies will depend on the particular person and job situation.  Physicians do earn higher than normal salaries, but they also have higher than normal expenses (malpractice, med school loans, etc.)  Still, even for a physician, there comes a point of diminishing returns.

Regarding "wasting" your training, as others have said, FI doesn't automatically equate to complete retirement.  An MD gives you a lot of flexibility, especially if you're FI.  You could always do one or more of the following:
- work PT instead of FT
- get an academic job and teach students and residents
- volunteer for a free clinic, or work abroad for MSF or other organizations that provide care for people in need
- write books/articles
- do research

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #40 on: February 26, 2016, 12:20:06 AM »
I know someone in the medical profession (RN) that is fairly Mustachian and similarly 'invested' a significant amount of time and money to get their degree and experience.  He remained frugal and this was his dream job.  After like 5 years he could essentially retire completely, but instead used this freedom to work part time.  Working part time, he figures he'll be less likely to get burned out (as most folks in his field do) and wants to keep helping his patients and maintain the passion.

Not sure if part time is an option for you later, but like others have said it more about the 'FI' than the 'RE'.

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #41 on: February 26, 2016, 06:22:09 AM »
if i read this right from a financial sense 12 years of school and 9 years work equates you are FI in 21 years Kudos to you. I am sure there are examples here where others worked 21 years didnt go to school and are in same boat, heck i am one of them so that part is irrelevant imho. To me that point is mute. End of day its 21 years.

The other point is simple. If you love what you do which I admire and appreciate good doctors keep doing it and just make sure you work towards making it a practice that fulfills your life and doesn't take it over. To many doctors become way overworked, stressed and spend no time with there family. None of us can tell you what to do or whats best for you BUT take advantage of the position you have put yourself in would be my recommendation.

golden1

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #42 on: February 26, 2016, 07:02:56 AM »
You have the double whammy - a high paying career that actually has concrete meaning.  You are helping people everyday, and you also devoted years of your life to train for it.  I would have a hard time walking away from that unless I had a really good reason.

Plus, I've heard that if you are FI, you could always quit practicing and investigate paranormal phenomena in the FBI.  The truth is out there. 

PhysicianOnFIRE

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #43 on: February 26, 2016, 07:11:40 AM »
It's absolutely helpful, but only if you let it be a help.  There's absolutely no income level where a person can't spend themselves into bankruptcy.  Just look at the long list of celebs, rockers and athletes who used to be multimillionaires.

But if you think it's any different towards the lower end of the spectrum, take a look at the indebtedness of those earning less than the median ~$52k median family income.  Something like 90% carry more non-mortgage debt than savings.

Ultimately it's about how much you can save on an absolute basis and how much you spend.  A very high income is definitely an asset (though one that can be squandered quite easily).

Very true.  Many doctors fall into the spending trap.  I've chosen a different path, but I live very comfortably.

A very rough breakdown of my income / spending looks like this:

x = a year of expenses for my family of 4.

Salary = 6x         
Retirement Savings = 3x
Income Taxes = 2x
Expenses  = 1x

Each year, I'm adding 3x to the nest egg and the 25x I've got will generate another 1x to 2x at 4% to 8% market returns.  Each additional year (given OK returns) adds about 4x to 5x to the nest egg.  It's a great position to be in, and I'm not at all ready to call it quits.  If I was only adding 0.5x per year, I might have a different opinion, though. 

TheAnonOne

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #44 on: February 26, 2016, 07:20:51 AM »
if i read this right from a financial sense 12 years of school and 9 years work equates you are FI in 21 years Kudos to you. I am sure there are examples here where others worked 21 years didnt go to school and are in same boat, heck i am one of them so that part is irrelevant imho. To me that point is mute. End of day its 21 years.

The other point is simple. If you love what you do which I admire and appreciate good doctors keep doing it and just make sure you work towards making it a practice that fulfills your life and doesn't take it over. To many doctors become way overworked, stressed and spend no time with there family. None of us can tell you what to do or whats best for you BUT take advantage of the position you have put yourself in would be my recommendation.

Unless they go to 22 years... then they have XXXXXX more money. The hindrance is the fact that OMY is MASSIVELY profitable. One more year, to increase yearly budget for the rest of my entire life? One more year to allow for international travel every single year? One more year to stay in nicer hotels? Own a nicer car? Pay for kids college? Donate?

OMY for high salary earners is a legitimate consideration. When does it become pointless? I would argue after the *3rd to 5th* 'OMY' you probably have retirement savings to fund your lifestyle twice over and the returns become 'diminishing'

PhysicianOnFIRE

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #45 on: February 26, 2016, 07:40:35 AM »

It's absolutely helpful, but only if you let it be a help. 

+1.

I also like to get a good return on investment.  12 years of rigorous education and training for a 9 year career isn't such a great ROI.

This attitude I don't understand. Who cares how long you trained?

What's the ROI on years of your life?  How much would you pay for extra years when you're old?

The only thing that should matter once you're FI is how do you want to spend your time?  You're completely free. Beholden to nothing. If work sounds good, and is literally the thing you'd pick most out of everything in the world, do it!

But to continue to work because of some weird thought about how long it took you to train for the job?  Read about the sunk cost fallacy, and then move on, cause those years of training are down the drain, so throwing more good years after them in the career seems like the opposite of logical to me.

The amount of training is not relevant. What do you want to do is. That's it. If you want to work, work. If there's something you can think of that's better, do that.  But don't talk about the years of training either way. It's irrelevant.  :)

Quote
Would One More Year (or more) be more worthwhile if your workdays became much more valuable?

Yes. As sol argues here, One More Strikes the Rich the Hardest

Great thread started by Sol.  One of my retirement goals is to build up my Donor Advised Fund to equal 10% of my nest egg.  It's currently about 5%.

As far as the ROI / years training down the drain, I see that differently.  Those 12 years allow me to have the career / life / income that I have now.  Without the prior sacrifice, I wouldn't enjoy these bountiful years.  The 12 busiest years are in the past, but they have created a great situation in the present. 

If my life was as stressful now as it was back then, it wouldn't make sense to keep working.  I can't say I like my workdays more than my days off, but I do get that sense of fulfillment and purpose from working.  I need to find the sweet spot where I've met or exceed financial goals and would feel comfortable walking away with a lower likelihood of regret.  I'm not there yet.

MoneyCat

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #46 on: February 26, 2016, 07:45:38 AM »
The number one thing I have learned from this forum is that it's insanely easy to FIRE if you are working a job that pays $100k+ per year. And humble bragging threads like this one are a lot of fun.

dandarc

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #47 on: February 26, 2016, 08:06:40 AM »

Great thread started by Sol.  One of my retirement goals is to build up my Donor Advised Fund to equal 10% of my nest egg.  It's currently about 5%.

Since you don't need it, why not donate about half of your salary this year?  Then you'd have roughly:

3X to donor advised fund
1X to taxes
1X to investments
1X to expenses

ETA - or something like that - charitable donations being deductible up to 50% of AGI means you could potentially save a boatload of taxes
« Last Edit: February 26, 2016, 08:10:36 AM by dandarc »

Bertram

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #48 on: February 26, 2016, 08:11:41 AM »
It should be irrelevant, but it isn't. At least for me. Spending 10 years in school earning so little - it's almost like I enjoy the overcompensation now to make up for what I didn't have then. Or, on the other side, I know what it's like to have so little money, the fact that money comes easily and quickly now is hard to turn away. Or, as an analogy, I'm like my rescue dogs- they've known hunger and it doesn't matter how many years I fill their bellies, they are ALWAYS hungry.

That observation rings very true - a fair share of very "successful" people in their job are driven. Not just by high standards or goals, but by deep seated psychological needs they developed at some point (early) in their life. I'd question whether trying to quench and unquenchable thirst is really the best path to happiness though. Especially given that it's not always sustainable and may result in health problems or quality of life issue at some point.

I think in another thread somebody pointed out that FIRE should not be viewed as leaving/avoiding something (the job), but as moving towards other objectives that one finds more important. This is likely correlated with whether viewing sunk costs or "loosing" the job are in focus or not. Sure, it can be challenging to re-invent ones life, especially when one is at a point where everything seems to be running very well. But then again, nobody has to, like others have said, as long as you are happy there is nothing forcing one to change things up. The important part is the independence (=choice to quit), not whether or not you exercise that choice right away. And for the independence part a high salary is not a hindrance at all.
« Last Edit: February 26, 2016, 08:13:31 AM by Bertram »

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Re: Incredible Salary: helpful or hindrance to an early retirement?
« Reply #49 on: February 26, 2016, 08:32:27 AM »

Great thread started by Sol.  One of my retirement goals is to build up my Donor Advised Fund to equal 10% of my nest egg.  It's currently about 5%.

Since you don't need it, why not donate about half of your salary this year?  Then you'd have roughly:

3X to donor advised fund
1X to taxes
1X to investments
1X to expenses

ETA - or something like that - charitable donations being deductible up to 50% of AGI means you could potentially save a boatload of taxes

Just chirping in - I'm always in a quandary about what to donate and how much. On one hand, we are far from FI (we have ~ 6x expenses saved) and every bit of saving means we'll reach FI sooner. OTOH, we want charitable giving to always be part of our lives.

There's a strong argument to be made that we should donate nothing now, but make charitable giving part of our FI number and our retirment expenses.  To put numbers to it, we could donate $1,000 a year now in perpetuity, and it would probably push back our FI date by about a year.  Conversely, we could donate $0 until FI at which point we'd give $2500/year in perpetuity.  Given that our FI date is probably about a decade off, the break-even point would be in 16 years.  This would put us in our early 50s.

Math-wise it's almost a no-brainer to wait to donate until we hit FI, and make that part of our FI plan.  Ethically it's very difficult to not contribute for the next decade, regardless of our future intentions.  Currently we're 'splitting the middle' and giving token donations to groups we support, but nothing that really eats into our budget.  Even that feels like we're skimping though.