Author Topic: Most docs can't afford to save for retirement  (Read 19403 times)

hoping2retire35

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Re: Most docs can't afford to save for retirement
« Reply #50 on: January 28, 2016, 06:23:44 AM »
You guys would be AMAZED at the doctors in my group.

I have doctors begging me to work my night and weekend shifts because of all their overwhelming expenses.

I told one that I need about 25% of what I make in order to live very , very comfortably and he literally fell out of his chair.  I certainly don't try and educate because I need more suckers to work my crappy shifts.
In my experience there are three major reasons for physicians self destructing financially:

1. Divorce.
2. Feeling the insane urge to build a 4000+ square foot custom house when their kids are 5 years away from leaving the house.
3. The equally insane idea that they must save for and fund college/grad school/med school for their kids regardless of the cost.

:)

lol, that is doctor starter home size...

try 6000 with a 200 acre ranch or any other extravagance you can imagine. They believe because they are saving the world the deserve something that could be on MTV cribs.

as an aside I was joking to our doctors in the family that if we won the lottery we could go 'crazy' and travel the world spending $20,000 a week on hotels and fancy dinners (the conversation was for 7 people traveling), they had funny looks on their faces when I said that.
« Last Edit: February 14, 2017, 06:43:36 AM by hoping2retire35 »

The Happy Philosopher

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Re: Most docs can't afford to save for retirement
« Reply #51 on: January 28, 2016, 10:03:24 AM »
You guys would be AMAZED at the doctors in my group.

I have doctors begging me to work my night and weekend shifts because of all their overwhelming expenses.

I told one that I need about 25% of what I make in order to live very , very comfortably and he literally fell out of his chair.  I certainly don't try and educate because I need more suckers to work my crappy shifts.
In my experience there are three major reasons for physicians self destructing financially:

1. Divorce.
2. Feeling the insane urge to build a 4000+ square foot custom house when their kids are 5 years away from leaving the house.
3. The equally insane idea that they must save for and fund college/grad school/med school for their kids regardless of the cost.

:)

lol, that is doctor starter home size...

try 6000 with a 200 acre ranch or any other extravagance you can imagine. They believe because they are saving the world the deserve something that could be on MTV cribs.

as an aside I was joking to our doctors in the family that if we won the lottery we could go 'crazy' and travel the world spending $20,000 a week on hotels and fancy dinners (the conversation was for 7 people traveling), they had funny looks on their faces when I said that. I am guessing they spend about $20,000 a week when they go on vacation.
Haha!
The thing that gets me is usually when they start building these houses are about the time the kids have only a few years left in school. I really couldn't imaging living in a 6000sf house with only two people.

The old mantra for physician financial freedom:
One job
One house
One spouse

Frank Earnest

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Re: Most docs can't afford to save for retirement
« Reply #52 on: April 14, 2016, 08:45:47 PM »
@bb11 (reply 6)....  You noted the incongruity between docs not being able to max out their tax-advantaged savings plans versus their salaries and said "assuming they [their] plans follow the same rules as 401ks [capped at 18k or so]." Their plans likely don't. Likely not even close to a 401k. Most docs are likely partners of a medical firm and treated as self-employed small businessmen. When you visit a doc at a hospital, the patient interaction feels like you're dealing with an employee of the hospital, but you're likely not. You're likely dealing with a partner of a medical practice that is, from the point of view of the hospital, an independent contractor leasing space, etc. from the hospital. This is why when you have a baby you get separate bills from (1) the hospital, (2) the doctors, (3) the other set of doctors, (4) etc. I am a lawyer and law firms work similarly to medical practices. If you're an associate lawyer, you are an employee, you get a W-2 and your tax-advantaged savings are basically limited to (i) 401(k), (ii) IRA and (iii) HSA. If you make partner, you are treated as an owner of a small business, you get a K-1 instead of a W-2 and your tax-advantaged savings potentially open up (depending on whether your partnership takes advantage of this stuff or not). In my case, by being a partner in my firm I am currently obligated by contractto (A) save $35,000 a year into a 401(a) profit sharing plan and (B) save $8,000 a year into a cash-balance pension plan. Because this is mandatory at my firm, those amounts are sucked straight out of my paycheck and I never see the cash. On top of that, I still can do 401(k), IRA (self and spousal) and HSA. Mandatory savings nut = $43k. Voluntary tax advantaged savings nut = $35.5k. Total tax-adv. savings opportunity = $75.5k. To take advantage of all my tax-adv. savings would be 25% of my gross income. I'm trying to do that, but am still feeling my way. Conservatively, a third of my income goes to taxes. That's a big chunk. I have to either get a different - much less profitable - job, or spend a certain amount of money on clothes and cars. I need a passable suit* and I need good shoes.** I need a decent car and need to keep it clean to be presentable.***  I don't have student loan debt because I went to lesser-ranked state schools for both undergrad and law school based purely on money (full academic scholarships at both shops, so no debt but much, much less cachet at cocktail parties). Most docs have a ton of student loan debt.

* The bar for a passable suit is pretty low. For 99% of American men, owning a well-chosen suit from Jos. A. Banks (~ $300) would serve them for a lifetime. Every suit I own is from Jos. A. Banks, except for one from a UK company that is similar. But, if you go below this level of quality the cost/benefit equation shifts pretty quick (i.e., if you're not going to buy a suit of this quality, just opt out altogether, because the clothes will make you look bad).
**If you don't have to wear dress shoes for work, please let me know if there are openings. I have to and I hate it: they're not comfortable and the whole concept bothers me. With that said, my current reality is my current reality, so.... Men's dress shoes are uncomfortable and expensive, but in certain lines of work they are required. They are required in my line of work. They are a tool. Probably shouldn't be a tool, but I'm not going to spit into the wind about how life works. If you're in a job that requires a certain kind of dress shoe, I recommend Johnston & Murphy as a good (relatively) cheap supplier of good business dress shoes that will work in 99% of situations. If you wear dress shoes ALL THE TIME, I recommend that you eventually think about buying Alden shoes and shell cordovan. Alden is a company, and they make very, very good shoes. Shell cordovan is a type of very tough and very attractive leather. If you wear dress shoes every day, you should buy two pairs of these shoes (you need to let shoes rest) and know that if your kid has the same foot size, he will be wearing them in 50 years. Great shoes.
***My decent car is a Hyundai. Give me what face-punches you will (just to rile you up, I bought the car new). But in my environment, to drive a Hyundai is an insane giant spit in the face.

MgoSam

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Re: Most docs can't afford to save for retirement
« Reply #53 on: April 14, 2016, 08:57:01 PM »

*Exception being a cousin who works on Wall Street, but I ignored him because he probably pays more in property tax on his brownstone than I spend annually on everything.

I assume you're referring to somewhere in NYC? We actually have really low property taxes (see https://smartasset.com/taxes/new-york-property-tax-calculator). The average tax rate is 0.7-0.8% (and I don't know if this even includes things like 421a tax abatements). So even a $1 million dollar brownstone only pays about $8k in property tax. It's New Jersey and Westchester County where the property tax rates tend to be killer.

Fair enough, I don't know precisely how much his property taxes are, but him and wife come from both money and are very high earners too boot and I can imagine them having a house that costs many millions. I believe they live in Long Island, but I may be mistaken.

BlueMR2

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Re: Most docs can't afford to save for retirement
« Reply #54 on: April 16, 2016, 10:58:13 AM »
As one with family and friends in healthcare as well as having worked in that industry for a few years, it's really sad to watch so many doctors self-destruct their financial lives.

- HUGE schooling debts that seem to be overlooked
- Massive overspending to keep up with the other doctors
- Malpractice insurance is through the roof
- Poor business sense.  Opening up their own practice with a medical degree that includes no actual business training.  Sometimes they'll be wise enough to hire practice managers, but the lack of business experience bites them there too with all too frequent bad hiring decisions.

kittenstache

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Re: Most docs can't afford to save for retirement
« Reply #55 on: April 16, 2016, 06:51:23 PM »
As one with family and friends in healthcare as well as having worked in that industry for a few years, it's really sad to watch so many doctors self-destruct their financial lives.

- HUGE schooling debts that seem to be overlooked
- Massive overspending to keep up with the other doctors
- Malpractice insurance is through the roof
- Poor business sense.  Opening up their own practice with a medical degree that includes no actual business training.  Sometimes they'll be wise enough to hire practice managers, but the lack of business experience bites them there too with all too frequent bad hiring decisions.
I agree with all of the above. I'm a pediatrician and thankfully, I don't keep up with the Joneses and my school loans were paid for by the hospital I worked for. But I see so many of my colleagues, people who are so smart with regards to medicine, act so foolishly with their finances.
And the practice managers that doctors hire? They are usually, in my experience, a family member of the doctor who owns the practice. A family member needs a job? Hire them as practice manager! Most have no experience in either business or medicine.

Tabaxus

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Re: Most docs can't afford to save for retirement
« Reply #56 on: April 16, 2016, 06:56:06 PM »
Many biglaw lawyers end up falling into this same trap, and it's even more ridiculous for lawyers to do it (at least before they make partner), since it's starkly up-or-out with a massive burnout ratio (i.e., at least doctors can, with reasonable certainty, keep working for the high pay if they need to--not true of lawyers).  Plus, we don't get paid as much as docs (though we also tend to have somewhat lower loans and we finish school more quickly).

Very sad to see.

talltexan

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Re: Most docs can't afford to save for retirement
« Reply #57 on: February 13, 2017, 09:18:10 AM »
The Doctor-versus-lawyer debate is fascinating...

1. I don't think many lawyers feel like they've been screwed over by the Gov't (the way many doctors seemed to feel was happening with the Affordable Care Act),
2. Many lawyers saw younger lawyers suffer through the great labor market collapse of 2009-2012,
3. The ramp-up time to making big money is much longer for doctors (who then make much more money). I suspect us non-doctors would be shocked at how much money doctors truly earn.

I have good friends who have become both. Strangely, I have many more JD friends who have opted out of labor entirely (often young women who are married to other lawyers or--more often--doctors.

Pigeon

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Re: Most docs can't afford to save for retirement
« Reply #58 on: February 13, 2017, 01:42:00 PM »
The many doctors in my extended family were feeling screwed over by "the system," in particularly by insurance companies and lawyers, long before the ACA came along.

Chris22

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Re: Most docs can't afford to save for retirement
« Reply #59 on: February 13, 2017, 02:14:05 PM »
One bought a Jaguar.  The other, a Ford F-150 SVT Raptor.

It's one thing to spend 1 or 2 years' salary on a home.  To spend that on a rapidly depreciating vehicle is another.

I get what you're saying, but check your math on that "rapidly depreciating Raptor."  A coworker was buying a used F-150, and we were giving him a hard time that he should buy a Raptor...looked on AutoTrader, Raptors with 50k miles were still over $40k!  These things actually hold their value like you wouldn't believe.  Might've not been a bad purchase for him.

Spork

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Re: Most docs can't afford to save for retirement
« Reply #60 on: February 13, 2017, 02:28:48 PM »
My dad was a surgeon.  He never retired ... though not because he couldn't.  He just loved being a surgeon.  He worked until he was 86, though limiting his practice to just do assists and teaching the young guys.  (He worked the last 10 years at a loss... because he could.)

But that said... I totally see how the original article has merit.
* Dad bit on every stupid get-rich-quick scheme there ever was
* He was scammed by an investment advisor over many, many years.  This guy eventually lost his securities license and was sued for big bucks.  (He was run out of our home town before that.)  Most of the investments lost money and most of the losses were disallowed by the IRS many years later.  They had to be paid back plus penalties/interest.
* Dad paid well over a million in economic outpatient care to my oldest sibling.  She never learned.

His saving graces:
* He was a cheapskate.  He bought a 1985 Chevy Blazer new.  He was still driving it up until he died.  He bought a very nice house (but not over the top) by 1964 standards, paid it off over 30 years and never looked back.  He still had it when he died.  Ne never bought in to the hoity-toity country club life.
* He mostly did pay-as-you-go for education.  He got a loan from his little brother (that was working a paper route!) and paid it back.
* He got in on the ground floor of medicine in our small town, which grew to a pretty good sized town where medicine was pretty much the main industry

Fomerly known as something

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Re: Most docs can't afford to save for retirement
« Reply #61 on: February 13, 2017, 05:22:55 PM »
Quote
7.  Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.

You sure about this? That just seems... unbelievably high...

Half of that could be round trip tickets to europe, nice but not luxurious hotels for a week or two and you are up to 30k pretty fast.
 

This, I was just talking to a friend about my upcoming trip to New Zealand I'm thinking it's be about $6k all in with 1/2 of that being airlines and a month long car rental.   She mentioned a sister that was thinking of going to Australia until they realized the month long trip would cost $40k for 2 people.

mm1970

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Re: Most docs can't afford to save for retirement
« Reply #62 on: February 13, 2017, 05:44:34 PM »
Quote
7.  Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.

You sure about this? That just seems... unbelievably high...

We are talking a week in Hawai'i over Christmas (peak time) in a fancy place.  4 hotel rooms @ 200-300$ a night, 7 nights, is 5600-8400.  Flights for 7 are probably 7K, maybe more from small midwest airports.  Fancy excursion-type activities like renting off road jeeps, flights between islands, all meals eaten out at nice places.  Dinner for 7 at a fancy restaurant with alcohol is probably 300-500$, right?  They have also done Europe trips.  We are not talking MMM style vacations, and for 7 people it adds up fast.  Maybe 30K is high, I'm not totally sure since that is not how I travel, lol. 

They also go out West and ski for a weeklong trip most years at places like Aspen.  I can only imagine that is 100$/day at least for lift tickets, and probably 1000$/night or more for accommodations.  I haven't priced out an Aspen vacation lately either ;)
Yeah, I looked up the cost to go to Hawaii for a week at Christmas or Spring break.  Family of 4 was $5000+, and that is *one* hotel room, and relatively "budget".

Laura33

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Re: Most docs can't afford to save for retirement
« Reply #63 on: February 13, 2017, 08:24:39 PM »
Lawyer, not doctor.  IME I agree with the comments earlier about pent-up delayed gratification/spousal expectations, keeping-up-with-Joneses, big loan repayments, etc.  But I also have to say, the big incomes are equally big targets for really anti-Mustachian financial advice.  Some of that I saw mentioned above as "asset protection," i.e., put your money into a giant house or big things in your spouse's name in case you get sued.  But the other aspect is tax-avoidance -- it can take only once or twice seeing how much you fork over on April 15 to make tax minimization sound appealing.  I have heard pitches for both whole life and annuities as great "investments" because of their tax-deferral/avoidance features.  And then of course if you are set up as your own business you can giant behemoth vehicles as a business expense and write them off.   

The problem is that by focusing so much on tax avoidance, you've got the tail wagging the dog.  The key isn't how much you pay in taxes -- it's which approach will leave you more cash in your pocket at the end of the day.  And I'll put my investment returns (Vanguard index fund minus LTCG) against their "tax-free" whole life any day.  But I see people not thinking gee, do I need this giant vehicle; it's "but I can deduct it."  There is just no concept that "saving" 28% on taxes means you are spending the other 72%.  And of course when everyone around you is hearing the same advice and doing the same thing, it just feels normal.

JAYSLOL

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Re: Most docs can't afford to save for retirement
« Reply #64 on: February 13, 2017, 08:36:50 PM »
Quote
7.  Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.

You sure about this? That just seems... unbelievably high...

Why?  plane tickets alone to Hawaii alone could be over $10k for that many people.  Add in 10 nights for a several hotel rooms at a 4 or 5 star beachfront resort, meals, wine, spa visits and a bunch of expensive activities later and you are well over $30k..

OvertheRainbow

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Re: Most docs can't afford to save for retirement
« Reply #65 on: February 14, 2017, 07:11:58 AM »
I'm just a registered nurse,  but looking from the outside,  I can't say I blame the young doctors for going nuts out of med school and residency. After spending seven years in med school and residency, many are still broke with almost 200k in student loans and still pulling eighty-hour work weeks.

I would probably do the same.

Chris22

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Re: Most docs can't afford to save for retirement
« Reply #66 on: February 14, 2017, 07:31:48 AM »
Quote
7.  Routinely takes whole family (now 7 people with spouses) on fancy trips, must be 30K easy per trip if not more.

You sure about this? That just seems... unbelievably high...

Why?  plane tickets alone to Hawaii alone could be over $10k for that many people.  Add in 10 nights for a several hotel rooms at a 4 or 5 star beachfront resort, meals, wine, spa visits and a bunch of expensive activities later and you are well over $30k..

My family is going to Hawaii next week, for 2 weeks, 1 week of which is on a cruise.  7 people.  Probably right around $25k for airfare, hotel rooms, and cruise passes.  Does not include meals or other activities/"excursions".

PathtoFIRE

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Re: Most docs can't afford to save for retirement
« Reply #67 on: February 14, 2017, 08:42:35 AM »
I don't have data to prove it, maybe someone's come across a source, but anecdotally it feels like traveling expenses really bottomed out during the Great Recession, and have experienced an impressive bounce back. In a form of hedonistic adaptation, my wife and I got used to several trips a year at very cheap prices, and now when you factor in the rebound in costs plus the fact that we we had 3 kids in the interval, the same quality and frequency of trips has really mushroomed (and gotten out of control in my opinion frankly, I think we're starting to turn this around a little in my family). So the costs of travel mentioned above seem perfectly in line with what I've seen recently.

BlueMR2

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Re: Most docs can't afford to save for retirement
« Reply #68 on: February 14, 2017, 10:06:41 AM »
I don't have data to prove it, maybe someone's come across a source, but anecdotally it feels like traveling expenses really bottomed out during the Great Recession, and have experienced an impressive bounce back. In a form of hedonistic adaptation, my wife and I got used to several trips a year at very cheap prices, and now when you factor in the rebound in costs plus the fact that we we had 3 kids in the interval, the same quality and frequency of trips has really mushroomed (and gotten out of control in my opinion frankly, I think we're starting to turn this around a little in my family). So the costs of travel mentioned above seem perfectly in line with what I've seen recently.

I had planned on volunteering for a special event just a few hours from home.  Well, then I did the math and it was going to be at least $1000 (I hadn't even finished adding in all the expenses yet at that point).  Called that trip off.  Used to do similar ones for ~$500-600 not too long ago.  Hotel prices & food costs seem to be up dramatically since then.  Car costs have stayed pretty flat.

exterous

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Re: Most docs can't afford to save for retirement
« Reply #69 on: February 15, 2017, 01:12:08 PM »
I don't have data to prove it, maybe someone's come across a source, but anecdotally it feels like traveling expenses really bottomed out during the Great Recession, and have experienced an impressive bounce back. In a form of hedonistic adaptation, my wife and I got used to several trips a year at very cheap prices, and now when you factor in the rebound in costs plus the fact that we we had 3 kids in the interval, the same quality and frequency of trips has really mushroomed (and gotten out of control in my opinion frankly, I think we're starting to turn this around a little in my family). So the costs of travel mentioned above seem perfectly in line with what I've seen recently.

Somewhat depends on where you're going. For many domestic or Caribbean destinations I would agree but Europe can be dirt cheap right now. We've got a $316 RT flight to Amsterdam coming up in a few weeks and paid $450 RT to spend NYE in Budapest. Pretty reasonable hotel\airB&B prices too and food\drink in Budapest can be crazy cheap. ($0.90 wines, $0.75 pint, $4 meal eating out, $2 stopping at the grocery)
« Last Edit: February 15, 2017, 01:13:48 PM by exterous »

talltexan

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Re: Most docs can't afford to save for retirement
« Reply #70 on: February 16, 2017, 11:30:33 AM »
the dollar is strong right now, travel abroad while you can, guys!