Financial independence, physician retirement age, and happiness with Xrayvsn

Mar 25, 2019

Closely intertwined with the topics of career fulfillment and maximizing your earning potential as a medical professional is the idea of financial indepdendence. Physician and blogger Xrayvsn joined me for an interview on this very topic, in which he shares his insight about financial peace of mind, physician retirement age, taxes as a high income earner, and more. Please consider reading and subscribing to his blog at https://xrayvsn.com

L4Z: Like Look for Zebras, your blog is about well-being for physicians. But rather than careers and job opportunities, your focus is on financial well-being, especially financial independence and early retirement for physicians. How do you define financial independence?

Xrayvsn: I like to think of financial independence as a level of wealth where you no longer feel bound to the traditional trade time for money relationship that the majority of workers face. True financial independence occurs when your passive income streams reach a level where all your financial obligations are met without the need for active/working income. This requires a lot of sacrifice in the front end of your career to build enough capital to get the process in motion.

But, at a certain tipping point, the passive income machine you have created takes a life of its own and becomes self-feeding (as the initial seed money creates money of its own that also starts working for you). I have previously termed this phenomenon the “Capital Snowball.”

Money is a tireless worker and will work for you 24 hours a day, 7 days a week, 365 days a year. When you are on the correct side of the lender-borrower equation you can take advantage by having this “money employee” work for you and earn more while you sleep.

L4Z: Is financial independence different for physicians than non-physicians in any way?

Xrayvsn: That is a great question. The principles of financial independence do not care whether you have an MD behind your name or not. However, in practicality there are a lot more issues that a physician will face when they share his or her desire to become financially independent.

A physician may receive negativity from friends, family, and even colleagues at the first mention of trying to become financially independent and retire early. Many doctors have mentioned that they have received negative comments such as they were wasting a medical school spot on someone who does not want to stay in medicine for the traditional length. Others may be accused of being only in medicine for the money and not to help patients. I touched on these and several other factors facing physicians in, “The Great FIRE Debate.”

Physicians also tend to have lifestyle inflation more so than other professions and to maintain that level of living would require a much larger nest egg/portfolio to be financially independent compared to a non-physician.

L4Z: How is it that financial independence became a priority in your own life?

Xrayvsn: It really took a very low point in my life, both emotionally and financially, to set in motion the events that have led me to where I am now. I went through a brutal divorce and a subsequent frivolous civil lawsuit by my ex from 2010-2012. I calculated those two events alone cost me over a little over 7 figures. I had just turned 40 and I wondered if I could ever retire at the normal age, let alone try and retire early after being decimated by my ex.

At this point I decided that I still had the opportunity to turn things around and sought to increase my knowledge by reading financial blogs and finance books. The principles extolled by these sources made complete sense to me and really struck a chord. I was fortunate that I had a great income as a radiologist and that I really did live well below my means.

As the capital grew, I made sound investments and began to see direct results with increasing net worth as well as increasing passive income streams. It was then I realized my goal was to become financially independent and retiring early was indeed a possibility.

L4Z: Do you think that striving for financial independence should be a goal for all physicians – regardless of how much they love working or when they want to retire? I feel that being financially independent means that you can make career decisions based on your personal goals and happiness, rather than how much money a job will bring in.

Xravsn: I really do think that all physicians would greatly benefit achieving financial independence. Although there is a strong online community dealing with FIRE (Financial Independence/Retire Early), you do not have to retire early when you achieve financial independence. As you astutely mentioned, financial independence allows an individual to make decisions that are not monetarily driven and that can be instrumental in preventing burnout.

I know of physicians who are financially independent but still practice medicine and just remove components of their practice that they no longer enjoy. This may mean removing the obstetrics part of your practice for an ObGyn, a common occurrence, or declining to take call or night shifts. Financial independence can allow you to choose a job based on things that truly matter to you such as location or lifestyle opportunities.

L4Z: For early- and mid-career physicians starting to think about retirement, what are the most important things to consider?

Xrayvsn: The most important thing to consider is developing a balance between things that benefit your current self and things that benefit your future self. When you are young, especially after years of delayed gratification, the last thing on your mind is to deny yourself even more so that your future self may benefit. That is why most newly-minted physicians suffer from lifestyle inflation the moment that first large paycheck hits their bank accounts.

I am not saying you have to continue to live a spartan life, but it is the money saved early on in your careers that has the largest impact due to the magic of compounding and time. Attacking your student loans and becoming debt free as early as possible will truly set you on a great financial path.

You still do need to satisfy your current needs as well and that is where moderation comes in. Enjoy some now so you do not get burned out, but make your spending intentional. Only buy/spend on things/experiences that provide long lasting value and are not fleeting in nature.

L4Z: Which do you think is more important for physicians to reach financial independence: maximizing their earning potential, or minimizing their expenses?

Xrayvsn: Although having a large income certainly can expedite your path to wealth, it is actually lowering your spending habits that has the largest impact. I touched on a very important concept in my post, “The Least Valuable Dollar.” Because of our progressive tax code, you get less bang for your buck with every extra dollar you earn. If you earn a dollar at the highest income tax bracket, at best you can raise your net worth by 63 cents as 37 cents gets siphoned off to Uncle Sam. If you save a dollar, your net worth actually increases by that full amount ($1) because that is after tax money.

One of my favorite sayings is, “No matter how much water you put in it, you can never fill a colander.” That is in essence the plight some doctors face:  No matter how much they earn, their household will spend every dollar (and sometimes more) that comes in. You will never gain wealth with that formula.

L4Z: Some say that switching jobs too often can wreak havoc on retirement plans. Do you think this is true for physicians? Often times our contracts take care of costs like relocation, credentialing and licensing, etc, so it seems to me that, if done smartly, job changing shouldn’t be an issue in terms of financial independence.

Xrayvsn: There is a mantra that is said by those on the FIRE path, “One House, One Spouse, One Job.” You have your best chance of reaching your financial goals if you can stay true to that tenet. However, that does not mean it is set in stone as I have broken all three rules and still achieved my goals.

What it does mean is that the more you deviate from this principle, the more work it is to right the financial ship. Changing jobs can incur expenses such as moving, etc., which can indeed be minimized with savvy contract negotiations. If that is truly the case then, apart from the actual downtime between jobs, it really should not have that drastic an impact on your overall financial future.

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