How a doctor managed to retire at 43

Leif Dahleen, MD, didn’t win the lottery or inherit millions of dollars. He worked as a hospital anesthetist for 13 years, saved half of what he earned on average, and invested wisely. By the time he retired at 43 in 2019, he had saved nearly $4 million, which he said was enough to cover his family’s expenses for the next 40 to 50 years.


Dr. Leif Dahleen

“We were spending between $70,000 and $80,000 a year on our family of four, which allowed us to live comfortably on half my income, which ranged between about $300,000 and $400,000,” Dahleen explains. (The average income for anesthesiologists was $405,000 last year, according to Medscape’s Physician Compensation Report).

“I recognize that I enjoyed a high salary as an anesthesiologist and that my student loan burden, having graduated from public schools 20 years ago, was only a fraction of what the average graduating medical student will have today,” he says. Dahleen quickly paid off her $60,000 college debt.

Still, Dahleen believes doctors who earn less than him and have higher student debt can still save half their income and retire earlier. For example, a single early-career primary care physician who earns about $200,000 and spends up to $90,000 a year (including paying off $24,000 in student loans) could potentially retire in 18 to 25 years old, he said.

A married primary care physician with the same family income, who would have a lower tax burden, could potentially do the same. “This alliance is actually an advantage, even without a second income,” says Dahleen. However, with a second income, a couple could live off one’s salary and save the other.

One of the main keys to early retirement for physicians is to have a modest lifestyle so they can save about half of their income and pay off their debts. “It could mean avoiding or postponing some long-held desires. Your dream house, car, or city could be holding you back from achieving your financial goals,” Dahleen says. “If financial freedom is number one on this list, a modest lifestyle will get you there faster.” Some doctors might not want to live as modestly as the Dahleens, which would delay their retirement.

For example, Dahleen and his wife bought used cars, donated 10% of their income to charity, and chose to live close to family in small Midwestern towns where the cost of living is lower than that of large metropolises.

Doctors who prefer to live in big cities (especially in the Midwest) will generally earn more, especially in private practice, he says. But they are likely to spend more, due to a higher cost of living and higher taxes.

Physicians can still save for retirement by maximizing their 401(k) contribution to get full employer matching and maximizing a Health Savings Account (HSA), Dahleen says.

“Having close to $3,300 a month in retirement savings approximates a common recommendation that physicians save 20% of their gross income for retirement,” says Dahleen.

Additionally, once student loans are paid off or forgiven, Dahleen recommends devoting some of that monthly $2,000 to retirement, which can also shorten the time it takes to reach retirement by at least a few years, he says. .

Not an easy goal

Dahleen had some difficulty saving half of her income each year. In some years, her family saved less, due to large one-time expenses, such as paying cash for a house and then building an expensive house years later.

But in other years, they saved more than half of his income. “I estimated that we were saving at least 70% of my after-tax salary at the end of 2014. This included capping my employer’s pre-tax pension plans. [401(k) and 457(b)].” Pension funds combined make up about 18% of his investment portfolio.

He calculated the amount he needed for his retirement based on his projected retirement age, his family’s projected annual expenses and a withdrawal rate of about 2% to 3%.

“I wanted to have 40 to 50 years of expenses that we would withdraw at a more conservative rate than the 4% that is generally recommended for a standard length retirement,” says Dahleen, who blogs about how doctors can become financially independent and retire. early (FIRE).

In 2014, Dahleen realized he could afford to retire soon. But he waited another 5 years to retire because he still loved working as an anesthetist and wanted to wait for his replacement to complete residency training.

Keep making sure his money lasts

Dahleen has always managed her investments, including choosing what to invest in. He’s a big fan of simple, low-cost index funds and takes a long-term approach to investing.

“I have about 90% equities and 10% bonds and cash. Over the past 5 years I’ve taken 10-15% of the equity allocation and moved it to the passive real estate,” says Dahleen.

He has also read books by well-known investors, such as John Bogle, the former CEO of Vanguard who introduced the first index mutual fund to investors, Warren Buffett, CEO and Chairman of Berkshire Hathaway, and Charlie Munger, Vice Chairman of Berkshire Hathaway. .

“Anyone smart enough to become a doctor can easily manage their own investments if they educate themselves first and understand what they’re doing. It can also save them a lot of money in fees,” says Dahleen.

Become a medical blogger on FIRE

After reading a handful of financial advice blogs for doctors written mostly by residents, Dahleen decided to blog about her experience (Physician on FIRE).

Dahleen said nearly three-quarters of the more than 1,500 doctors who responded to a readership survey he conducted would like to retire before age 60. “Fifties seems to be the most likely age, which is certainly still early for my readers, most of whom education and training before starting a career in their late twenties to mid-thirties in many many cases,” says Dahleen.

Another 20% said they would like to retire in their 40s, as Dahleen did, and just under 2% hope to retire (or have done so) in their 30s.

“Doctors in their late 40s and 50s are often at a crossroads trying to figure out what their work/life balance will be over the next 5-10 years of their lives as their children age and the demands of their work become more onerous,” says Dahleen.

He confesses that he did not feel called to practice medicine as some doctors do and that he wanted to travel the world with his wife and two children while they were still at home. The blog gives him the flexibility to do that. Dahleen is well paid through advertising on her website, but says “it was not a financial factor in my decision to retire. We achieved our goal and our finances were very healthy.”

He offers the following advice for physicians who wish to increase their savings for retirement.

Formula for retirement

Since most doctors retire later than him, Dahleen generally recommends that they save an average of 25 years of planned expenses. “If you do that, you can get away with a 4% withdrawal rate. That will be enough in the vast majority of cases to last 30 years or more in a normal retirement period.”

He acknowledges that some physicians, especially early in their careers, may want to take advantage of their higher income rather than saving for retirement. These simple steps can boost their savings.

  • Contribute to your employer’s 401(k) or HSA to get a tax deduction that will reduce state and federal income taxes. Otherwise, it can cost you thousands of dollars.

  • Contribute to a Roth IRA or taxable account to invest after-tax money and your taxes will be lower when you’re ready to withdraw funds in retirement.

  • Avoid accumulating credit card debt; even a little can snowball into something much bigger.

Dahleen also recommends that doctors read and learn about placements. If doctors don’t take the time to learn about money and investing, they can make costly mistakes, he says. Instead, they should consider consulting low-cost financial advisors who charge a fixed fee or an hourly rate, especially in the beginning when they may still be figuring this out.

Physicians with a lot of student debt may benefit from applying for positions eligible for Public Service Loan Forgiveness (PSLF), including those at nonprofits and hospitals.

“If your debt is more than double your annual income, I recommend that you seek exclusively PSLF-eligible positions. Fortunately, they are abundant in most medical specialties, especially those in the bottom quartile for compensation,” says Dahleen. .

“Ultimately, physicians who want to achieve financial independence and retire earlier need to increase the gap between their income and their expenses. This will allow them to save and invest in the future they want,” he said.

But if living modestly isn’t for you, don’t choose misery in the name of financial independence, but recognize that choices have consequences, says Dahleen.

“Do some soul-searching and decide what your top priorities really are. If a beautiful neighborhood in one of our country’s most expensive cities appeals to you, make sure you love your job and it loves you back!”

Christine Lehmann, MA, is the Managing Editor and Writer for Medscape Business of Medicine based in the DC area. She has been featured in WebMD News, Psychiatric News and The Washington Post. Contact Christine at [email protected] or via Twitter @writing_health.

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