Speaker 1 (00:02.946)
Welcome to the Physician Family Financial Advisors Podcast, where physician moms and dads turn today's worries about taxes, investing, and extra money into a comfortable feeling of financial security. I'm Ben Utley.
and I'm Nate Renneke. Today's question comes from Marina, an internist from New York City who's in her mid 40s. She says she's really new to investing and her question is, I was wondering if you can provide some guidance on how to choose index funds and also what percentage of income would be a good to shoot for when it comes to investing in the market beyond retirement investing. Ben, got any ideas?
Yeah. So first off, Marina, thank you for bravely raising your hand and reaching out and asking this question. let me just start by saying that my compliance attorney would make my head into a football if I gave specific investment advice on, on a publicly aired podcast. but let me give you a hint. I was born and raised in a Vanguard household. I named my dog after Jack Bogo, the founder of Vanguard. And if they made Kool-Aid, I would be faced down in it. Okay. But with that said,
The question that we can really address today is how much you should be saving for retirement. So Nate, how much should Marina be saving for retirement?
20 percent.
Speaker 2 (01:24.27)
20 % of income.
20%. Is that it? Like just 20 %? I mean, is it really that simple?
I mean, that's what it appears to be that simple when you kind of look into this. It is a good number. There's nothing really wrong with saving 20%. It's a big chunk. That being said, I guess there's nothing really right about it either. Everybody is different. And personal finances, it really is as personal as medicine. Just like everybody has their own, I guess,
prescriptions and treatment plans. Everyone has should have their own plan for saving money. And one thing I can say, though, is that just like taking care of your body and in medicine, you know, maybe you could say everyone should have a balanced diet and maybe exercise. It's the same as saying everybody should save. So there is a number for everyone. Everyone should be saving, even if you have so much money or just saving, maybe to save on taxes. But
How much exactly? You know you could I could find an example for for any percentage I could find plenty of examples where 10 % is enough a lot of examples where 30 % Would be required to hit your goals. It really is just not a one-size-fits-all type of question Or there's no there's no one-size-fits-all answer
Speaker 1 (02:55.918)
Okay. Well, if there's no one size fits all, um, like what, uh, kind of like, I mean, 20 % is like not the answer. Uh, 10 could be at 30 could be it. I mean, that's all over the map. That could be somewhere between, you know, depending on how much a person makes, that could be somewhere around $300,000 a year. could be as little as, you know, $20,000 a year. So give us, give us an idea, you know, let's, let's throw Marina a lifeline here. Like what are the.
the sizes if it's not one size fits all what are we looking at?
the factors that go into making your number, finding your number. Maybe we could start there. we have some examples, many clients, let's say that work for Kaiser or work at the VA and they have pensions. So you have a pension, you have a very different size of savings that you need to be executing.
For those people, they may not need to save anything. Maybe they are on the lower end, five to 10%. Then, you have to factor in how much do you make. So you just made a good point of, if you're a physician who makes $300,000 a year, you probably spend accordingly and maybe you're the average. But if you're a person who makes a million dollars a year and you love your job, you maybe.
don't need to save 20 % because that would be a lot of savings. You have to factor in how much you spend, how old you are, when did you start? In Marina's case, mid 40s, doctors kind of already have a little bit of a late start after residency and if she really is just getting started, I'm sure she has something going on at work, but.
Speaker 2 (04:49.164)
If she really is just getting started, she would probably need to save more than 20%.
It seems like there's a big difference between the ENT who's living in Virginia Beach, earning the seven figure income, versus the primary care doc who's in an academic setting someplace in Chicago that's earning near the lower end, making a good difference in people's lives. But it seems like it takes different amounts of money.
Yeah, is certainly true. And it's not even just you. What about your children, let's say, if you had children at a young age, a young age for a physician would be like during residency. Right. Maybe you want to be the typical grandma, grandpa, and you need to retire earlier. Or maybe that means you get to work later because your kids, you know, you're an empty nester earlier on.
But then you throw in your spouse into the mix in their situation. Maybe you are a double doctor family or maybe you have a spouse that stays home. So there's so many different ways to kind of come at this question. And we haven't even gotten into, as you said, the investing side, where it's like, how much risk do you want to take? And the truth is the more risk, generally the more reward otherwise, why would you be taking the risk?
And if you're not a big risk taker, need to add that low risk tolerance with more savings.
Speaker 1 (06:13.79)
Say more.
Speaker 1 (06:18.966)
Right. And that, and that leaves out, you know, the whole concept of upstream money, know, inheritances, that kind of thing, which is a big game changer. So, you know, we talked about like where a person lives and what standard of living they're going to have, but what about the retirement goal? I mean, you know, if we assume all doctors are the same, then they're all going to retire at the same age in the same way. But, you know, we serve almost 200 physicians today and no two are the same. So, what, what about the goal?
Yeah, the goals generally are the same type, but very different inputs. So for Marina, she lives in New York City. Right. You can't tell me that that's the same as living in Iowa when it comes to spending. Right. The taxes are much higher. Cost of living is much higher. In fact, we have plenty of New York clients who have told us that they plan on never buying a house. It's just too expensive.
Yeah, yeah, and not even cars, you know, they're, they're, they got their lift, lift and Uber costs and ride sharing and never even got owned a car, but it's similar to the cost of a car.
Right, right. And if you don't own a house and you never pay it off, that means you're renting forever, which must go in your plan. It's a lot different for the person that's trying to pay off their house before they retire. Right. But you said, as you said, many clients in Chicago, they love living there at this point in their life, but they intend on moving because they don't want to live in that expensive of an area when they retire. So.
You know, in their plans, we have them moving to Colorado or Montana. Doesn't sound so appealing when you're young, but when you get older, Florida and the warm weather sounds great. Yeah, yeah, right. Keep those bones warm. So, you know, the cost of living, how much you're spending, that all, your retirement goal, when you retire and where, that all factors into how much you need to save.
Speaker 1 (08:03.822)
Bring on the heat, baby.
Speaker 1 (08:19.918)
Well, so far we painted a picture of somebody kind of sitting on their rocking porch in Montana, looking at the great big sky or, you know, sitting in their backyard in Florida, staring at the big puffy clouds. But it seems like most of the folks that we serve are looking at a travel goal, you know, like they want a nice retirement, but they want to see the world. So talk to me about travel a little bit.
Yeah, right. In those scenarios, that Montana scenario, you got to go back to see the kids. Right. And they're probably in Chicago because they're young. And so sometimes travel goals are come from some families will choose no travel goal and some have an extremely large travel goal. A big travel goal, for example, we recently spoke to a dermatologist whose family is halfway across the world. Yeah, Hong Kong. And they they want
is Hong Kong.
Speaker 2 (09:14.86)
to go see their family. So they have a really expensive travel goal that means the world to them. It's not just glitz and glamour, it's go see family.
Yeah, literally the world, that's like on the other side of the world.
Right. Yeah. So then maybe you want to consider traveling with your children. Because if you're not living real close to them, maybe you want to do a family vacation. They're older and they got families. So you have to plan for a big goal or you're just not the traveling type. And you intend on retiring, let's say, when you're 70 and you want to do the traveling before that. Yeah. You know, yeah, all shapes and sizes.
Well, you you've got little kids and, uh, there were times when I had little kids, I just wanted to like run away, right? Cause it gets tough sometimes, but we always took them with us. And I've found that over the years, there's a lot of joy in traveling with my kids. And one of the things I would hope to do, uh, if I ever retire, it's not really in the cards for me. It's just not something I'm interested in, but, uh, I'd like to be able to take my kids with me when I go places, even when they're adults, them, and maybe their spouses and perhaps their children. Cause, uh, you know, traveling as a family can be a lot, a lot of fun can be very.
very pleasant.
Speaker 2 (10:27.054)
There's an argument to say that would be much more fun than when they're young, right?
Yeah. Okay. Well, so we've talked about, kind of the cost of living. We've talked about, travel. So another thing is like, what about housing? Right. So, you know, maybe Marina wants to retire in New York city. we served an ER doc who lived in New York city and she wanted to retire in Montana, love to ski and,
So when we talk about housing, mean, there's everywhere from a little cabin, you know, kind of off the map to, you know, 5,000 square foot house in Colorado Springs. Right. So there's a, there's a yawning gap there and it's, it's hard to express that goal as a percentage of income to really kind of to pin things down. Right. So I think where you want to live in retirement, makes a big difference. And then, I think we're leaving at least one more thing out. It's like healthcare, right?
I mean, that's the cost of healthcare is what fuels a physician's ability to retire. But it's also, I find it hilarious that I have docs that are, you know, they're making a high six figures in their earning years. And then when they get out, they start to pay for their own healthcare because they're early retired. And they're like, I cannot believe what healthcare costs. I was like, you're seeing the other side of the coin.
Right. Yeah, right. Right. I mean, it is really expensive and healthcare is one of those things that you just said. I didn't say it. You said it, Ben, but even doctors are kind of unaware of the high cost of healthcare because when you're young, you're invincible. Yeah. Right. I you don't think about that stuff. Well, the truth is Medicare is not free. It doesn't cover everything. Right.
Speaker 2 (12:10.604)
I mean, when you get older, your health bills pile up. So you need to plan for that. And this is why rule of thumbs fall apart when you really get down to the planning part of retirement. I don't think 20 % is a terrible thing to do. It's just that 20%, it may cover your expenses that you have now, but your expenses are different in retirement. You are paying out the nose for healthcare.
and you have more health issues when you're older.
Yeah. Well, and speaking of health issues, know, some cultures and societies rely on themselves as an individualistic culture. Some of them rely on their children. something that we hear from physicians regularly, particularly those that are in their late 40s, perhaps early 50s, they're wanting to provide for their children. They're wanting to protect their assets. They want to be able to, you know, protect them and provide for them. So talk just a little bit about that, if you would please.
Right, yeah. Well, when I speak with physicians about their kids in relation to retirement, physicians are sending their kids to college and everything. the question inevitably comes up, like, what about when I'm retired or what about when I pass? What happens with my money and how do I protect my kids? The things that they tend to ask is or say that what they want.
Is they want to make sure they leave their kids something. They don't usually know exactly what that thing is. And the reality is it's because their parents are usually still around. they haven't gotten anything. So they have no roadmap for like, what is a good amount to leave? How much should I be planning for? But what I do know is that most physicians don't want to give nothing. Right. and a form of taking care.
Speaker 1 (14:01.859)
Yeah.
Speaker 2 (14:07.016)
of their children is to essentially say their children won't have to take care of them. Right? So you get to in your later years of life, you don't want to be a burden on your family. So you want to have plenty with margin in life. you know, this isn't everybody, but we serve a lot of physicians where their parents came from, quote unquote, nothing. Right. And so their parents worked really hard. I found that
Coming from nothing is a breeding ground for doctors.
Mom and dad were immigrants to this country and what I see regularly is that they started a small business.
when I spoke with yesterday, they were in the dry cleaning business, which is hard work. You know, that that family worked until they're in their seventies and they wanted something better for their children. And, and they're like, Hey, you should be a professional. And so we, see doctors and lawyers, know, not, not, no lawyers here, but, you know, they, they become physicians and you're right. And I think you just look back and you see how hard your parents work to, get in a place where
they could raise you with the opportunities that you have. You kind of want to give back, and one way to do that is to leave money for your children. I think that requires a different savings rate than someone who is planning to write their last check to the undertaker and hope the check bounces. So if you're going to drain your money down to empty, it's a whole different story than leaving your children with something.
Speaker 1 (15:42.654)
And I mean, it could just be a house that has equity in it, but that requires some planning too. sure. Well, so I guess, you know, we've talked about all these various things that go with a, with a retirement, retirement goal and the imputed savings rate for retirement. So why do we hear people all the time just like tick this 20 % off? Like it's some kind of gospel. Like why, why do we hear that all the time? Yeah.
Right
Speaker 2 (16:07.086)
And by the way, 20 % is generous. A lot of people will say less, 15%, and that's 25 % difference. So where does that come from? Where I hear it from is generally two places. The first place is just blogs or maybe books, but in the blogosphere, this is how they make their money. They make their money by giving advice.
Yeah.
Speaker 2 (16:36.162)
to people that read their blog. How do you give personal advice to someone you've never met?
Right, like you're talking to the masses. Right. Like we are right now.
Right now and the easy way the easier way out and I guess the more concrete answer is just to give them something give them a number Yeah but the reality is 20 % is just a rule of thumb and I think that you know for let's just say If we wanted to give them an out you could say that the average person making the average wage Wants who wants the average retirement?
can save the average amount, which might be 15 or 20%. But I mean, we don't work, we're not speaking to right now, average people. They didn't have an average start to their career, it was late. They don't make an average amount of money. They didn't get average grades, they don't usually live in average places.
Mm-hmm.
Speaker 1 (17:29.244)
average grades.
Speaker 1 (17:33.688)
Yeah. Yeah.
So the tough part is, it's tough to, I don't want to totally throw them under the bus, but at the same time, this is how they make money. They have to give advice to the masses and that's just one way to do it, is to give a roll of thumb.
Yeah, right.
The other place would be financial advisors. Financial advisors can give a number and I will throw some of them under the bus that might be just the lazy way out, just to give them a number. 20 % for a physician is usually far more than whatever they got going on at work. know, maxing out their 401k at work and they got a lot left to go and financial advisors want to gobble up all that assets under management and make money off of it.
And the truth of the matter is not getting real specific and always leaving some doubt that you don't have enough fuels their income.
Speaker 1 (18:30.158)
Yeah, it's, it's almost like if you think about it, okay, so let's say that I'm, uh, you know, Marina and I'm maxing out my 401k, you know, I'm being a good soldier here and I'm putting away my $19,500 this year. And if that's 20%, then that's 20 % of a hundred thousand dollars. Okay. And so I go to my, uh, my financial advisor and I'm like, how much do need to save for retirement? They're like, oh, you're to need $10 million when you retire. Like.
A, where does that number come from in the first place? But B, if you think about it, an advisor who charges a percentage of the assets that they manage, no amount of money is going to be enough for them. They want that number to be as large as possible. And they want you to stay employed for as long as possible because the minute that you stop working, you stop saving and you start spending. And then that pool of resources that they bill against goes down. you know, there's a huge conflict of interest there. And I can see them.
you know, not spending a lot of time thinking about exactly how much it needs to be or exactly what the goal is. It's just say more, more, more. I mean, the answer is simply more. And that's fine if you have unlimited life energy, but you know, being a doc, it's you burn the candles at both ends and then you come home and you do the same thing with your family. it's, you know, it's just, uh, it's, it's neck breaking without, having that. like the question I have done is for Marina, like how does she find her number?
Well, if you go back to the beginning, mean, starting, just starting, mean, you've, we've said this before on the podcast, getting started is step one. Right? you can start by saving 20 % and you can be close, let's say you're plus or minus 10%. And that's better than waiting one more year of.
Not doing your 401k if you're not doing that, not doing your backdoor Roth, not saving, that's better than that. But the disc doesn't stop there. You you keep learning, you keep reaching for what do I want and really planning for what you want and developing a roadmap. Something else that's really important, I think, is the planning process. So it's not something that you get to
Speaker 2 (20:48.14)
You figure out your numbers and then you're done. And I've experienced very recently several newer clients, maybe they've been with us for a year or so. After a year, they come back and they say, we went through this planning process, but after I thought about it more and more over the last 12 months, I've realized that these aren't really my numbers. It's close, but this is off or this is off. And the big takeaway there isn't that they were off by
$1,000 a month in their spending is that they actually considered what retirement will be like
Mm-hmm for the first time Yeah, rather than just the savings but like the the the possible doing of retirement which admittedly it's hard to it's hard to be a very young physician You're just starting it's like you just got your job and already these guys are talking to you about retiring right? So it's almost unfair, right?
for the first time.
Speaker 2 (21:41.905)
And what I found is that from the planning process, you do get to your number eventually. You know, people who have been with us for five years, they got their number down pat and they know their goals. They can recite them to us without looking. The other thing that comes out of it though is hopefully some peace that maybe you could work less. Maybe you know your number so well that you start saying, hey, I only spend X, I only save Y. That actually means I could reduce
work and still have this life and hit my savings goals.
Yeah, shave a day off or maybe not be so worried about what the, what the management's next choice is going to be. And, you know, what, what that new EMR is going to come along or like what, what fresh hell they're going to foist on you, right? Or, or what the guys at CMS are going to come up with. You know that you're, you're feeling independent.
Yeah, but you know what number doesn't get you that is the 20 % number.
Yeah. And it's not because it's too much or it's too little. It's just, there's no, there's no confidence in that number because that's been a Nate's number or that's the blogger's number. It's not, it's not Marina's number.
Speaker 2 (22:49.134)
Yeah, so for Marina, know, start with 20. Yeah. And then do a plan, create a roadmap to decide what are my goals and how do I get there? And if you find that your goals are something special, you're probably going to need to do a special amount of saving. Yeah. You find that they are average and you love work and you're working a sustainable amount. You would at least get confidence that 20 percent or even less is enough. And you can.
kind of drop your shoulders a little bit and enjoy your life and enjoy work without this fear that you're going to be destitute in retirement. Right. So it's a process. Start because you don't want to not start, but also start the planning process because, you know, six to 12 months later, you'll know a lot more about yourself, your situation, and you will probably get to your number maybe with some help. Great.
Okay, so I'm gonna take us out here. Marina, thanks so much for your question. I enjoyed our email conversation back and forth. For everyone who's out there listening, if you're kind of hiding behind your iPhone and you're wondering whether not to reach out to Ben and Nate and ask a question, just remember this. Marina got her own special copy of our Overtaxed Physician's Guide to Retirement 2021.
We're going to be coming out with another version of that in 2022. It's got the seven or eight strategies that we recommend that people do in various circumstances to save taxes while they're saving for retirement. That was her gift. could be your gift too. So to reach out and ask us a question, you can write us at podcast at physicianfamily.com. You can visit physicianfamilypodcast.com or my favorite, drop us a question on the answer line. That's 503-308-8733.
That number again is 503-308-8733.
Speaker 2 (24:41.9)
Thank you for listening to the Physician Family Financial Advisors Podcast. Is there a question you would like answered on our next show? Go to PhysicianFamily.com to record your question. While you're there, sign up for our newsletter and gain access to tools you can use to turn worries about taxes, investing, and extra money into a lifelong feeling of financial security. That's PhysicianFamily.com.
