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Physician Finances: How Much Do I Need to Retire?

Physician Finances: How Much Do I Need to Retire
By: Cameron Hamilton, CFP®, MBA, CPWA®, Partner, Director of Financial Planning

How much do I need to retire?  It’s the number one question we get when we meet someone new, and the number one easiest question to answer.  Everyone gets the same response- it depends!  Luckily most of us have similar math that, without too much difficulty, can yield a better answer.  Most people have a certain income, spend a certain amount, retire at a certain age, and face similar risks of running out of money- long life, health complications, overspending, inflation, and poor investment returns.

 A good place to start is the 4% Rule.  This financial planning rule of thumb says that 4% is a reasonably safe withdrawal rate for most retirees based on historical assumptions.  Conversely, divide 100 by 4% and you get the 25X rule saying you would need 25 times your income to sustain your lifestyle.

Does it work for physicians?  Yes and no.  The 4% rule applies to most, minus the “live like a resident” types who save 80% of their earnings and want to retire after 10 years of practice.  But doctors need to focus on spending, not income.  This is where the dreaded “doctor budget” curse becomes a blessing.  Most mid-career physicians spend a small minority of their gross income on personal living expenses for themselves and their spouse.

Let’s consider a recent example of a mid-career physician we met who had a household income of $600,000.  In comparing today to retirement, we realized they spend at most a third of their income on expenses they will want to reproduce in retirement, with their top “temporary” expenses totaling over $400,000.

  1. Taxes: $130,000 lower in retirement (payroll/high bracket)
  2. Retirement: $69,000 to max out three qualified retirement plans
  3. Mortgage: $72,000 principal & interest
  4. Private School: $70,000 for two children
  5. College Savings: $24,000 for two children
  6. Children’s Activities: $24,000 (not including plenty of travel sports expenses)
  7. Insurance premiums: $12,000 (disability/life)

Circling back to that 4% rule target, we aren’t shooting for $15 Million here; this couple will do great if they can save $5 Million to cover the $200,000/year they actually spend on themselves.  Of course, that is assuming they can get their children off the payroll by the time they retire, but that’s a subject for a whole separate article!

About Ballast

Ballast is an employee-owned, financial planning and investment management firm located in Lexington, KY.Ballast provides individualized services to high-income earners, high-net-worth clients, and those individuals/businesses who have complex situations. To learn more about the intricacies of the information above or to learn about our firm, please visit, email us at, or call our office at 859-226-0625.

Ballast, Inc. is a registered investment adviser with the SEC. Registration with the SEC does not indicate that the adviser has achieved a particular level of skill or ability, nor is it an endorsement by the SEC. All investment strategies have the potential for profit and loss. Ballast, Inc. is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation.