The White Coat Investor Network[Editor's Note: Today's WCI Network post is from Physician on FIRE. Most docs have already won an equivalent of the lottery with our high incomes. Unfortunately, too many of us act like lottery winners and fail to develop financial muscles that build up from years of earning, saving, investing, and giving. I have a lot of hope, however, as I've seen time and again, that financial discipline CAN be learned and habits can change. Enjoy the post!]


She watches with anticipation, hoping to become a lottery winner as the numbers pop up on the screen.

3. Her daughter’s age

12, 16. She was born on December 16th!

26. Her age when she graduated medical school and got married.

33. Her current age and the fifth of her lucky numbers. This is really happening. Just one number to go…

11! This one goes to eleven!

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She figured if she didn’t win the lottery, she could live on half her takehome pay and be financially independent in about 11 more years.

But that won’t be necessary. She won the lottery! She really won!* A lottery winner at age 33.

Can you imagine? Millions of dollars at her disposal only a few years into her medial career. The question is, what does she do next?

While almost no one reading this blog will have to answer this question as an actual lottery winner, most of you will be facing a similar question one day after becoming financially independent.

*She didn’t really win; this is a fictional story, and she doesn’t exist. Non-existent people cannot win non-existent lottery drawings… or can they?


Would You Quit Your Job as a Lottery Winner? How Financial Independence is Like Winning the Lottery


Before comparing and contrasting, we ought to establish what sort of lottery winner we’re talking about and what it means to have financial independence.

Starting with the latter, people are considered to have reached financial independence when they can maintain their current standard of living indefinitely without having to earn additional income. Their accumulated assets will support them.

This can mean having at least 25x one’s annual expenses invested (abiding by the 4% rule) or having sufficient truly passive income that meets or exceeds one’s anticipated cash flow needs.

Regarding the lottery winners, we’re talking about life-changing money. Millions. Not the five-figure or low six-figure winnings that have a fascinating tendency to bankrupt your neighbors, but a true multi-million dollar prize.

There’s obviously a difference between a $1 Billion windfall and a $10 Million payday, but either will make almost any of us truly financially independent overnight.

The Value of a $10 Million Lottery Winning Ticket

Let’s say those numbers in the introduction (which are the actual winning numbers from a rigged Iowa lottery) gave our lucky lottery winner a $10 million prize.

Would she start planning a life based on a $10 Million nest egg? Of course not.

First, she would only get $10 million in earnings if she took the prize as an annuity over 20 to 30 years. That would give her $333,333 to $500,000 a year in income for the next two or three decades. She would have to pay taxes on those payments, so she might only have about $250,000 to $350,000 per year after the IRS and state get their cut.

Once the 20 or 30 years of payments is up, she might have another 30 or more years to live, so it would be prudent to set aside a portion of those earnings to cover her remaining lifespan. Clearly, she’s not going to be able to apply the 4% rule to that $10 Million number and live on $250,000 a year indefinitely.

What if she, like many lottery winners, opts to take the lump sum instead?

Lottery winners are typically given a choice to take the annuity years or take a lump sum at a reduced rate. I’ve calculated the difference between the reported prize and the lump sum offered on a number of recent lottery prizes, and it tends to be 40% to 50% reduction right off the bat.

For example, the recent winner of the $1.537 Billion Mega Millions jackpot received a lump sum of $877.8 Million. After taxes in South Carolina, the winner is left with about $492 Million, or less than a third of the stated prize.

If our hypothetical $10 Million winner takes the lump sum using the same formula, the bounty is now worth $5.77 Million. The tax treatment on the lump sum is not kind. The vast majority of the earnings will be in the 37% federal income tax bracket and with state or local taxes factored in, half of that money could go to pay income taxes.

After all is said and done, the after-tax lump sum $10 Million lottery winner will have something in the range of  $2.8 and $3.6 Million left depending on where she lives.

That’s fatFIRE money and happens to be in the nest egg range where I felt comfortable retiring.

That’s right. It’s almost as if I won a $10 Million lottery prize. I just had to work a little harder for it.

How Financial Independence is Like Winning the Lottery

Multimillion-dollar lottery winners and the financially independent will be faced with similar choices. Will you keep working? Are you ready to call it quits?

physician retirementA life-changing amount of money is a life-changing amount of money no matter how you acquire it. You could also include the recipients of a large inheritance in this category, although they’ll have a different set of issues to contend with like grief and RMDs. Still, money is money.

Realizing that you are truly living a work-optional life, you will question how you are spending your days.

Is there something you’d rather do with your time? Is your career a calling or just a good way to pay the bills and save for what’s next?

What is next? Will you feel guilty if you do leave your job? How will you fill your days? Do you have kids to raise that could benefit from more time?

Would you work part-time? Can you work part-time? Have you considered locum tenens or temporary work?

If you choose to work less or not at all, how will your coworkers feel about that decision? How about your immediate family or extended family? What’s the transition plan?

Bombarding you with all these questions is starting to stress me out, and I’m the one on the delivering end and have already answered most of them for myself already.

The fact is, whether you won the lottery, lost a wealthy relative, or earned enough money to become truly financially independent, you’re going to have some soul searching to do and some big decisions to make.

How you answer those questions and what you do with that money will have a huge impact on not only what your life looks like going forward, but also on the lives of your loved ones, colleagues, and on how others perceive you.

The Difference Between Lottery Winners and the Financially Independent

If you want to be particular, you could argue that lottery winners are also among the financially independent; they’re just a subset of the FI. Technically, you would be correct, but you don’t want to be that particular.

For the purposes of this discussion, I’ll be comparing the lottery winner who became FI overnight to someone who earned, saved, and invested until the magic number was reached.


One obvious difference is the suddenness in which the lottery winner became wealthy.

This person may not be accustomed to having much left over after paying the bills. She might not have much experience with investments. She might not have any idea what to do with a seven-figure balance.

She also hasn’t had any time to ponder what life could look like if she didn’t have to work anymore. All of those questions above thrown at her all at once could be overwhelming.

The person who arrived at FI over a number of years has seen it coming. She remembers when her net worth first hit zero, then six figures, and when she finally could call herself a millionaire. She celebrated each and every one of those milestones.

Friends & Family

Guess whose Facebook profile gets flooded with friend requests? The lottery winner, of course. Who’s more likely to be asked for a “loan,” an investment in some hair-brained business idea or straight-up asked for the gift of money?

Once again, it’s the lottery winner.

When you reach financial independence one paycheck at a time, practicing stealth wealth while working your way to eventual financial independence, you won’t be dealing with the same level of wealth envy.

As a steady wage earner, you may not be immune to some of those requests — your friends and family do realize you have a good job — but they probably won’t know you’ve accumulated the equivalent of a $10 Million lottery prize. That is, unless you state it publicly on a website that receives millions of views each year.

No. You cannot have my money.

Marketable skills

One of these people has proven that they have the ability to earn a good living, resist the temptation to spend up to or above their means, and to invest in a sensible manner.

One of these people has not.

The person who earned financial independence the hard way is in a great spot to better her position by working just one more year or several more. She also has the ability to alter her course and return to gainful employment if she takes a break and finds out that a life without a career doesn’t suit her.

Remaining in her career may be more meaningful as compared to the lottery winner. After all, the job is what put her in this enviable position. The impact of continuing to generate income will probably affect her finances more than working one more year at the cheese factory like the 100 Sargento workers who split a $208 Million prize in 2006.

Experience With Money

If you ask any geek off the street what they would do if they had a million dollars, they probably wouldn’t tell you they’d invest it to be one step closer to financial independence. No, they’d tell you how they would spend that million dollars, or at least a good chunk of it.

A big lottery winner can be pretty much anyone off the street, or anyone off the street with a spare dollar or two and an interest in playing the lottery.

And what do too many of them do? Blow it all. Don’t act surprised.

In contrast, the get rich slowly types will know what it’s like to have $10,000, $100,000, and eventually $1,000,0000 or more at their disposal.

They have taken the time to learn some investing basics. They’ve seen what the Joneses are doing and have chosen a different path. There’s a plan for the dollars they’ve saved up over the years and they’re not likely going to squander them.

Asset Location

It’s not looking so good for the lottery winner, but she will have one advantage over the lifetime achiever. Pretty much all of her money will be post-tax.

Now, she won’t have much in the way of tax-protected space in which to invest the money, but a taxable brokerage account is a perfectly fine place to invest. Other than some potential tax drag that should be minimal if she no longer has earned income, and the possibility of future capital gains taxes (which can be avoided in several ways), this money shouldn’t see much in the way of future taxes.

The wage-earner will have more money growing in a tax-advantaged way, but all of her tax-deferred dollars and their earnings will eventually be subject to ordinary income tax.

If I Won the Lottery

Would I quit my job if I won the lottery?

Way back in late 2015, I discovered Mr. Money Mustache and the concept of financial independence. I realized we were in pretty good shape right then and there.

The nest egg looked a lot like it would after a $5 Million prize was pared down by the lump sum discount and taxes were paid.

I did not quit my job.

I did, however, begin to contemplate what I wanted the rest of my career and post-career to look like. I thought about the things I might do if I were to retire.

I decided to work for a while longer, but I bowed out less than five years after that initial revelation. It’s a decision that I came to after much reflection and discussion with my wife, my kids, and even my parents.

In the interim four and a half years from discovering this thing called financial independence, our nest egg has doubled from a combination of both work and investment returns. I felt more than ready for what would come next (semi-retirement) both financially and emotionally.

I did not want to leave my colleagues in the lurch, and I played a prominent role in identifying my eventual replacement who happened to reach out to me to inquire about the possibility of a job opening in our small group.

He was hired a year and a half before he’d be eligible to start and I agreed to stay on until he was finished with residency, living here, and oriented to the job. I expressed a desire to be involved in that aspect, too, and I was able to pass on a few last bits of wisdom before moving along.

To answer the question posed, yes, I would quit my job if I won a $10 Million lottery prize, but I would take my time and do it right.

What would you do if you won the lottery? Buy something you’ve always wanted? Change careers? Work less? Would you quit your job?