[Editor's Comment: Today we have a republished post from Physician on FIRE, a member of The White Coat Investor Network. This post is about doctors that keep working even though they've reached financial independence (OMY). PoF is by far too young and good looking to fully retire from medicine right now. He's sure to have a few more good years of medicine ahead and can't retire until he gets that statue! The original post ran here, but if you missed it the first time, it’s new to you!]
If you’ve been following the FIRE movement, you’ve got a pretty good idea of what it means to be financially independent, and can appreciate the power that financial independence provides.
Chief among the benefits is the ability to retire early; your investments should adequately provide for your spending needs indefinitely at a withdrawal rate less than or equal to four percent.
That’s a great thing! But what if, like me, you’re not ready to hang up the stethoscope quite yet. You know you’ll miss your patients and colleagues, and frankly, you’re too young and good looking to be retired!
A frequent topic of discussion among the FIRE community members is a constellation of symptoms that describe OMY syndrome. Is it a real thing? Oh, My Yes. A real thing called One More Year syndrome.
What is One More Year Syndrome?
To be afflicted with OMY syndrome is to continue working for “one more year” even though you’ve reached your financial goals, and no longer need the paycheck to make ends meet.
OMY syndrome is often looked down upon in the forums as a weakness in fortitude. If you can afford to retire early and choose not to, you are clearly guilty of some sort of moral failing.
The world is your oyster, and you’re afraid to open its shell. The only prescription is to retire, and fast. Of course, not everyone feels this way, but it seems to be a common opinion.
When I read such opinions, I’m reminded of the classic film Swingers in which nice guy Mikey is being “coached” by his buddies on how to approach the pretty girl at The Derby:
Trent: And you got these $#(% claws and these fangs, man! And you’re looking at your claws and you’re looking at your fangs. And you’re thinking to yourself, you don’t know what to do, man. “I don’t know how to kill the bunny.” With *this* you don’t know how to kill the bunny, do you know what I mean?
Sue: You’re like a big bear, man.
Mikey appreciates the confidence boost, but he doesn’t need to go for the kill; he’s going to take his time, and do things his own way. Don’t worry; he’ll get what he’s after, playing his cards in his own way.
It’s like that with early retirement. You don’t have to do what your peers or internet strangers think you should do, or tell you to do. You do what works for you. Financial Independence can be a starting point to begin contemplating an early retirement plan, rather than an endpoint. Of course, retirement in any form is completely optional.
I’d like to discuss the positive aspects of OMY syndrome today. If you’re not miserable in your job, OMY syndrome can be a real boon to your financial future. Even more powerful are OMY syndrome’s cousins, FMY (five more years – a syndrome of which I am guilty) and TMY (ten more years) syndrome. Incredible wealth can be attained if other variables (namely spending) remain the same, as we learned from Dr. A when she chose to continue working after achieving FI.
If you are on the brink of an early retirement as a physician, you are in an enviable position. You’ve got a high savings rate (calculate yours here), and you’ve paid down your mortgage. You’ve got Enough to live a comfortable life. If you can give the career one more year, you might be able to do some amazing things with that money.
Financial Benefit of One More Year
How much money are we talking about? In one year, a physician with a high savings rate can not only cover living expenses for the year, but also put away anywhere from $50,000 to $250,000 or more depending on specialty and salary.
The net effect of working one more year is equal to after-tax pay. You have to take into account both the usual year’s savings plus the amount you spend from paychecks rather than spending down your portfolio as you will in retirement. For full-time physicians earning $200,000 to $500,000, after-tax pay would be in the neighborhood of $140,000 to $300,000 for one more year.
What could you do with money like that? Using a 4% safe withdrawal rate as a guide, you would have an extra $5,600 to $12,000 per year to spend in retirement, or an extra $15 to $33 a day.
you can afford Iceland. every year forever. #omy
That kind of money could buy one or two tremendous vacations per year, or be an entire year’s travel budget for a frugal or infrequent traveler.
What else could $5,600 to $12,000 a year buy?
- a decent portion of your health insurance costs.
- season tickets every year for your beloved Home Teams or the Theater.
- tuition for your eventual Grandkids at the parochial school.
- airfare for the extended family to vacation together annually.
- date night at a gourmet restaurant every week.
- beer. just a whole bunch of beer.
I’m sure you could come up with a whole bunch of ways to spend that kind of money. You may have noticed that none of my suggestions are objects; they’re experiences. Well, technically beer is an object, but I’ve come to find it can most certainly lead to experiences, and the enjoyment of a good craft beer can be an experience in and of itself. I favor experiences over things, and happiness studies do, too.
I’m not going to tell you what you should or shouldn’t do with your OMY money. You don’t have to stretch it out over the length of your retirement. If you want things, buy things. Things don’t even have to be plural; it’s your money and you can blow it all on a thing. Like a Bentley, if that’s what you really want.
You don’t have to spend the money.
I’ve shared some ideas of different ways you could spend the extra OMY money, but you don’t have to spend it at all. If your FI number was based on your anticipated retirement spending, you probably accounted for the season passes and plane tickets, and at least a modicum of beer, wine, kombucha, or whatever little luxury you enjoy.
What if you let your OMY money ride? Using a compound interest calculator, you can see that $200,000 left alone for 40 years can be expected to become millions.
Now you can afford a fleet of Bentleys, even after accounting for inflation, but you probably won’t want that when you’re in your eighties or nineties. But you could do something awesome, like help fund a new YMCA building or incredible community park with your name on it.
Or a statue. You deserve a statue.
If you plan to do a fair amount of charitable giving in retirement, it’s best to plan for it several years before retiring. I’m an advocate of using a donor advised fund (but WCI is not) to build up a large reserve from which you can give.
My OMY giving plan is this: use my last several years of paid employment to build up a sizable DAF, giving up to 30% of adjusted gross income (AGI) each year until the DAF is equal to 10% of my own invested assets. [post-publication edit: goal achieved]
Why 30% over several years? I will intelligently donate mutual funds with significant capital gains. The cost basis becomes irrelevant when received by the DAF, and nobody pays capital gains taxes. When giving appreciated assets, the IRS limits donations to 30% of AGI. When donating cash, the limit is raised to 50%, but I want to give in the most tax-efficient manner, so I’m not donating cash.
Also, I want to give now while I’m in a high tax bracket, to benefit from a larger tax deduction. Waiting until I’m retired to build up a DAF would represent a missed opportunity.
When giving appreciated assets, the IRS limits donations to 30% of AGI. When donating cash, the limit is raised to 50%, but I want to give in the most tax-efficient manner, so I’m not donating cash.
When you have a high salary, One More Year can make a big difference for you, your family, or for people and causes that matter to you.
Have you been blessed with the opportunity to work OMY? Is it something you’ll consider when you reach your goal retirement number? What would you do with your OMY money?
I think that the most powerful part of reaching. FIRE is that you can rerire IF YOU WANT to retire. That doesn’t mean you have to retire.
Having that freedom is huge. I also imagine that it magnifies the parts of the job you don’t like (and now technically don’t have to deal with if you don’t want to… Could just retire).
I plan on reaching my FIRE number by early to mid 40s, but I love doing research (if I have the time), teaching, and doing (most of) my clinical responsibilities. What I really look forward to when I have the money is cutting back the things I don’t like.
That way I’ll have a OMY problem and I’ll enjoy it. It’ll probably turn into FMY problems.
Thanks for the post. Each extra year purchases a lot of financial power. But only if you want it.
TPP
Great comments, TPP.
You hit the nail on the head with this one: ” I also imagine that it magnifies the parts of the job you don’t like (and now technically don’t have to deal with if you don’t want to… Could just retire).”
I am fully engaged with the work that I do, but since I was hit with the realization that all of it is optional, additional “one more years” start to feel a bit tedious. I used to think I loved my job, but the remuneration was a big part of that. When the money doesn’t matter as much, the joy of working as a physician can fade. For me, it’s sad but true. I feel privileged to have had this career, but I’ve learned that anesthesia is not my true passion
Best,
-PoF
I turn 54 in three weeks. I had a goal of becoming a millionaire at age 45. I had no clear plan, maxed out my 401K from 30 to 45 and did not make it.
It took to about age 50, counting real estate equity. Now, I have a goal and a plan: retire at age 58, working a bit as I wish from 58 to 62. If I can execute the plan of selling my large home and using the equity to pay off the mortgage on our cabin, the plan provides about $110,000 in income, not a lot per a recent Sermo post suggested many docs want $200-$250K in retirement.
The OMY syndrome may come into play based on market returns over the next five years, but I hope I can keep to the plan. It has many moving parts, not the least of which is selling the big house in a rising rate environment.
I can still do everything I want these days physically, but this may not be true in five years. This idea that you can only draw down 4% of your portfolio is also stodgy. I am drawing down 5%. I don’t plan to live to be 90…and if I did, the bulk of the monies I need from 85-90 would be for prunes, medical cannabis (just kidding), and an aluminum chair to pee myself in if I can’t afford depends at Sams Club.
I plan to live it up from 58 to whatever, while I’m able. What the heck are millions to be spent on in your 80’s. Where are all these virile, vigorous and potent 80-somethings choking down tapas in Spain while clubbing it to 4AM? They are quite rare, despite anecdotal evidence to the contrary.
My dads QOL was poor from age 75-80. One of his sisters died at 56 (cancer). Another brother of his died at 66 (early onset Alzheimer’s dementia) and another at 70 (MI). My father-in-law was vigorous to age 75, then languished through multiple joint surgeries and died in an ICU of a rare form of leukemia…in a week. I’m glad he never listened to me about eating better…
My paternal grandparents lived to age 75. Both died demented. My maternal grandmother lived to age 95, but from age 85 onward she was ready to go having stopped driving due to macular degeneration.
If you are genetically gifted and live a pristine life as to diet and exercise, happy 70’s to you. Your 80’s may still be quite a disappointment. Its unlikely anyone will in Europe spending $250,000 a year. The biggest expense is likely to be healthcare and tablets to cheat the reaper out of a year or two.
Once they take away your car and checkbook…it won’t matter how many millions you saved and didn’t spend. Your kids and grandkids may benefit, but I’ve seen many who never optimize their own life waiting on a chunk from the older generations.
I’m hiking the mountain while I can. I’m going on the Appalachian trail while I can (in April). I’m going to party in Spain and walk the Camino de Santiago while I can. I’m swimming a mile along the coast in the Caribbean while I can (in May of this year) It doesn’t cost that much to sit in a chair after working a year or two “extra”…but may involve a large measure of regret.
What docs want and what docs get can be two very different things. Many docs may want $200-250K in retirement, but the average doc in his 60s has a net worth of just over $2M. Assuming a $500K house, that’s $1.5M, or about $60K a year from the portfolio. Perhaps add another $40K in SS, and that’s $100K. A far cry from $250K.
The Sermo post asked doctors what they felt they needed as a nest egg to retire. One doc was making fun of the folks shooting for $100-$150K retirement income implying we would be eating at Denny’s while he/she was in Europe on the $250K a year plan.
I added up all my projected expenses and added in $10,000 a year for entertainment and $10,000 a year for travel and I don’t need $250K a year with the kids gone, no mortgage, and a LOT less taxes. The total tax bill federal, state, SS, Medicare on $100,000 income was about $20,000. I currently pay $120,000!
Adding up my current double mortgage (big house plus retirement home), private school and college savings and tuition, huge tax bill, from making a lot of money, and my retirement funding…it is about $270,000 a year I don’t need in retirement!
My family of six is spending something like $13,500 a month right now (not counting taxes and charity), and that includes $2500 a month toward vacations and $2500 a month toward large purchases. If there were something else I could buy that would make us happier, I would buy it. I don’t know what I personally would spend $250K a year on.
But sure, if you lived in a more expensive area or had multiple homes or something, I can see how someone could spend $200-250K in retirement. My point was that most docs don’t have enough savings to do that. Nor do they likely need that much.
I like your plan for the most part, and 5% works out most of the time. The 4% rule is based on what’s pretty close to a worst-cas scenario, historically speaking. As long as you have contingency plans to cut back in a down market or earn a bit of income if needed, you should be OK.
There is a concept called the “retirement smile” to consider. You start spending less as you get older, there may be a trough in your 70s or early 80s, but then health care spending causes your spending to rise again. If you’ve run out of money by then, some combination of Medicare and Medicaid will be covering most of those costs, but if you have money, expect your costs to rise in the last decade of life.
Best,
-PoF
Thanks POF and WCI. Your posts, sites, blogs, and continuous support are very helpful.
I am passing all I can of this info down to my kids who already have Roth IRA’s.
My 24 year old made $37,000 last year and maxed out her Roth, but owed $1900 in federal tax and $400 in state tax due to underpayment during the year. She wanted me to recharacterize the Roth, but I talked her out of it.
She has adjusted her W4 for this year. Her effective federal tax rate was 9%. Mine was over 23%.
Our spending per month with a family of six is $16,000 per month elevated by the mortgage on the retirement cabin ($1400) and 11acres of land next to it ($650).
Once we sell the big house (4000 sq ft) and move to the retirement cabin (2900 sq ft), my bills drop by about $10,000 a month, down to about $6000 a month. Lower property taxes, no mortgages, lower electric, etc.
YourHuckleberry, I’m glad to see that you are concentrating your efforts on experiential activities that provide more joy and memories than any fancy sports car can bring. I, too, am in my early 50s, and have thought about where I’ll be spending my time and money over the next 20 to 30 years. For me, it will be hiking the uplands of Iceland and Patagonia, and skiing in Chile, New Zealand, and BC.
However, I am concerned that if that’s all I’ll be doing, then I might be losing some sense of fulfillment and purpose (despite how corny that sounds). I’ve known some docs who retired in their 50s and became extremely bored, primarily due to a lack of hobbies and interests. They were too busy cultivating a successful career in their youth. I’ve also known other docs who kept working into their 80s, partly due to lack of savings, and partly due to lack of outside interests. I don’t want to follow in any of their footsteps.
Sounds great KingT!
At any time, a psychiatrist (and many other physicians) can get back in, do a locums assignment, have a small practice even in someone else’s office space, start a second career, etc.
For me, I feel as though I have so many interests outside medicine (my kids, my wife, hiking, triathlon, writing, travel) that I’ll be fine. I’ve done enough work in my career to fill two careers, like a lot of docs.
POF is so money he doesn’t even know how money he is.
I have noticed that people who want to retire but are never going to be able to seem to brag about how they never will retire and will die at work. As if it is a choice. They would likely look down on a young physician retiring early.
Those on the FIRE forums who will be able to retire in 10 years but wish that they could tmo will likely look down on a physician who could retire but chooses to work. I think that is the greatest position to be in and proof that you chose the right field.
In other words, haters will hate. Do you. People are just jealous.
I look up to the financially independent physicians who choose to continue working indefinitely and have no interest in retirement. They’ve clearly done something right!
I agree with the first sentiment, though. And the last. Haters gonna hate.
Cheers!
-PoF
If you enjoy medicine more than life…by all means work until you are 70…or 80 (!?).
I’ve been working since I was 12. I had paper routes at 12-15, a bigger one at 16, then a huge one from 18-21. I’ve been a dishwasher, a fry cook, a math tutor in college, and moonlighted to double my wage in residency (did psychiatry compensation and pension exams for PTSD every Saturday for two years), and now I moonlight 26 weekends a year and work half of the holiday weekends.
I cannot wait to be done. Miss my patients? Well maybe my geriatric psychiatry years (2001-2011). At the clinics where I’ve been for the last few years, it’s all about Xanax and Adderall “beat downs”, threats towards me, people cursing at me, worrying about my safety…no thanks. Again, can’t wait to be done.
Had I been a better saver and investor, I would have finished at 50 and never looked back. So, some enjoy their work like I did for many years, but choosing to work with the most ill patients has taken a toll.
Looking forward to FIRE and I will avoid OMY if at all possible.
Great post! Greetings from Edina. Next time you’re around here we should grab a beer. Cheers! ????
I’m game! I make it to the Twin Cities for my share of sporting events. Last week, I entered a lottery for 4 NCAA Final Four tickets in 2019. The cost was $865 and I’ll get all but $25 back if I don’t get them.
Working one more year would allow me to afford this every year and pay for flights and hotels, too.
Cheers!
-PoF
Being financially independent and financially free at the age of 58, I still enjoy seeing the most patients. Except for one type of patient which I call the help-rejecting complainer.
That’s great, David. If there were a way to avoid that particular subset of patients, you’d have the perfect job! Unfortunately, that’s much easier said than done.
Cheers!
-PoF
I think I am in the TMY group. I have plenty of investments and too much money, but I like to work, to see patients, to teach, to build the practice, to keep busy, to be productive. Oh well, that is just who I am and what I do. If I make it to my 90s, I could theoretically have a ridiculously high net worth. I guess I am going to have to ramp up that charitable giving a whole lot more.
That’s an enviable position to be in. The more time I spend writing and interacting with this community, the more I realize I prefer this kind of work, which I can do on my own time at my chosen pace, to the work I do as a physician. But the doctor job pays me much better.
I don’t necessarily need the money, but I am building up the donor advised fund, padding the “cushion” by lowering our anticipated withdrawal rate, and biding my time until my replacement arrives in 18 months.
Cheers!
-PoF
I would say I am somewhere between OMY and FMY. It is instructive how each additional year of work impacts not only savings but future expenses by decreasing the number of the years before SS and Medicare.
It is a win / win when you look at it that way. I’m still 28 years away from Social Security, assuming it still makes sense to delay to 70 a couple decades from now.
Best,
-PoF
I for one am dealing with OMY syndrome big time. Our net worth will easily accommodate our planned retirement lifestyle. Moreover, I’m reasonably happy with the status quo of working full time with some flexibility to travel and pursue other interests.
Our post-work plans call for a primary focus on charitable activities. My challenge is dealing with the reality that any “soup kitchen” labor or other noble effort pales in value to the financial support I could give to the same organization by working “one more year” and contributing the excess income. The practical side of me keeps asking, isn’t contributing the $500/hour I make in my profession better than contributing the $10/hour of “free labor” I could offer by pulling the retirement cord? (And no, my skills/expertise would not translate well to doing the same activity for a charitable organization.)
Apologies if this is coming out a bit sanctimonious but I wonder if it’s a struggle others face to varying degrees.
Definitely an issue, but take it to its logical extreme and you see the issues with it.
I sometimes wonder the same thing with regards to family. Perhaps the best thing I could do would be to provide all the money they’d need to live the rest of their lives rather than spend time with them. Then I come to my senses.
Wise words.