So far, so good. You’re saving 20 percent of your earnings, preferentially putting it into retirement accounts, and investing it into index funds. This can be set up to happen automatically, but even if you’re doing it manually, it takes just a few minutes a month to maintain an investing plan. It seems very simple, but over time produces powerful results through the miracle of compound interest.

Compound Interest

While there are no guarantees about future returns and there is wild variability in the returns of stocks and bonds in any given year, over decades all that variability more or less evens out. A reasonably conservative assumption would be that your investments would earn eight percent before inflation and perhaps five percent after inflation over decades. If you start upon graduating residency at 30 and work and save until you retire at 60, that $75,000 per year would grow to be about $5 million, in today’s dollars. (In reality, by saving 20 percent of a gradually increasing income, you would likely end up with more than $10 million, but it would only purchase as much as $5 million does today). 

$5 million allows a retiree to safely spend about $200,000 per year in retirement. Adding Social Security to that (and yes, Social Security will still be there for you in some form) will allow you to maintain a similar lifestyle to what you enjoyed during your career. Keep in mind a net worth of greater than $5 million will put you into the top 10 percent of physicians. Despite the simplicity of this plan, most doctors are not doing this due to ignorance, lack of financial discipline, or misfortune.

Final Best Practices

While saving up a retirement nest egg is the greatest financial task of your life, it does not need to be overly complicated. You need enough discipline to start early, to save 20 percent of your gross income for retirement, and to leave your investments alone when markets seem destined to implode, but you don’t need to have any sort of specialized knowledge or put in an inordinate amount of time or effort. You can focus on your patients, your family, and your own wellness and enjoy a wonderful career in emergency medicine. You can have your cake and eat it too.  