MtoM #118 - Cardiologist Becomes a Millionaire

This is the White Coat Investor Podcast, Milestones to Millionaire Celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast 118 cardiologist becomes a Millionaire Getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the ideal policy for their gender, specialty, state or health status. And one in seven doctors get disabled at some point during their career. Because these policies can only be purchased through brokers, we put together a list of vetted agents who are experienced with working with the specific needs of medical professionals and who have your best interest at heart. If you have questions about insurance and what kind of policies would be the best fit for you, check out our insurance recommended list, the whitecoatinvestor.com insurance and feel the peace of mind that comes with knowing you have the optimal policy in place. You can do this and the White Coat Investor can help. All right, we got two great things today on the podcast. The first is an interview with a cardiologist who's recently become a millionaire. And then the second is I'm going to be talking a little bit about one of my favorite investing accounts, the triple tax free stealth ira. And if you don't know what that is, stay tuned after the interview and I'll give you a clue. Our guest today on the Milestone the Millionaire podcast is Mike. Mike, welcome to the podcast.

Thank you, sir. I appreciate it.

Now, you recently became a millionaire. Congratulations on that.

Thank you.

But tell us a little bit about yourself, what you do for a living, how far you are out of your training. Sure.

So I'm a cardiologist. I am at this point about seven years out of training and I was a military provider for 14 years. So my training path was pretty circuitous as you can imagine. It sort of was broken. I was Navy, so I did my internship and then I did a general medical officer tour as a flight surgeon for a few years, came back to training for residency and then went right into fellowship. And then I finished my time in the military as a cardiologist and so I was a little late finishing fellowship training and that's how I came to be six years out at 43 as opposed to my early mid-30s. But I married, I have four children, all under 10 years old, including two 1 year old twins. And my wife is also a physician, she's a psychiatrist actually and we live in a multi generational home. So my wife's mother lives with us and she actually helps care for the children as well. And so that's kind of me in a nutshell.

And what part of the country are you in?

The D.C. area.

Okay, so fairly expensive cost of living.

Area, but better than where I was in San Diego.

And you are no longer in the military, correct?

That's right. Yeah. I got out in 21. So.

All right, so you basically. I mean, there. There were a few other years that probably contributed to your wealth building and. And presumably, given your military commitment, you probably didn't have that much in financial student loans anyway. But over the last six or seven years, since you got done with your training, what's your household income been?

So while we were still in the military, our total gross income, because remember, in military you have allowances which are untaxed pay, but are usually a significant portion of your pay. So it's probably approaching somewhere in the 3s, mid 3s. But really only in the last couple of years have we been over five between the two of us.

Okay. Is she a doc as well?

She's a psychiatrist, Yep.

Okay. All right. And a bunch of money coming in as an inheritance or a trust fund for one of you, or is this. Pretty much everything you've built has been from your own earnings?

It's been from our own earnings. And it's funny you mentioned we didn't have much debt coming out of the military, which was not true at all. Actually. I joined the military through HPSP after I finished my first year. So I definitely had a significant amount of debt, and so did my wife. We ended up taking a little bit of Stafford beyond our military scholarship for a lot of reasons, but it was necessary. And so we ended up leaving training with about 220,000 in debt, which we paid off in 2019, which was a big deal for us. That was a big milestone as well, as you can imagine. But since that time, the wealth building has been, as you can imagine, a lot easier.

It's amazing how much easier it is to save money when you don't have payments, huh?

Yeah, much easier.

All right, so tell us how you did this. I mean, becoming a millionaire is no small feat. There's a lot of people in America that think they can't do it at all. But yet you managed to do it. It about six years out, despite starting out, you know, a couple hundred thousand dollars in a hole. So really it's a swing of 1.2 million in net worth. How did that happen? What do you guys do to make that happen?

You know, there wasn't any specific, you know, magic thing that happened. It's that. And that's where, like I said, with the fire movement, it was really just steady investment, regular savings, certainly pursuing the match and maxing out retirement accounts and things like that. And the rest was just doing it consistently over time. And then returns in the market and then eliminating our debt. I mean, that was the other. The big thing as well. And just over time, you watch the balance go up, and eventually it just reached a point where it's over a million now. So that's how we did it. It was no magic, no special thing here or there. Just slow and steady and consistent up to this point.

What percentage of your income do you think has gone toward building wealth since you got out of your fellowship?

I mean, that's certainly varied over time. It was probably started out somewhere between 30, 35%, but now, just with our income being what it is, it's closer to 25%.

Of course, you're also paying a lot more in tax, which makes it a little harder. True.

Very true. Yep.

Yeah. How'd that feel to come out of the military and start making an attending cardiologist salary and see your tax bill be more than you used to make as a fellow?

So it's interesting because of the tax benefits that you get in the military, you know, you can choose your state of residency, essentially, which means most people in the military unofficially live in Texas or Florida or someplace that doesn't tax personal income tax. And then between that and your allowances, which, again, are untaxed, our income really didn't change a ton. I mean, it certainly went up, but I'd be lying if I said it went up by six figures. It really didn't go up that much. And I actually changed jobs in the last 12 months. So now it's kind of our take home is closer to what we made when we got out in the military. Still a little bit higher, but it's roughly the same. Part of that is, too. My wife works part time, so when she goes back to full time, that'll change, of course. But right now we make a little bit more than we did when we were in the military from our take home.

Now, we were talking before we started recording a little bit about fire and how you guys have kind of taken a little bit of a different approach, maybe a little more patient approach to building wealth. Tell us why you made that decision.

Yeah, it's one of those things where my wife and I both feel like, you know, as physicians, the training and the time that's been put into our careers, I don't want to say that we owe anything to anybody, but we have a sense of obligation for service with that. And the concept or the idea about retiring early, even if that was something we were able to do, it's not something we're pursuing, I guess. And once that's off the table, the timeline becomes a lot longer, as you can imagine. And so if you intend to work into 60 or 65 or even in your 70s, because you like what you do all of a sudden, you don't need to have a huge nest egg when you retire to support you to whatever age you're going to live to. That takes a lot of pressure off. I mean, you don't feel the need to put away 40, 50, 60% of your income when really, if you're looking at 25, 30, 35 years of retirement, you probably only need to put away 20 or 25%. And again, that's with the understanding that we make much more than the vast majority of people in this country and in the world for that matter. But it helps to feel if I'm not planning to retire until I'm 60, I don't need to have several million dollars in a nest egg. I mean, I'm going to end up having that anyways. But I don't need $10 million, I guess, to live comfortably for 25, 30 years in retirement.

It's interesting, I made that point in a blog post in, I don't know, must have been the end of 2015 or so, that basically, life gets a lot easier if you're actually gonna work a full career as far as finances go. And it turned out that was the blog post that led to the birth of the Physician on Fire blog, because he disagreed so much with that post that it inspired him to start blogging. But it's true. I mean, it is a big sacrifice to save enough to put it together enough, get it all sorted out, to be financially independent, you know, five or 10 or even 15 years out of your training. True. You know, and you can, you can have a lot more flexibility in, during your career if you're planning on having a full career, for sure. Now, some people have their career cut short for whatever reason, health problems or disability or, you know, other issues. But for most docs, it is an option to work until you're 60, 65, 70, and that sure makes the finances easier, for sure.

Yeah. Particularly if you're in a job that you enjoy and isn't extremely burning you out to a place where you need to get away from it or cut back or anything like that. And my wife and I are both, fortunately, we work for organizations and work in situations which are extremely beneficial. And the work life balance is, in our opinion, ideal. That's really what it comes down to. I think if we were working like dogs and we're having trouble spending time at work and then with family, appropriate amounts of time for those two things, it would be a lot harder to say, yeah, I can stick around and do this until I'm in my 60s or whatever, but I don't know, we found magic jobs, I guess, but we both are very happy with what we're doing and where we're at and hopefully, if it remains the case, we'd stay here for the foreseeable future.

Yeah, and plans change of course too. I have a partner that just turned in his notice, his six months notice. He's going to retire in his early 50s and, and that was never his plan. His plan was to work well into his 60s and he kind of put himself on a very sustainable plan, one that he could have, you know, longevity in his career. He's working day shifts and not too many of them and you know, and he's pretty frugal person anyway and just got to the point where he was like, you know, I'm kind of done. I think I want to do the retired thing. And he ran the numbers and was willing to maybe be a little more frugal in his retirement. And now he's heading out, heading out of the career and not heading to another job. But it's interesting how things change. We think we know what we want 10 years from now and we really don't. And I think when we get there, we find out things are different and we adapt as we always have and it works out fine. All right, well, what advice do you have for somebody that is like you were, you know, six, seven years ago. They're like, I'd like to build some wealth, but I want some balance in my life. I'm not actually planning to punch out at 50. What advice do you have for that person as they embark on this process?

Yeah, sure. I mean, you know, it's like you said, you don't know what you're going to want in five years, 10 years, sometimes even in a year. I mean, I got out of the military, I had one job that I was happy with and then another one that was better for me and better for my family presented itself within a year. And I left the other job, which again was a good job for what ultimately turned out to be the perfect job for me. And so expect. I guess my advice would be just expect that your plans may not be seen through to fruition as they are when you initially make them. And that's okay. I mean it's really mostly about as the fire movement always teaches and just general investing teaches is be persistent, be consistent, make sure you're putting something away. I mean, for us, the priority is ensuring that we're getting our full match from our employers. We max out our Roth IRA conversion, but every time we crunch the numbers and look at what we're probably going to need conservatively in retirement, whatever we don't need beyond that becomes money that we can spend today for things that we want today, whether it's travel or a certain kind of vehicle. Disclosure. I have a Tesla.

It's funny you mentioned that because I just saw a survey today that we put out on social media. This is fun about social media because I actually don't get on social media basically at all. It's run by totally other people here at the company. But we put this survey out and it turned out that more doctors are driving Mercedes than Teslas. I was floored. I couldn't believe it. I thought the Tesla was the dock car of choice, but people are. Apparently there's docs are still driving more Mercedes than Tesla.

All luxury vehicles though, right at the end of the day?

Well, no, actually the top ones are Toyotas and Hondas, but I think Tesla and Mercedes were fifth or sixth.

I gotcha. Yeah, but I mean it's really just, it's slow and steady, consistent, persistent and then patience really. I mean it's, you know, ultimately I feel like most physicians that are working full time, if they are diligent with their finances, will reach at least millionaire status, if not multimillionaire status by the time they retire. Certainly we all have that capacity and you know, potential, but I feel like we potentially get in our own way in the long term.

Yeah, for sure. Avoiding, avoiding the big errors goes a long ways and just reasonable investing plan, a reasonable savings rate and you know, and it works out. You know, you multiply the numbers out, it works out. It's a very reliable plan to becoming a multimillionaire as a retiree. You know, saving 20% of a position income invested in some boring index funds and it's amazing what happens with it over a couple of decades. So.

I agree.

Awesome. Well, what's next for you and your financial goals?

Oh boy. Just. Yeah, I don't know. I mean, we're in pretty good shape with regards to estate planning and saving for the kids, education and emergency savings, and so just continuing to build general wealth and just enjoying the money that we have that's available for spending, for travel and the things that we want and the things that we want to enjoy. And yeah, just really focusing more on how we can give back and what ways we can serve our community and serve our friends and family. And yeah, I'd love to tell you some big long term goal, but once you get to this point, I'm sure you have experienced this, things just get. There's, at least financially, there's less to worry about, I guess, is what it comes down to.

You start becoming more philosophical. What trip do you have planned with the kids this summer?

We are going back to my hometown for a family reunion. We rented a house there and then we're gonna spend time with family. The big thing next year is we're probably gonna try and do a Disney cruise, though.

Cool. Well, I'm sure the kids will love that and hopefully you can tolerate it as well.

Yeah. One way or the other.

All right, Mike, well, thank you so much for coming on the Milestones to Millionaire podcast, sharing your success and helping us use it to inspire others to do the same.

Thanks for having me. I appreciate it.

All right. I hope you enjoyed that interview as much as I did. You know, it's interesting to talk to people and to see all the different pathways that doctors have taken to acquiring wealth to being financially successful. You know, I meet the people that crush their student loans in six months or are financially independent in five years. I meet the people who get a late start and are salvaging a retirement in the last few years of their career. And I meet people that kind of put it on autopilot and just let it happen over the course of two or three decades. And there's lots of different roads to Dublin. You just got to pick the one that works for you and stick with it. Because it takes some time to achieve wealth. No matter how you choose to do it, you have to stick with the plan for a while. Now it may be the case that your plan should include the triple tax free stealth ira. And what is that? That is a health savings account. First thing you got to do when it comes to, you know, health insurance, health savings accounts, is figure out what the right health insurance is for you and your family. You know, it might be because you have a lot of costs each year, a lot of healthcare expenses, that it doesn't make sense for you to have a high deductible plan, in which case you should get a lower deductible plan, a more standard plan, if you will, and not one of those high deductible health plans. But if you're like a lot of docs, you can take care of some things yourself. You're in reasonably good health. Maybe none of your family members have significant health problems. It can make sense for you to have a high deductible health plan. And if your only health plan is a high deductible health plan, you are eligible to contribute to an hsa, a health savings account, whether your employer provides one for you or not, you are eligible to contribute to one. You can contribute to the one your employer provides for you, or you can contribute to your own that you open at a place like Fidelity or Lively or one of those sorts of companies. The benefit of going through your employer, having this run through payroll, is that you don't end up having to pay payroll taxes on the money that goes into the hsa. But sometimes your employer's plan stinks. It requires you to keep a bunch in cash, it requires you to pay a bunch of fees, the investments in it aren't so good, etc. If that's the case, you can transfer it periodically into your own HSA that you've opened at some other institution. And that's what I would recommend you do. If you got a crummy now, you don't need to transfer it every month. Maybe you do it once a year, once every six months, and then you can invest it from there. Yes, these accounts can be invested. They don't have to just sit there in cash. You can leave it in cash if you want. But most of the cash accounts are basically like checking accounts and you're not making much money there, so you probably want to have it someplace where you can invest it. So the money is growing now. If you're spending from it each year and you've only got five grand in there, well, you may want that in cash. But if you've been putting money in there and you're not spending from it now, you got $50,000 in there, you probably want to be investing that money and typically into low cost, broadly diversified index funds. And so that's what we do with our hsa. I think we've been using an HSA since I got out of the military in 2010. And so we've made a contribution to it every year. The maximum family contribution this year in 2023, that contribution, I believe, is 7750 bucks. The if you're single, it's basically about half of that. Bear in mind a family plan can be you and a kid, you and a spouse, you and a spouse and three kids, whatever. As long as there's one other person in the family, you can make the family contribution for the hsa. And so this works out sometimes when one spouse has a job that provides a low deductible health plan and the other spouse has a job with a high deductible health plan and they put one kid on that high deductible health plan. Now they can use a family contribution for the hsa. Now these are great accounts because they're triple tax free. Just like when you contribute to your 401, you get an upfront tax deduction. All that money that goes in there is money I don't pay taxes on this year. So when I max out my HSA every January, I don't pay tax on $7,750 of income. Then as the money grows in those investments, it grows in a tax protected way, just like in your 529 or your Roth IR IRA or in an able account if you have a disabled kid. It all works the same way. It grows tax protected when it spits out dividends. When you buy and sell stuff in there, you don't pay capital gains taxes, you don't pay taxes on dividends or interest or anything. It grows tax protected when the money comes out, so long as you spend it on an approved health care cost, which is just about anything in health care related, including Medicare premiums, I might add, that money comes out tax free. So it's triple tax free. Tax break going in grows tax protected, comes out tax free. That's better than your 529, that is better than your Roth IRA. That's better than your 401k. It's your only triple tax free account. Now let's say you got a huge one. You know, this big old HSA, it's $300,000. You think you're never going to spend that on health care. And you decide you want to take some of that money out in retirement, well, you can do that after age 65. There's no penalty associated with taking money out of your hsa, no matter what you spend it on. But you do have to pay taxes on it at your ordinary income tax rates. So at its worst, the HSA is essentially functioning as another 401, another IRA. Thus my name for it, the Stealth IRA. So these are great. You know, you shouldn't get a health plan. You don't want just to get an hsa, but if you have a high deductible health plan, of course, fund the hsa, invest the money, take advantage of that tax protected growth. You do want to spend this during your life though. This is not a great inheritance. People that inherit an hsa, basically it's all taxable income to them in the year that it's inherited. So if you're not going to spend it yourself and you have any charitable inclination at all, this is the first account to leave to charity and you can do that with an hsa. Hope that's helpful. Getting quality disability and life insurance should be the first financial chore for a doctor to complete. Most docs don't have the best policy for their gender, specialty, state or health status, and plenty of doctors get disabled at some point during their career. Thankfully most for not too many years, but some for the rest of their career. These policies have to be bought through agents. That's the way they have to be bought. Somebody's going to earn a commission on it, so you might as well get a lot of great information and a lot of great education in exchange for that commission you're paying. We put together a list of vetted agents. These are people who have sold literally hundreds, if not thousands of policies to white Coat investors over the years. They are experienced. They know what they're doing. They know the ins and outs of all these policies. They can help you get the right one for you. Where do you find them? You go to whitecoatinvestor.com insurance. They will answer your questions. They'll review old policies you have. They'll explain what kind of policy would be a best fit for you. Yes, they're going to make a commission, so don't feel bad asking them questions. Take advantage of the fact that they probably spend an hour or two educating those who are buying these policies. Every time they sell a policy, but do get it in place, it is an important type of insurance. All right, I think that's the end of our episode today. I hope you're enjoying these new, longer Milestone to Millionaire podcasts. Send us feedback as always and let us know how you're liking what we're doing. But in the meantime, pass these along to others. Keep your head up, your shoulders back. You've got this. We'll see you next time on the White Coat Investor or the Milestone to Millionaire podcast. The hosts of the White Coat Investor podcast are not licensed accountants, attorneys or financial advisors. This podcast is free entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.