MtoM #120 - Career Military Doc Takes on Retirement

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 number 120. Military physician it's retirement. Still not sure what to do with your student loans? Overwhelmed with how to tackle that giant debt in an ever changing political climate, the the experts@studentloanadvice.com are here to help guide you through the best options to manage your loans. Our experienced staff have consulted on over $250 million in student loan debt, and the averagestudentloanadvice.com client has saved over $190,000. You will receive a customized student loan plan using the principles of the White Coat Investor. Get answers to all of your student loan questions, gain clarity about your financial future, and start down the right path toward financial freedom. Book a consult today@studentloanadvice.com you can do this and the White Coat Investor can help. All right, welcome back to the podcast. Hope you are enjoying these newfangled Milestone to Millionaire podcasts. They've got some additional information on them. We're also starting to include that in the show Notes. Your feedback's always helpful. Our podcasts are always driven by you and what you want to hear about and learn. So if this isn't working for you, we want to know what we can make better. We have implemented a lot of the changes that have come from you over the years and that has made your experience today much better than those who had to suffer through the first few episodes. And so we thank you for helping us to continue to improve. If you want to come on the podcast, the URL to do that is whitecoatinvestor.com milestones. You can apply there. We'll celebrate any milestone you can come up with and use it to inspire others to do the same. We've got a great guest on today. As I mentioned in the title, this a military doc who's recently retired, but afterward we're going to talk a little bit about umbrella insurance, so stick around and get the bonus material at the end. Our guest today on the Milestone to Millionaire podcast is Scott. Scott, welcome to the podcast.

Thank you. Thanks for having me.

Yeah, first thing I should say is thank you for your service. You retired not that long ago as an Air Force general surgeon, which is you, involves a fair amount of sacrifice over the course of a career.

Yeah, we went a lot of places all around the world. I'm not sure my wife thought one of our last tours in Italy was too big of a sacrifice. But there was a lot of great tours and a few that were a little challenging, for sure. Two years in Afghanistan were pretty long. I bet.

Was Aviano your favorite posting? Is that where you were in Italy?

Yeah, we were at Aviano. Boy, they're so different from each other. Japan was cool. Germany was cool. Aviano was cool. They're all good. Know, from a professional standpoint, Afghanistan was. Was cool that, in that regard. So, you know, they're all good. I won't say which ones weren't maybe our favorites, but I'm sure you can.

Guess a few because I've been in the Air Force and it turns out all those cool places you just listed are not available in your first tour.

No. No kidding.

All right, well, very cool. When did you retire?

Fall of 2020.

Fall of 2020. So you got to experience a few months of the pandemic with the rest of us and then got to be on the sidelines for the rest of it.

Yes.

How did that plan come about? I mean, Was this your 20 year mark or what made you decide? I think I'm done.

So I was financially independent at about 50, and I was loving what I was doing for the Air Force. The last half of my career, I was mostly a physician leader, doing less and less surgery, unfortunately. But I was enjoying the leadership aspects of it and having bigger and bigger impact, so I was really enjoying it. And then I got to 28 years and the Air Force started talking about my next job would be in the Pentagon. And I didn't think I'd enjoy that. And so I talked to the boss and we decided that it was fine to hit the retire button, the boss, of course, being my wife. And so I retired after two years at my last job.

What'd you Finish as in 05? 06, 07.

Yeah, I was in 06.

Colonel.

I was in 06 a long time. Over 10 years.

Very cool. Well, thank you so much for serving.

Thank you.

All right, So, I mean, 28 years, you've got a decent pension from the Air Force, I assume?

That is for sure.

Tell us about that a little bit.

The Air force pays me $112,000 in 2023 a year before taxes, of course. And you know, as, you know, it's. It's a linear progression, although the rules changed a couple of years ago. But, you know, it used to be 50% at 20 years and 75% at 30 years. And it just was a straight line and then spaced on your last three years. So of your base pay, you know, you And I got a lot of bonus pay, but that doesn't count, so. But still 112 grand, nothing to sneeze at. And then a little bit of a windfall that we got, which I wish we didn't get, to be honest, is the VA. I ended up being 100% disabled and so that's nearly 50 grand a year, not tax free. So we are pretty comfortable before we even look at the nest egg.

Yeah. And plus tricare. I assume you've got some sort of tricare benefit.

Yeah, Tricare is unbelievably low. When we were talking to our financial advisor before retiring, he asked how much Tricare was and at the time it was like 500 bucks. And he's like, he put that in his spreadsheet for each month and I'm like, no, no, 500 bucks for the year. And he couldn't believe it. And it's still, you know, well under a thousand dollars for the year for the two of us to have insurance. Of course there's co pays once you retire. But the VA also gives me free health care for everything. So I actually don't use Tricare hardly ever. I just go to the VA for everything. And I found the VA system to be bureaucratic, surely, but to be fine. And so I use the VA almost exclusively. Of course my wife goes Tricare, she's super healthy and actually hasn't used it much.

Yeah. And you have an experience working your way through a bureaucratic healthcare system, that's for sure. Well, that's pretty cool. Pretty cool. So you mentioned also a nest egg. You're a saver. I mean, I've been getting emails from you. I look back through my email box, I've been getting emails from you for years. You've been a white coat investor for a long.

Yeah, almost the beginning.

And you saved and invested along the way. How big's your nest egg now?

Just a tad under 3.5 million. About half taxable and half tax advantage in some way. So yeah, we've saved enough that we could live off of that if we had to, which is important because half of my pension and half of my VA money goes away when I die. And so my wife's got to have something to live off of. But to be honest, I'm sure we'll get there eventually. It's been tough ramping up the spending. It's, you know, we were spending around 120k a year when I was on active duty, which allowed for a nearly 50% pre tax saving rate at the end of my career. And, you know, there's nothing for us to spend money on because we don't need more things. And so we've started to say, well, what should we spend it on? And like, first class travel has been wonderful, and we will continue to do that because it's so much less stressful and much more comfortable. But we also have a grandchild now, first one. And so that's been amazing. And we're spending money on her, but, you know, we're looking for things to spend money on. It's crazy, I think.

Let me pause this podcast for a point that I think we ought to make here.

Okay.

I talk a lot about Roth versus tax deferred decisions. And one of the exceptions I throw out there all the time is for people on active duty ought to be making Roth contributions because it is not infrequent that they end up in a situation like this where they're making typical military money, often less than $200,000 a year throughout their career. And then they finish and they have this big pension plus a nest egg and are actually in a higher bracket later in retirement than they are during their peak earnings years. So this is why that's an exception for those who have never met somebody in this sort of a situation. Very cool. So tell us about retirement. I mean, you're now two and a half years in. What's retirement been like? What are you doing?

Well, my last couple of jobs were extremely stressful. Working for four stars. They only expect miracles every other day. And so it was a ton of stress. So to be honest, I vegetated for close to six months. Like, got up late, went to bed early, watched tv, vegetated. Probably recovering from some mental health issues and whatnot. But eventually I started approaching a time where I had long time wanted to go hike the Appalachian Trail. And the time to leave was three months away. And I realized, okay, time to stop vegetating and get ready for this thing. So I told my wife, hey, in three months, I'm leaving for the Appalachian Trail. I'm going to hike Georgia to Maine. And she's like, I want to go. Which was the shock of my life because she hates camping, but she loves hiking. She's a huge day hiker. And so off we went April 4th or April 2nd. I mean, we started in Georgia and headed north. And almost 2200 miles later, we were all done with the trail in October.

October, yeah. And you did it in a little bit of a unique way. Tell people about how you did it there toward the end.

Yeah. So there's northbounders who just go straight north to south and southbounders go Maine to Georgia, but a lot of people flip flop. And so as we were heading north, we realized we weren't going to make it to Maine in time because it gets pretty bad weather in October up there. So we headed to Maine and headed back south and. And then we finished the trail in New Hampshire where we flip flopped. So, yeah, it was a little bit unusual and it's a little anticlimactic. You know, you climb this amazing peak at the. In Maine and then you head south. But it's all good.

Very cool. Well, congratulations on accomplishing that. That's no small accomplishment either. How many, how many days of hiking?

So we took 10 days off in the almost seven months. So we hiked most every day. In fact, two of those days were for a hurricane that came through. So that's a lot of hiking. 202 total days, I think it was, or something like that. So a lot of hiking, I was slow, slowed down a little bit by my feet were really bugging me. But you know, it's really largely a mental challenge, the physical stuff you get over and of course you get into shape of your life. I lost 70 pounds on the hike and unfortunately gained a lot of it back. But yeah, it's largely just a mental challenge to get out there and walk for 10 to 14 hours a day.

You know, in your application to come onto the show, you mentioned that military physicians can live a comfortable retirement and that you essentially make from your pension and the VA what you spent when you're on active duty. Do you feel like that message is not out there, that people feel like serving in the military sentences you to a life of relative impoverishment? Or what do you think the general sense is out there?

Yeah, I think there's two populations you're really talking about, those that are in the military and owe the four years, or like in my case, eight years, who they don't really understand or think it through. They're a captain making no real bonus money other than, you know, the 15 grand they give to interns or whatever. But. And so they just don't think that part of it out. I made a lot more because I stayed in so many years than the guy, a friend of mine who got out at 20. But it's still, it's a. He gets a sizable chunk of money every, every month. So it's, it's a, it's, it's real money. And people need to consider that when they leave. And then B, like you mentioned, the healthcare tricare is an incredible benefit from a bunch of reasons. Super cheap, the CO pays are pretty low and the benefit is actually spectacular compared to a lot of healthcare insurance out there. So that's a huge benefit as well. And then the VA might get kicked in there as well. So all those things are real. And I will tell you too that literally this week I was asked, yeah, but when you do the math, wouldn't it worked out to be better a general surgeon and just saved all that money and you never do the math because you owe so many years. You just got to do them. And when I could get out, it was 13 years in because I did five years of training and I did the math. It was pretty close to break even and I was enjoying it. And so I said, you know what, I'm not leaving. Why mess with what's working? But man, I see an awful lot of people get out. And the other thing that surprises me too is a lot of people, when they get out, talk about how much they miss it. There's lots of crap that you don't miss. But the military is unique, as you well know, and there are things to miss. It depends on your specialty.

Yeah, certainly it can work out pretty well getting out at four years, but once you've done 8, 10, 12, every time I run the numbers, it makes sense to stay at least 20.

Yeah, no, I agree.

I'm not surprised about your decision one bit. But here's the deal. A lot of people don't realize how valuable this pension is. Not only is it a pension, it's guaranteed, Right. But it's indexed to inflation. You can't buy that. You can't go to an insurance company and buy an inflation indexed single premium immediate annuity these days. You just can't do it.

Yeah, it's indexed just like Social Security. And your wife gets a survivor's benefit or your partner gets a survivor benefit.

And so a lot of people don't realize the value of that pension with Tricare is probably higher than your nest egg.

Yeah, I would agree.

If you actually had to purchase it from some company on the open market, it's probably more valuable than your nest egg to be getting, you know, 120 and another 50 from the VA and the TRICARE. You know, I mean, you talk to early retirees about what they're paying in health insurance, it's often between 20 and 30 thousand dollars a year.

Right.

And so I think that's a real important point to make about your pension is that it's just really valuable. And people need to understand that. All right, well, it's time for you to give some advice. There's some people out there that want to reach your goal. They want to finish a great career and be retired and be able to go do things that you could never do during a medical career, like hike the Appalachian Trail. What advice do you have for those people?

The biggest thing is just have a plan and stick to it. We did what some people call reverse budgeting. We automated all the important things, which included all of our retirement investing. And what was left over was for us to spend. And every time we got a raise, half of it went to that plan and half of it went to spending. Never felt like we wanted anything. We spent 30 grand on a anniversary Galapagos cruise. I drove Mercedes and BMWs, although we hung on to them for like 10 years. But the. Oh yeah, I had everything we wanted and we, our whole family did. And so we never wanted. But we just stuck with the plan. And, you know, it didn't always go perfect and there weren't always perfect investments, but it just kept going. I also keep it simple. Indexing is just so simple and stress free compared to when I was trying to stock pick when I was younger and not very good at it.

There's a reason that's what's in the tsp, no doubt about it.

Yeah.

All right, well, Scott, thank you for your service. Thank you for coming on the podcast and sharing your success with us. And congratulations to you. Thanks for coming on and inspiring others to do the same.

Thanks so much for what you do, Jim. It's been fantastic.

All right. I hope you found that interview helpful. That, I think is actually the first retirement milestone we've had on Milestone to Millionaire, so I thought that was fun. The milestone was not completing the Appalachian Trail, although that was a pretty cool one. And takes obviously a lot of work and a lot of willpower to complete, but it was actually getting to retirement and there is an end to this. Almost none of us practice until we're 100, although I saw an interview the other day of a neurologist who is literally practicing at 100 years old. Most of us are not in that camp. We don't even want to be in that camp. There are some benefits to working longer, aside from the financial benefits. I think it helps keep your mind active. We've all met somebody who retired and their health went south pretty quickly thereafter. So you have to guard against that in retirement. But I think Most of us aren't planning to work to 100, let's be honest. So retirement's coming up for all of us. Have a plan, work your plan, get there, and it will work. All right, I promised you I'd talk about umbrella insurance. What is umbrella insurance? Umbrella insurance is personal liability insurance, just like you have professional liability insurance. That is malpractice insurance. Umbrella insurance is personal liability insurance. Now, you probably already have some personal liability insurance, even if you didn't know it. If you have a renter's policy or a homeowner's policy, you have some liability insurance that is a component of your auto policy as well. And in fact, auto claims are the most significant part of liability insurance. About 80% of umbrella claims are related to an auto issue. So basically, you get your auto policy, you get your homeowner's policy, and then the umbrella sits over the top of those two and gives you additional protection. For example, you might only have 50,000 or $100,000 in auto liability, which is desperately inadequate, right? I mean, there are lots of cars out there on the road that cost $50,000 or $100,000, and that's not including the damage you do to the occupants when you hit it. So you need higher insurance than that to start with with. So raise that up to $300,000 ish or so, and then you stack an umbrella policy on top of that, and you can often get it from the same company that you buy your auto or your homeowners from. And these policies tend to be $1 million, $2 million, $5 million type policies, and they're dramatically cheaper than your malpractice policy for just a few hundred dollars a year. Or if you're particularly, particularly big policy and you're a particularly dangerous person, it might be as much as $1,000 or even $2,000 a year. But you get all this excess liability coverage. And as you become wealthy and have something to protect, this becomes a lot more important, because declaring bankruptcy and walking away with whatever you get to keep in bankruptcy becomes a less and less and less attractive option in the event that you have some huge claim against you. And that is possible. It's rare. The reason your policy is so cheap is because it's so rare. But it does happen, and you want to be covered in the event that it does. So get an umbrella policy in place. People ask, well, how big should it be? And they're like, maybe it should be 1x your net worth, or 1x your unprotected net worth, or 2x your net worth. There's no rule of thumb there. It's like malpractice insurance. You want to know what the claim is before you decide how much insurance to buy. But you can't do it that way. And so you want to have enough insurance that the person who has a claim against you, that is now your creditor, gets enough money without your personal assets, they feel like they got a big payout. And in my view, that's a seven figure amount. You give most people $1 million and they're pretty happy to say I got paid something. I don't think a 2 or $300,000 payment has that same effect on people. But if you're concerned that you could have a higher claim against you, that's when you get the $2 million, $5 million sort of policy. We carried $1 million for a long time, bumped it up to $2 million at one point, and now carry $5 million. I remember hearing from Dave Ramsey once on his show. He's much wealthier than I am or ever will be, and he carries a $5 million policy as well. I don't know that there's a point to carrying much more than that. But if you're well to do looking at retirement, you may want to look at increasing it to $5 million. But most people, by the time they're coming out of residency, a million dollar policy really ought to be in place. So get out there, get your disability insurance, get your life insurance, but also get an umbrella policy to protect you from this other financial catastrophe that you could face in your life. Still not sure what to do with your student loans? Overwhelmed with how to tackle that giant debt in an ever changing political climate, the experts@studentloanadvice.com are here to help guide you through the best options to manage your loans. Our experienced staff have consulted on over $250 million in student loan debt, and the averagestudentloanadvice.com client has saved over $190,000. You will receive a customized student loan plan using the principles of the white coat investor. Get answers to all of your student loan questions, gain clarity about your financial future, and start down the right path toward financial freedom. Book a consult today@studentloanadvice.com you can do this, and the white Coat Investor can help. All right, another great episode is come and gone. Although this one isn't dropping until mid June. We're actually recording in mid April. April did five episodes today, so most of the ones you've listened to for the last month. We recorded in the last three or four hours. It has been a long day for us. It's probably been a long day for you if you're listening to this on your way home or something. And I thank you for what you do. Your work does matter. It is important. We'll see you next time on the podcast. Keep your head up and shoulders back. You've got this.

The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your 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.