A high earner chronicles his ‘trifecta of financial mistakes’ and finding his financial footing after age 50.
Our guest on the podcast today is Bill Yount. Bill is a practicing emergency physician. He’s also co-host of a podcast called Catching Up to Fi, where he and Jackie Cummings Koski discuss pursuing financial independence later in life. Bill received his bachelor’s degree from Duke University, his doctor of medicine degree from the University of North Carolina at Chapel Hill, and completed his residency in emergency medicine at Northwestern University.
00:00:00 From a Scarcity Mindset to the Hedonic Treadmill
00:10:04 The Wake-Up Call: Burnout, Lawsuits, and Turning 50
00:11:05 Finding FIRE Late: Catching Up to Financial Independence
00:13:44 Budgeting, Downsizing, and Boosting Savings Rates
00:20:56 Landmarks on the Way to Financial Independence
00:25:50 Life Planning, Risk Parity, and Calibrating Safe Withdrawals
00:34:51 Achieving FI and Knowing When It’s Time to Retire
00:43:44 Building Generational Wealth, Giving Early, and Advice to Late Starters
My Baptism by FIRE: Lessons on Financial Independence
The Best Retirement Strategies for Leaving Money Behind
Cliff Asness: ‘The Problem Was Never Beta. The Problem Was Paying Alpha Fees for Beta’
If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com.
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(Please stay tuned for important disclosure information at the conclusion of this episode.)
Christine Benz: Hi, and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar. Our guest on the podcast today is Bill Yount. Bill is a practicing emergency physician. He’s also co-host of a podcast called Catching Up to FI, where he and Jackie Cummings Koski discuss pursuing financial independence later in life. Bill received his bachelor’s degree from Duke University, his doctor of medicine degree from the University of North Carolina at Chapel Hill, and completed his residency in emergency medicine at Northwestern University. Bill, welcome to The Long View.
Bill Yount: Thank you, Christine. I really appreciate being here to chat with you again today.
Benz: Well, we’re excited to have you here. We want to talk about your journey a little bit. You’ve been candid about how you were hurtling along on your career path as a physician, and you were on what gets called the “hedonic treadmill.” I wonder if you can talk about that experience?
Yount: Yeah. I am an emergency physician. I’ve been practicing 30 years, and boy, I’ve been running on the hedonic treadmill for a long time. I was paycheck to paycheck. I wasn’t paying attention to money. There was money in, money out, and after about 20 years of this, I woke up and realized I had to take better care of myself.
Benz: We want to delve into the specific things that you did. You recently announced that you were financially independent, so it sounds like your efforts were successful. But I was struck—I was listening to you talk about your journey to financial independence—and I was struck by your discussion of your childhood, where it sounds like there was a bit of a scarcity mindset that was imbued in you, and that affected your approach to money. Can you talk about that?
Yount: Yeah. My father was also a physician. He was state-employed, and my mother was a stay-at-home, previous nurse. We grew up a very middle-class lifestyle, but we didn’t talk about money. I didn’t know what they did with it. I had fear of it because my father did his own taxes, and he would dive into his office for a few weeks at a time trying to eke any money he could out of the federal government. He got audited one time, and that really shocked me. I’ve had an aversion to taxes ever since, and as we know, our money scripts, our imprints when we’re kids, sort of live with us. So they didn’t talk about it. I didn’t talk about it. I got scared of it because it caused my father some distress. I exited into my adult life with really no working knowledge of what money could do for me and how I needed to take care of it.
Benz: And you started working super early. I was interested in that. Can you talk about that? What made you want to get out there and start earning money?
Yount: There was kind of a “we don’t have enough money” mindset in our family, even though my father was a doctor and we were comfortable. There never seemed to be enough, and I felt the need to go to work at age 9, and I worked at a day camp as opposed to going to camp. So in many ways, it parentified me as the oldest child to do my part to help out with regards to the family finances.
Benz: And it sounds like there was some conflict between your mom and dad about money—that that was a frequent source of strife in the household.
Yount: Yeah, as we know, that’s one of the top stressors in a marriage. And it was part of the equation that broke up my parents’ marriage. There were pretty much constant fights about it. My mom was known as the spender, and my dad, sadly, used money as a bit of a weapon in the family. So it was unfortunate, and maybe not intentional, everybody does their best, but it was not a healthy money family conversation at the table.
Benz: Let’s fast-forward a few years. You went through med school, did your residency in Chicago at Northwestern, and you were living in Chicago, and that’s where it sounds like you got your first big paycheck, and talk about that period, how you weren’t really considering how you were using your money and investing it and saving it.
Yount: Well, it really started in residency because back in the day, we only earned $25,000 a year to start in residency. And by the end, I was earning maybe $29,000 a year. And this was in Chicago. I lived in Lincoln Park. And as a resident, I felt I deserved things in my time off, like vacations that I couldn’t afford. So when I exited residency, I had upwards of $30,000 of credit card debt. And yes, I did have a big bump in pay, as many doctors see. And after 10 years of education and delayed gratification, it was a little bit like “Yahoo! Here we go. I can get the car that I’ve always wanted.” And I bought the new Toyota 4Runner truck, and we moved into a house, and all of the trappings of lifestyle inflation immediately began because of this pent-up delayed gratification. So I didn’t know how to partition my first paycheck. I didn’t know to save first and spend last. I flipped the equation, and we spent first and only saved what was leftover at the end.
Benz: As your podcast partner, Jackie, said on Catching Up To FI, it seems like doctors should have it made from a financial standpoint. But you have pointed out that there are some unique challenges to doctors and financial management. And of course, the whole White Coat Investor empire very much addresses that. But can you talk about some of the things that you faced as a doctor just starting out?
Yount: Yeah, I call it the “rich doctor syndrome” as opposed to the “wealthy doctor syndrome.” And it’s all too common even today, as you may have heard: Only about 25% of doctors are not millionaires when they turn 60. And, this I found out later, but I can see how it happens. You get caught up in this hedonic treadmill, as we talked about, and all the trappings of a doctor’s life, which tend to involve a big Jones effect or a lifestyle effect. You see what’s going on around you and you tend to gravitate toward that, whether it be the cars in the parking lot or the houses in the neighborhood. The Jones effect is real. And unless you are aware of it and modulate that, you will get caught up in this slipstream of physician lifestyle or high-income professional lifestyle. And thankfully, yes, we both know Jim Dahle, and he is actively out there to try and help physicians not get caught up in this and get off on the right financial foot as med students, even before they exit into residency and then attending physicians.
Benz: And of course, another dimension is the debt that a lot of physicians emerge from school with. Can you talk about that? It doesn’t sound like that was a big component of your financial journey. You had a pretty affordable med school education, but maybe you talk about doctors at large.
Yount: Yeah, my situation is not the situation of doctors today. For example, tuition in my day for the first semester of med school was $500—it’s hard to believe at that time. I went to my state school, which was probably the best financial decision I had made up to that point. It was highly subsidized, but that is not the case today. As you say, doctors come out of med school with upwards of $250,000 to $300,000 of average debt. And this is a huge weight on their ankle. It holds them back financially right out of the get-go. Not only have they given up 10 years of their 20s, where people have been working and earning and saving and hopefully compounding, so there is naturally a late start for doctors, but it’s even later when you look at the debt burdens they have to deal with right out of residency.
Benz: You’ve been candid about what you got wrong earlier in your career, and it sounds like overspending, undersaving was kind of the through line in a lot of those decisions. But can you share what, in hindsight, you view as some of the bigger mistakes early in your financial journey?
Yount: I call them the “trifecta of mistakes,” actually. It really is poignant around the time of the great financial crisis. My wife and I had gotten into this house, and it started out as a paint job, but it turned into a whole home reconstruction in 2007. So you can imagine what happened after rebuilding a house in 2008. We were underwater. Not only were we house-poor, which means we had such a big mortgage that we had very little gap to save. So we had a small gap to save. We were house-poor. We got scared at the bottom of the market and actually were allowed to derisk by our financial salesman advisors into a more bond-centric portfolio. So we sold out at the bottom, we were house-poor, and so we missed a lot of this bull market in the early 2010s, ’11s, that would have helped us greatly because we were just strapped with cash, and it was all going toward lifestyle expenses.
Benz: And you’ve been candid in saying that that’s not all bad, that actually you were able to have some wonderful experiences early in life. It seems like, with some of the people who are really stringent about financial independence, they do deprive themselves of some things. You didn’t do that. I suppose that’s a plus. In hindsight, you have a lot of great memories.
Yount: Yes, exactly. I mean, late starters have done life, right? The typical FIRE avatar was this young white male, say, who retired at age 30 with $1 million and had done their 20s in a very depriving manner. And so we didn’t deprive ourselves. We have a lot of memory dividends, memories, experiences that we had with our kids along the way. We have great memories in that house that we rehabbed. We have great memories of all the travel that we undertook with our kids and families. So yes, we’ve accumulated a lot of life experience. And so it’s not all bad. And late starters have a superpower there where they haven’t deprived themselves on rice and beans, for example, like is often talked about in the FIRE community.
Benz: You call it a 20-year slumber that you were in, where you were busy with your career, certainly, and family, and you hadn’t given much thought to your money. I’m curious, what was the wake-up call for you? Was there one catalyzing moment?
Yount: There was an age, a generational wake-up call, where I turned 50, and I was like, wait a minute, nobody’s coming to save me. I’ve got to take care of myself. Retirement is 10, 15 years away. And I don’t even know what a net worth is. I don’t know what our budget is. We don’t have one. The other thing that happened to me and is unique, potentially, to physicians is I was sued. I got sued as a doctor, and that is a risk we take that we don’t really realize and underappreciate. And whether or not it works out for you, it is a very stressful experience. And all of a sudden, I was dealing with career burnout at the time that I found out that we were nowhere near where we need to be with our money in order to exit a career that had become, in some ways, toxic for me.
Benz: It was kind of personal circumstances that led you to get more information. What was your initial exposure to the FI community, or the FIRE community, as it was called in the past? Were there specific podcasts or blogs that resonated with you?
Yount: It’s kind of funny, actually. The first book I remember very vividly reading was William Bernstein’s The Intelligent Asset Allocator.
Benz: Not an entry-level book.
Yount: That’s one of his more complicated books. I was like, boy, this is hard. I actually had to buy a financial calculator in order to read the book and understand it. And then I thought to myself, wouldn’t it be great if somebody was doing this for physicians? Because there are a lot of us out there like this that wake up and realize we are behind with money. Then I dove into it and found out that Jim Dahle was already doing this. Our friend Jim Dahle has been, since 2011 or so, been really on a campaign to help high-income professionals get a “fair shake on Wall Street.” And so he had already done what I thought was a novel idea for me. So, congratulations to him.
Benz: How about FIRE, specifically? Were there any blogs or podcasts that you were listening to that made you think, oh, you know what? I’m not hopelessly behind. I can probably do this?
Yount: Yeah. I mean, there’s a traditional rabbit hole that people talk about. And it was Mr. Money Mustache. It was JL Collins’ The Simple Path to Wealth. It was Mad Fientist, Brandon Ganch; Paula Pant, Afford Anything; Choose FI with Brad Barrett. There was so many places that people—once you open your eyes and enter the door, there are so many resources for people that want to become intentional about their money.
Benz: You realized that you hadn’t gotten great service from the advisors you were using, but you were a bit scared to take your family money matters on your own. You had a little bit of analysis paralysis when you were figuring out next steps. Why was that? It sounds like you had done your homework and were really steeping yourself in a lot of the great resources that are out there.
Yount: Well, I’m kind of a typical doctor there, where I’m a bit type A. And I took myself to graduate finance school and read books for about a year. For some reason, I thought I had to know everything before I started. And that is not, again, the way to do it. There’s a few basic things you need to learn, and you need to get started sooner. So yes, I was in analysis paralysis because I had to get it perfect. And there is no perfection in finance. And I took a little longer than I probably should have getting started, being too comprehensive in what I thought I needed to know to get the basics of personal finance right.
Benz: What were the key steps that you took to get your family’s financial life on track? I assume budgeting was part of it, but I loved your comment that it’s so hard to deflate lifestyle once you’ve inflated it. Can you talk about that?
Yount: Yeah, I mean, initially, we were overwhelmed. We were ashamed. There was anger, regret, remorse. And these are typical emotions of somebody that wakes up to money and realizes that it is controlling them and they are not controlling it. And when you get started, you don’t know where to start. The financial-services industry is an alphabet soup of complexity. And in some ways, that’s intentional because there is a fear associated with money, and fear sells.
And when you realize and boil it down and distill it down to its fundamental concepts of saving, investing your money, and creating a gap that works for you over time, you want to work your way through that overwhelm. And what we did first was, OK, I’ve got the knowledge, the book knowledge, we took our money back from a private bank from a sales-oriented financial-services industry. And we had been sold whole life, for example, we had been sold financial planning under the guise of a very large AUM fee. And we moved honestly at that time to Vanguard. That was the flagship of DIY personal finance. And so when I took back my money, literally, I took it back and put it in Vanguard to create our own growth and accumulation portfolio.
Benz: You eventually did bring on a planner, which I want to discuss a little bit later in the context of your journey to determine how financially independent you actually were. But first, I want to talk about budgeting, because you said something really interesting. Most of us talk about budgeting in the realm of like, you’ve got your fixed expenses, you’ve got your discretionary expenses. You mentioned something called “comfort expenses.” And I’m curious what you mean by those.
Yount: Well, I mean, I look at it kind of like a 5% withdrawal rate. And I break it up into three parts. The first part is kind of the 3%, which are your “keep the lights on” expenses. That’s your base living expenses that puts food on the table, a roof over your head, gas in the car. And then the next 1% is kind of comfort. That’s your travel, your food, your eating out. And when you take the final 1% of a 5% withdrawal rate, say, it ends up being luxury expenses, that’s that epic trip to South Africa, for example. And so you can scale back on those top 2% of expenses, too: OK, the market’s crashed, I need to go huddle a little bit and not travel this year. So there’s a flex in there. And comfort expenses are things that really makes life worth living in some ways.
Benz: When you reflect on the spending changes that you made in order to support a higher savings rate, were there any nonnegotiables in your budget where you basically said, nope, not touching that one. And I mean, apart from like the basic things that you have to pay to keep the lights on and keep your housing intact, any things that you were spending on that you just said, you know what, this is really important to my quality of life and I’m not touching it?
Yount: Well, the one thing, my wife and I met over our love of travel. So we had to do it differently, but travel was still a priority. What we did do, when you talk about deflating is really hard, and I agree, once you’ve inflated, trying to make your life smaller or just big enough is really hard. You have a 4,500 square foot house full of stuff. There’s a physical weight to life there. And we literally had to go from that big doctor house to a much more reasonable, just big enough house, about half the size. So you’ve got to unload physically a lot of stuff, but emotionally, you’re unloading a lot of money-mindset baggage and trying to rework it. Downsizing and squeezing into a smaller life can be hard. But once you do it, the loss of that emotional weight on your back is huge.
Benz: And you also relocated to a cheaper part of the country. You mentioned that that was a really big decision that translated into a higher ability to save. Can you talk about that?
Yount: Yeah, that was one of the superpowers we have. And it was accidental at the time. That was back in 2013. We moved from Chicago to Tennessee because of a career shift. And there was more pay and less overhead. We weren’t paying Illinois-, Chicago-level taxes. We weren’t paying state taxes. And I got a big bump in pay. Soon thereafter, my wife went back to full-time work when our kids exited the home. So we lived on one income and saved half. And we were paying less in the way of overhead, so to speak, in life. And that, we took our savings rate, literally, from 8%, 9%, 10% to 35% to 40% in the course of about a year. It’s hard to believe. And we had a hard time believing it because we were like, where did all this money go? It was just like trickling through our fingers into sort of stuff and life. And we just didn’t know where because we didn’t track it.
So it’s amazing. Once you start tracking your money, monitoring it, being intentional with spending it and saving it, saving it first. Budgeting wasn’t really hard for us in the end. Luckily, we’re physicians, and we had bigger shovels, but we did what we referred to as a “backwards budget.” We saved 35% upfront, cut it off the top, and then we covered our expenses and lifestyle with everything that was left over. So it was relatively easy to do. Because I’m not a spreadsheet guy. I’m kind of like maybe the average human, not interested in digging into the meticulous nature of the details. But if you do it and invert it and save first and make your savings goals first, you can live life pretty freely after that.
Benz: Yeah, I’m a big believer in that reverse budgeting as well. I’m curious, was your wife on the same page in terms of making these lifestyle changes? Was she with you in the decision to cut back and relocate and some of the changes that you made?
Yount: Well, obviously she was because she moved with me, but at a certain point, yeah, there was a physical nature to it. But the mental emotion nature of it, yes, absolutely. She is kind of our chief visionary officer, and she likes to live more in the present and make sure we’re living a full life in the present. And I became the chief financial officer looking toward the future and taking care of our future selves. Actually, we made a very good partnership because we didn’t lose out on life in the present and sacrifice for the future. We’ve been living, for the last 10 years on this journey, a much more balanced life. And she was, she wasn’t digging into the numbers maybe like I was, but she definitely was aware of what was going on. We had conversations about this, and you have to lock arms. I mean, a marriage is a business partnership. People forget that that’s part of it. And marriages fall apart because of finances, and the business partnership dissipates. You’ve got to look at it that way. It’s an emotional resource. It’s also a financial resource when you are working through life together.
Benz: I want to talk about the origin of Catching Up to FI, the podcast that you and Jackie Cummings-Koski work on. What made you think that there was a place for people who were embarking on a FIRE journey a little bit later than that 30-year-old guy working in technology and earning a big salary? What made you think there was room for conversation about embarking on financial independence a little bit later in life?
Yount: Yeah. I mean, when you look into the category of FIRE, there just wasn’t anybody speaking to me at age 50. I mean, my contemporaries who had been on the FIRE journey were retiring in their 50s, and I’m beginning. There was nobody talking about restarting and beginning, and there was just a dearth of information for, oh, I don’t relate to this 30- or 40-year-old that’s got it right. And we get all these sensational media stories about how people retire early and/or on time and have been prudent with their money. But as far as I know, there’s no major podcast or media outlet that’s talking to what we call the silent generation, the lost generation. I mean, I grew up in the evolution of the 401(k) defined-contribution plan, and nobody, I didn’t get the memo that that had happened. And I didn’t know what 401(k)s were. And Gen X really falls into this category, as that’s the largest part of our audience. So those Gen Xers that wake up after 10, 20 years and realize they’ve got to put on their oxygen mask and take care of their finances so they can retire even on time.
Benz: As you were building out Catching Up to FI, you were also pursuing your own financial independence journey. I’m curious, what sort of landmarks were you looking for on that journey? How would you know if you reached financial independence?
Yount: Well, I mean, there’s the basic rule of thumb or guideline: 25 times your expenses. So the first thing you got to know is: What are my expenses? And then you can map it out. Pete Adeney of Mr. Money Mustache has a great article called The Shockingly Simple Math of Early Retirement. And I would actually caveat that with it’s not actually early retirement, it’s retirement in general. And it’s a math function of your savings rate and investment returns. And the savings rate is your big lever. And so we cut expenses, we increased our income, my wife went back to work, and our lever got huge. And if you follow that little graphic on his article, you’ll know that in the 40% savings rate in 10 to 15 years, depending on market conditions and returns, you will reach your mathematical number of FI. Well, what you do with that is a whole other story.
Benz: Do you think we’ll see less enthusiasm for FI if we encounter a period of not great market returns because that has been an enormous tailwind for people who have wanted to see their savings grow, their investments grow really rapidly?
Yount: Yeah, I think there’s a danger in our community now because we have a lot of recency bias. We’ve been in a bull market for 15, even longer. It’s been remarkable. And that’s one of the reasons we caught up in 10 years was because of market returns with a high savings rate. And there’s a lot of people in the FIRE community that preach 100% equities. And they haven’t lived through a great financial crisis. That’s going to happen again. And it’s kind of like what Warren Buffett says, when the tide goes out, you see who’s not swimming with any shorts, or something like that. And the tide will go out, and it’ll be very interesting to see who is able to maintain FIRE, because lean FI and regular FI may not be enough. I believe in a bit more of a cushion, as you might as well, than that. So I’m a little scared for these traditional FIRE community because of, like I said, recency bias and being kind of numb to reliable big market returns.
Benz: And my anecdotal observation is that sometimes people in the FI community do seem a bit casual about what constitutes financial independence, the 25 times spending seems a little bit aggressive to me as someone who focuses a lot on retirement spending in my work for traditional retirement time horizons. It makes me a little nervous that it’s not enough of a savings cushion.
Yount: And one of the things I promised myself because I did not pay attention to the exact spreadsheets and I knew that we were getting close to FI when I turned 60. But I promised myself at age 60 that I would do a formal retirement readiness check where somebody got to look at our numbers and tell us, you know what, this is where you are. You’ve got two or three or four more years to work. And I was fully expecting to work until 63, 64, which would have been about a 13-, 14-year journey. And I was shocked to find out that we were FI a few years earlier than I thought we would be.
Benz: Well, I wanted to delve into that, Bill, because I do think that that’s a best practice for anyone embarking on a big life change, especially if they’re quitting work and going to subsist on their portfolios. You did get, you brought a planner in, and I’m wondering if you can talk about what you were looking for in that specific planner. It sounds like AI played a role in how you found that person, but maybe talk about that journey to identifying an appropriate financial planner for you and your wife.
Yount: Yeah, that’s a great question, and it’s a difficult question. It’s one that took me seven, eight years of learning fluency in finance, because it’s just a foreign language, to really be able to understand the nuances of looking for a financial planner. It is as much of an art as it is a science. People talk about we’re looking for a flat fee, fiduciary, hourly, or advice-only planner, and sometimes a comprehensive planner that manages your investments. Those are some of the financially important points, but for me, also, I look at a financial planner as a life planner. You’re locking arms, and this person has your best interests at heart, does not have any conflicts, and wants you to live your best life, and that’s their goal. You use numbers to do that, but they want to get to know you, and a good friend of mine is George Kinder, and he is the father of life planning. I think life planning actually comes first, and financial planning comes second. And people get that wrong, they put the math first as opposed to life first, and really got to, like Charlie Munger, invert that equation.
I did use AI; it was kind of funny. I put in there: I want somebody who’s focused on—very long query—focused on life planning and George Kinder and uses the math of a certain kind of portfolio that I wanted to engage in as a diversified retirement portfolio of risk parity in order to get you there so that I can have the highest possible safe withdrawal rate and spend the most possible in retirement and give the most possible in retirement while I’m alive. I didn’t want to be a hoarder, and I wanted somebody focused on helping me spend because I’d worked so hard to save. I put this long query in an AI chatbot, and in multiple bots, there’s two or three people that came up there repeatedly that were independent RIAs, fiduciaries, and the one I chose actually quoted George Kinder on his website, which is why he popped up there.
I reached out, and I reached out to three, four, or five planners, and we interviewed each other as to whether or not I fit into their philosophy, and they fit into mine. Another criteria that people don’t think about is I wanted somebody in their 30s who had had 10 years of experience and was at the top of their game, so to speak, just like you’re looking for a primary care physician, but I wanted them to have the longevity of living with us and growing with us through retirement so that I didn’t hire a 50- or 60-year-old that was going to retire and I’m like, wait a minute, I need 20 more years of retirement planning. I mean, people don’t talk about the age of the planner either. You can buy into a system where there’s a practice that they will carry on the same philosophy, but in my case, I went with a solo practitioner, independent RIA that followed along with the math I wanted to use, a collaborative experience where I could dialogue with them about, OK, let’s look at this and backtest this and how does this increase our safe withdrawal rate or decrease drawdowns or the length of drawdowns so that we don’t have a real bumpy ride through retirement. I did not want to tolerate the volatility of a typical stock/bond portfolio.
Benz: Well, let’s talk about that. You mentioned risk parity. I think some of our listeners might be familiar with what that means. We’ve had Cliff Asness on the podcast before, but maybe you can talk about how you think about risk parity and why you wanted that to be part of your investment portfolio.
Yount: Well, I mean, I think a portfolio in retirement or leading into retirement is very, very different from an accumulation portfolio. I think DIY in accumulation is imminently possible, one to three equities, 80% to 100% equities, and then just work that plan for 10, 15, 20 years. But as you get to within three to five years of retirement, I started to notice that when the market had a dip of 5%, 10%, I got less and less tolerant of that. I got more and more nervous because I could not afford it as a late starter at 57, 58, 59, with a 30%, 40% market crash, I was functionally going to work longer. I needed a portfolio that was less volatile and had adequate reward for a unit of risk, so to speak. That’s what risk parity is about.
It’s a big word. It can seem intimidating and complicated, but this is, you can do with five or six asset classes, a great diversified portfolio that has uncorrelated, well-diversified assets. There’s different market weathers. We’ve been living in the weather of relatively low inflation and high growth for well over a decade except for one bump in 2022. But there’s environments like recession and low growth or inflation and low growth or high growth. It all is a slider between inflation, deflation and growth, no growth. You want asset classes that are operating in all of those environments at a different time so that your portfolio is not taking big swings. What happens in the FIRE community is you tend to have oversavers and underspenders who can tolerate big market swings because it never drops to their spending level. They’ve always got this big cushion. I call it a “volatility cushion.”
Well, as a late starter, I’m not going to be able to save as much because I’ve not had the advantage of compounding, so I want to retire at a net worth or a liquid net worth that’s just right with a higher safe withdrawal rate so that I don’t have to work another three to five years. Risk parity, I think, is a great tool for late starters and a tool worth looking at for almost any retiree. It is on the cutting edge of financial technology, I think, because we have access to asset classes that Ray Dalio used in the ’90s. Why not look at that and evolve beyond, say, a typical 80/20 stock/bond portfolio that is based on research from 20 or 30 years ago?
Benz: How about your withdrawal system in terms of how you will calibrate your withdrawals? It does seem like this idea of people doing a static fixed-real withdrawal system leads to pretty significant underspending in many cases. If they’re starting with a 3.9% or 4% starting withdrawal and then just inflation-adjusting that dollar amount, our research points to people having big leftover balances at the end of life. What’s your plan? When you eventually do retire and stop earning a salary, how do you plan to adjust your withdrawal?
Yount: It’s interesting because the traditional financial-services industry uses a bond ladder for a risk-liability matching portfolio and then a growth portfolio at the other end. I don’t have a bond ladder. I have one year of cash to spend, and we’ll withdraw with that at a 5% rate. So one year of spending. Beyond that, I’ll have asset classes and, say, gold, vintage futures, a long-term Treasury fund, and then I split my equities between growth and value, and my portfolio is about 49% equities. So, there’s things that operate in all environments, and as far as the withdrawals go, that’s one of the reasons I engaged a financial advisor and planner. He has a CFA and a CFP. This is what he operates in, and there are so many balls at operation in your 60s, especially. There’s complexities. They all interrelate, whether it be IRMAA or Social Security, taking that, and you can optimize, but I didn’t want to focus on the money. I wanted to focus on life. So offloading the math of retirement to a financial planner was critical to me because it allowed me to spend my time living life as opposed to dealing with the stress of managing the dollar. So honestly, our withdrawal strategy is based on guardrails, the Klinger approach, but I’m going to let him worry about that.
Benz: Yeah, it’s interesting. We work with a financial planner as well, and when you see her projections for the years as they unfold and how our tax rates might change, you really do see that there’s a whole other level of sophisticated planning that is really best left to the professionals, in my opinion. I liked your comment about one of your motivations for seeking financial planning guidance was that your wife isn’t steeped in financial matters. It’s not her thing. You mentioned she’s more the visionary, and you wanted her to have kind of a succession plan if something were to happen to you. Can you talk about that dimension of it?
Yount: Yeah, I mean, we see in the FIRE and financial independence community kind of a rabid adherence to DIY and a rabid adherence to optimization, and you like satisficing, and I tend to fall into your camp. There’s good enough. But the problem is with DIYing, I’m 60, I’m going to age, I am going to have cognitive decline. I am going to have bandwidth issues where I just don’t want to do it anymore because it’s too much work and too much stress for me emotionally or psychologically, because I tend to be a bit of an emotional investor. I made a bunch of mistakes through with regards to following tracking error and recency bias, and I knew from myself. There was some self-knowledge. I knew I needed somebody to be a buffer between me and the emotional nature of investing, and as you mentioned, for my wife, she doesn’t run the numbers. She wouldn’t know what to do with where all the money was, and she just enjoys that it shows up in the account, and she gets to spend it, and she doesn’t have to worry about it. I kind of am jealous of that, but I have to protect for that, and it was important to me to develop a relationship with a financial advisor well before the emergency of my death because then there’s a seamless transition for her without the stress. I mean it’s part of our estate plan. It’s part of my legacy plan, and I feel it’s like an insurance policy.
The funny thing here is when I looked at the math of hiring the advisor, I found somebody where there was a high value for low-cost approach. He just had his values all in line with ours, and the cost of—one of the questions we had for working with him was: Can I drop my disability policy? Can I drop our life insurance? Are we basically self-insured? And it came back, yes, you can drop this. You’re self-insured, you’re financially independent, and we stress-tested it every way from Sunday, and we still had 100% success, and I’m like, boy, that’s an underspending risk. We need to spend more money. But the cost of those policies—the disability and the life—were more than the cost of his financial services. So there was actually a net gain in paying him for his professional financial advice and life planning. People don’t realize that you can do this and not see a massive budgetary increase where you’re spending $40,000, $50,000, $60,000 a year for the same service. We got our service very economically under $10,000 a year.
Benz: Yeah, it’s interesting, and I don’t want this to be a commercial for financial planning, but our first visit with our financial planner, she pointed out something, it relates to Illinois state taxes, something that we could be doing and basically earned her fee in that first sit-down. My husband and I kind of looked at each other. I had missed it. It was about something with in-plan conversions, and yeah, it was very eye-opening to see someone earn their fee just in the course of the first conversation.
I wanted to talk about the news that you were financially independent. It sounds like it was anticlimactic, but you also said that it was a great tonic against career burnout because you are continuing to work. It sounds like you really like your work as a physician, but can you talk about that, how crossing that threshold and hearing that you were financially independent was kind of energizing?
Yount: Interesting question, and it’s an important one, because I think a financially independent doctor or at least one who has control of their finances and realizes they’re going to be independent is a better doctor. They don’t have the stress of having to go to work and earn more to pay for their financial, say, indiscretions or lifestyle issues. I know that the solution of a doctor is typically, OK, I’m going to earn more, work more, to outearn my problems. Well, that’s not a good solution. That’s a hedonic treadmill solution, as we talked about before. And so in order to stave off burnout during the journey, I actually cut back on work, and I changed my location, and I knew that it would extend my journey, but I knew that I had to maintain at least that level of income to meet our lifestyle expenses over the course of 10, 12 years. But I worked a little less, it enabled me to work longer, and so I didn’t burn the candle at both ends, and I was prepared to work to 63, 64, 65 and be patient, but it came sooner, and it is a tonic. All of a sudden, I went to work—it’s really funny—our financial planner said, yes, you’ve made it, you’re financially free, and my wife looked at me and said, when you go to work tomorrow, you can’t complain anymore.
And that’s true. It’s still something that I value. I do want to migrate out, and I think retirement is more of a glide path than a cliff. The one change I’ve made after three months of reflection and digestion was I’m going to cut two shifts. I’m a shift worker, so I have the ability to do so, which is a little different from, say, a corporate person that’s 9 to 5, but I’m peeling away shifts, and it feels good. It feels right. And there will be a point where maybe I continue to do three or four shifts of emergency medicine, and I can negotiate day shifts. Financial independence gives you leverage. You don’t have to be there, so you can have healthier conversations with your oversight. You’re more present for your patients. You’re more present for the staff. They’re asking me all these questions about how they can help with their finances. There’s a lot of distress out there, so there’s a lot of value in staying but working the optimal amount.
Benz: I wanted to ask about being a physician in particular, but it would apply to anyone with a job that’s physically and/or intellectually demanding. What will be your cues to say, you know what? It’s time for me to step away, or you know, maybe not be in this part of practicing medicine anymore?
Yount: Well, as you’ve talked about with Fritz Gilbert, there’s a lot of soft sides to retirement. That’s the 80%. The math is 20%. It’s Pareto’s Principle all over again, and you have to work on the soft sides leading up into retirement. You don’t want to be caught with your pants down with a cliff like retirement and you don’t have a plan for how you’re going to spend your time. You’ve got to start developing those hobbies, developing those relationships, leading up into retirement. Fritz Gilbert has 20 steps to help you get there in a great article on The Retirement Manifesto, but it is a process. It is a project, and you have to take it seriously, just like you take the math seriously.
And for me, I’ll peel it back to, say, four shifts. I’m going to negotiate day shifts only. They’re 12-hour shifts. They’re long. I’ve been doing nights, weekends, and holidays and missing out on things for 30 years. And let me reach the point where I say, you know what, I don’t want to miss Christmas this year because I have to work. I’m going to just say goodbye, and I’m working toward that point over the next one to three years—actively doing so. And I may reach the point where it’s like, you know, it’s enough, because what happens is your life outside of work starts to crowd out work. Your life becomes so robust outside of work, and in my case, it’s Catching Up to FI and wanting to work on financial wellness instead of physical wellness. Wanting to work on mindset wellness and money, wealthcare as opposed to healthcare. And I don’t want to have it be an emergency that I have to exit work.
When you hit your 50s and 60s, all of a sudden the dings of life physically and mentally accumulate. And for me in emergency medicine, if you’ve ever watched The Pitt you understand, there’s kind of a PTSD that goes along with this. And it kind of builds up and letting go of this—I look forward to that day, walking out of my last shift. You know, I’ll be replaced as a cog in the wheel. I’ll hand off the torch. But the thing that keeps me in there now are the relationships at work, the mentoring of younger colleagues as well as the patients and the value I provide. But emergency medicine is a sad field. We’re giving out bad news. It’s the worst day of somebody’s life, a big anxious moment. And when you focus on financial wellness and health, you get so much gratitude—people saying from our podcast, “You’ve saved my life.” And that has nothing to do with physical health. So I really look forward to the next chapter.
Benz: Going back to your retirement plan, you referenced the tension between lifetime spending and leftover assets. I’m curious how that has affected your desire to maybe set your sons up earlier, to give them gifts when they’re younger, not have them wait until they’re in their 50s and 60s to receive an inheritance from you. Can you talk about how you and your wife have approached that?
Yount: Yeah, I mean, we’ve gone through a generation of saving, investing, and, in some ways, hoarding. And the cultural norm is to leave your legacy at death, where there’s a big bolus of income that may come to somebody in their 60s or 70s that don’t need it. The people that need the money are in their 20s and 30s, and they have the most advantage to take advantage of compounding. They have the least ability to save at these low salaries and the biggest need and risk tolerance to grow their money. So you have to ask the question, and this was the question we asked ourselves, as soon as we were told we were financially independent: How can we help set up the next generation, vis-a-vis our kids, for wealth accumulation and growing wealth? And there are several strategies we developed in discussion with our financial advisor as well.
One of them was to make sure that their Roths and HSAs were filled up every year. That’s a space that doesn’t come back. It goes away, and that’s great tax-efficient, tax-free money. So they do their part, and they have skin in the game, but we give them, and it’s great. In their low-income years, there’s a really tax-efficient way to do this. We give them low-basis appreciated shares. They tax-gain-harvest them up to the ceiling of the 0 percent capital gains bracket and then put that money into their Roths and HSAs. It’s a beautiful thing. It feels really good. I call it a tax-efficient living/giving wealth generation plan. Now that’s a lot of words, but we need to focus on generational wealth. I don’t want to hoard. I don’t want to identify with dying with my highest net worth. I want to see the money get put to work, whether it be charitably with nonprofits that we do as well, with a donor-advised fund, or through our family and kids that really benefit from it. It makes their lives easier. It allows them to save in different vehicles. For example, they can save more in their workplace retirement account because there’s so many buckets to fill up, and it becomes overwhelming. You can help fill up those buckets. There’s nothing wrong with it. It’s actually, I think, the right thing to do.
Benz: So making the transition from being a saver to actually spending from your portfolio when you step away from paid work altogether: Can you talk about how you think you will handle that period? Will that be difficult for you?
Yount: Oh my goodness, that is the question. That is the elephant in the room. I call it the “fog of FI,” or it’s “FOGO,” the “fear of getting out.” It’s the fear of creating your own paycheck, and that’s why I want to dial down the active income gradually as we dial up the passive income with our financial advisor. I mean it truly is an emotional glide path. I mean, do you identify with money. Well that’s the wrong thing to do. You can’t identify with a number. I mean identity, purpose, connection, relationships are so important. There are basically only four things you can do with money when you’re retired, and that’s give it away; that’s spend it on things that buy back your time from, say, mowing the grass; that’s buying experiences; and enhancing or creating new relationships. Those are fundamentally the four things you can do with it, and those are the four things that help you avoid Bronnie Ware’s [The Top] Five Regrets of the Dying.
And the way I look at personal finances is: It’s a reverse-engineered process. You get to know your future self, and if you start from what you want on your tombstone and look at The [Top] Five Regrets of the Dying, we’re given the answers. It’s an open-book test on how to live life to die happy.
Benz: For my last question, Bill, I wanted to ask about your advice to late-start folks, as you once were, who are interested in pursuing some sort of financial independence. What’s your top one or two pieces of advice for them?
Yount: It would be focus on your health because there’s no point in accumulating money without the health span to enjoy it. Don’t forget that: Don’t neglect health to money. And then another message would be: You can do this. You got this. It’s a mathematical certainty that if you do these things over the course of 10 to, say, 20 years, you will be financially free. I want to get people started before 50, if at all possible, that’s one of our mission goals, but if you start at 50, you’ve lived life and, just like me, you can retire at the average retirement age of 62. What’s so bad in that? We’re kind of driven to work. The goal is to not not work. The goal is to have autonomy and work on the things that bring you joy, purpose, as opposed to the requirement to work. So the time freedom and the financial freedom, yes, it’s a great goal, and everybody should aspire to it, and we need to help them get there. And that’s what Catching Up To FI is all about: to give them a message that yes, you can do this; the tactics of this is how you can do this; be patient and enjoy the ride.
Benz: Bill, that’s an inspiring message. Thank you so much for being here today.
Yount: Oh, it’s my pleasure, and thank you for the opportunity to talk with you about these important topics.
Benz: Thanks, Bill.
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