MD Cents: I know how much (history says) you need to retire!

Many people spend inordinate amounts of time planning for their retirement. I applaud people who take time to plan for the future, but wondering how much money you need to retire is something that you can know reasonably well. Of course, no one can predict exactly how much you need in retirement, but history gives us a great guide.

Bill Bengen originally suggested that someone could withdraw 4% of an investment portfolio, adjusted for inflation, per year and not run out of money for 30 years. This means that if you want a 30-year retirement (i.e. 65-95 years old) you must do two things:

  1. Determine what your annual expenses are
  2. Determine what number your expenses are 4% of

Here is an example:

Ann has annual expenses of $80,000, what amount does she need to fund a 30 year retirement?

$80,000=0.04(X)

=$2,000,000

This means that Ann needs 2 million dollars in her retirement accounts in order to withdraw $80k each year adjusted for inflation. What does adjusted for inflation mean? It mean that she will actually take out more than 80k each year because the price of things goes up each year. This can’t be true you say—what if you retire and the great Financial Crises or the Great Depression happens where stocks (and people’s retirement accounts) lose over half of their values? The important thing about this number is that it held true over every 30 year period since the advent of the stock market. Meaning no matter what, you could follow this strategy and still be okay.

People will likely say that past performance is no indicator of future return. This is completely true, but if this formula holds true in the worst economic conditions our country has ever faced, I am willing to bet that it will be okay no matter what comes our way. If our stock market goes to zero, we have much larger problems than how much money one can withdraw for retirement.

The devil is always in the details in financial formulas. In order to replicate the portfolio in this study you would need 60% large stocks and 40% intermediate term government bonds. Today many people hold a much more diversified portfolio. In an earlier post, I told you about index funds and the ability to hold every stock/bond sold in the U.S., every stock/bond in the developed world and safer emerging markets with just 4 mutual funds. The yearly return of this portfolio is expected to be higher than one made up of only U.S. based assets. This portfolio would be expected to make it more likely that you could withdraw your 4% yearly without trouble.

As you see, you can know how much money you need to retire for 30 years, but what if you want to retire for an even longer time, i.e. you want to retire early? The same work determined that if you want to retire for 40-45 years you could withdraw 3.2% of your portfolio each year, adjusted for inflation and not run out of money.

 

So using Ann again:

80,000=0.032(X)

=$2,500,000

 

You can see that if Ann wants to retire at 55 years old she needs to have $2.5 million in her accounts to fund this length of time. This also assumes that Ann never decreases her withdrawals but this is not what rational people do. We all flex our spending based on our budget (i.e. if we don’t work as much one year, we don’t take as nice a vacation, or we put off a home renovation, a big purchase, etc…). These numbers assume you never change your spending no matter what. This means that even if your accounts lose half their value due to changes in the stock market, you keep on spending the same amount and don’t cut back like most of us would do!

As you can see, based on history, you can know with as much certainty as possible how much you need to retire and fund a certain level of spending in retirement. This assumes, you have your budget down and know how much you actually spend each year!

What do you think? Do you feel comfortable knowing your “dollar number” needed in retirement?

As always this post is for educational purposes only and you should always consult a professional regarding your personal situation for specific, tax, investment, legal, or other advice.

MD Cents: Food for Thought on Your Career’s Location

An interesting article was released a few weeks ago regarding the “best” and “worst” states in which to practice medicine. I’m pretty happy practicing where I do and I hope you can say the same, regardless, I was curious. You may wonder (as I did) where does your state rank for physicians and what makes a state a good place to practice?

We each have our own criteria when looking at jobs after fellowship. Some will favor compensation, some location, and some reputation of the institution. This article looks at some of those factors but also considers many items that most PEM physicians don’t count at all in their decision process.

Here is a link to the article: Best States

Surprisingly, the top three “states” are: Iowa, Minnesota, Idaho and the worst “states” are: New Jersey, DC, and New York.

In order to explain why they make these determinations let’s dig a bit into the methodology of the report and also why some of the factors they consider should be on the radar of PEM physicians when deciding where to practice.

In their methodology they give a score to several factors:

  1. Physicians average annual wages
  2. Physicians average annual starting monthly wage
  3. Hospitals per capita
  4. Insured population rate
  5. Primary care provider shortage
  6. Projected elderly share of the population
  7. Current physician competition
  8. Projected physician competition
  9. Number of CME credits required
  10. Presence of interstate medical licensure compact law
  11. Quality of public hospital systems
  12. Punitiveness of the state medical board
  13. Malpractice award payout per capita
  14. Annual malpractice liability insurance rate

As you can see they take many factors into consideration. Some of them we often think of like salary and the quality of the health system we are joining but many are unique (and some don’t apply to the PEM physician at all like the elderly population rate). For instance, I did not consider the insured population rate, the presence or lack of a primary care physician shortage, or the punitiveness of the state medical board in my decision to practice in Indiana. Many of these are directly related to your finances, hence the examination of this article on this blog.

Let’s dive in a bit. The factors that arguably can make your job help or a hinder your financial future include factors that directly affect your compensation and factors that effect the chance you will get sued potentially taking away financial resources.

The authors assign a 0-100 score to each state based on the 14 factors listed above. The first 10 make up the opportunity and compensation factors where a state can score up to 70 points and the last 4 make up the medical environment factor where a state can score up to 30 points.

As you would imagine, several different states lead in different categories and none is all “good” or “bad.” For instance, Indiana ranks #1 in physician compensation and in the top 5 for malpractice insurance premiums, whereas New York is in the bottom 5 for annual wage, competition, malpractice awards and insurance rates. Given this it isn’t hard to see why some states ranked lower than others.

One important caveat is that compensation rankings in this article were adjusted for cost of living. This makes it easy to see why a relatively high wage would be ranked higher in a place like Indiana than say, California or New York as the cost of living is much more on the coasts. Also, more desirable locations attract people, physicians included so this inevitably leads to more competition (and higher physician density) decreasing the score for some of the same locales that have lower adjusted compensation for the cost of living. This proves a double whammy to certain states.

Other important factors that have nothing to do with physician density are the punitiveness of medical boards (sorry New Mexico, Ohio, Delaware, Louisiana and Wyoming), the amount of malpractice awards (lowest in North Dakota, Minnesota, Wisconsin, Texas and North Carolina), and the cost of malpractice insurance (condolences New York, DC, Michigan, Illinois, West Virginia). Malpractice insurance is cheaper where malpractice awards are relatively lower and this is often partly due to the presence of tort reform laws. These awards also cause a double hit to certain states, as it seems that many states with high desirability, geographically speaking, also have more punitive environments for physicians and any mistakes they might make.

Overall, I found this article interesting and it raised a couple of points that I think are pertinent to PEM physicians looking for a new/first job. Namely, the state practice environment depends on more than just whether there is an ocean/good climate/mountains present and that a PEM job seeker should consider physician density, the state medical board, and the malpractice climate along with more traditional considerations like salary when they make their decisions.

What do you think about the article? Did you consider the malpractice environment in your future practice site when thinking about your current job? Do you think the score is faulty or how would you change the scoring system to rank states in your opinion?

Slow is smooth, Smooth is fast but too slow is dead)

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Slow is smooth, smooth is fast

Special forces push this concept when training for urban combat.  When we work too quickly we risk making mistakes that  lead to harm.  This is especially true in high stakes but time sensitive situations (battlefield or resuscitation bay).

 

Slow is smooth, but too slow is dead

In contrast, in both the battlefield  and resuscitation bay working too slow can lead to people dying (or suffering permanent harm).  Slow is a relative term and  delays can be the result of a variety of factors including inefficiencies in our teams, failures of our systems or uncertainty in our thought process (paralysis by analysis).

 

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In pediatric resuscitation our most time-sensitive and critical events are exceedingly low in frequency.  Even in the busiest pediatric trauma centers a life saving intervention such as an ED thoracotomy is a rare event.  At the recent pediatric trauma society meeting I was awed by a case presentation of a patient who had a traumatic arrest with an unbelievable outcome.

 

The efficiency and effectiveness of the team in this time critical situation was not by an “accident”. This patient survived because this centers hard work to create a robust trauma system that includes highly trained providers.

As a northeaster for life I am not a NASCAR fan, however during the meeting someone showed the following video comparing trauma care to a pit stop.  This video gets at the point that no matter how skilled we are we need the right tools AND the right people.

Right people:  Those of us who work in academic centers need to recognize our responsibility to train community ED physicians who will care for 9/10 of severely ill and injured patients.  With decreasing time in pediatrics during residency and reduced exposure to critically ill children many of us leverage simulation-based instructional design to provide this training.

In our simulations and debriefings I have started to help trainees recognize their two modes of thinking that have been described by Nobel Laurette Daniel Kahneman:

  • System 1: Fast, automatic, frequent, emotional, stereotypic, subconscious
  • System 2: Slow, effortful, infrequent, logical, calculating, conscious

The challenge of time sensitive cases in pediatric trauma care is balancing our use of system 1 vs system 2 to be SMOOTH, fast and slow (with experience and practice my role models have developed a unique ability to use system 1 heuristics while concurrently using system 2).

However an additional challenge that I have always recognized is the over-confidence that can be found in some of our trainees and colleagues (and sometimes ourselves).  A great piece I read this month introduced me to some science in support of this phenomenon–The Dunning-Kruger is when low-ability individuals suffer from illusory superiority, mistakenly assessing their ability as much higher than it really is.  This effect is exemplified by the statement we don’t know what we don’t know– we may overestimate our skill and ability and FEEDBACK is critical to avoiding this. (interesting article on how this effect may have contributed to Trumps success in the election– http://www.politico.com/magazine/story/2016/05/donald-trump-supporters-dunning-kruger-effect-213904)

 

 

While NASCAR pit crew lessons can be applied to predictable events such as providing CPR the analogy to the battlefield is more appropriate for  complex medical or trauma events.  However through the use of checklists and a standardized approach to trauma we have standardized  our approach to make the unpredictable/infrequent predictable.

 

 

March Madness- 2016–Yale beats Butler and 2022 PEM attending matches in peds)

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March is an exciting time across the Yale campus!

For the first time in history Yale has one a game in the NCAA.  In addition to basketball tournaments March has the residency match and is decision time for our medical school applicants (+ St. Patricks Day and the start of baseball season).

The pressure we put on our medical school and residency applicants matches that of March Madness.  I recall the stress and thrills of match season over a decade ago and medical school selection four years before that.  I felt like I was the Cinderella team (as did many of my peers).  We could not believe we were fortunate enough to advance to the next phase in our pursuit to become doctors.   The next few “matches” for fellowship and my attending position where similar experiences.  Now that I am off the cycle of 3-4 years of “training” to test my luck in the “march madness of medicine” I enjoy watching from the sidelines.  I am lucky to have a role as an individual who interviews applicants and I feel this generation is in a  league of its own.  They all seem to have publications as elementary students and grants in college.  I am waiting to see the Nobel Prize on an application soon.
Am I getting old or are students getting better, stronger and younger?

While many physicians (including myself) are frustrated by some components of modern academic medicine today is a day to be “cup half full”.  On a day like to day I am proud to be an academic physician and of our US medical training system.  While we struggle with financing, grants drying up and the challenges of EPIC let’s all take a moment to celebrate the Classes of 2016 and Pediatricians who will graduate in 2019 and PEM fellows in 2022 (how scary is that)!
CONGRATULATIONS to pediatrics programs across the country and the future PEM, pediatricians and sub-specialists of tomorrow.  We often feel LUCKY to have people decide to go into peds and see this as an “upset” as they did not pick one of the DREAM residency (that have max lifestyle and $$$).  However, remember PEM attendings are the happiest of all sub specialists so in reality WE ARE LIVING THE DREAM!!

This year I was excited to see on the AAP site that in the 2016 Match, Pediatric filled 99.5% of all positions.  U.S. senior medical students comprised 67.5% of all offered pediatric positions (Not that this is a competition, but family medicine filled 95.2% of all offered positions; internal medicine filled 97.9%; and OB/GYN filled 99.4%)

What do you recall about match day?

What was your best match memory?

Please add your comments!

Our Rights and Obligations

Ameer Hassoun

In 2012, after only a few months of my taking my new position, Hurricane Sandy was heading to the Northeast. My passion for disaster relief kicked in.  After all, I have seen many wars during my childhood which led in part to my decision to become a pediatric emergency doctor.  I have always desired to help those who are in need and to rescue the disadvantaged. I found in Hurricane Sandy an opportunity to satisfy my goals of helping families suffering from displacement and hunger. Despite my working an 18-hour shift so that colleagues would not have to travel during the hurricane, I enthusiastically jumped into the relief work to help families in Far Rockaway.

I met an energetic nurse at my institution and offered to help these families with him on my days off. We managed to gather a group of health professionals and went to the devastated areas where we witnessed the destruction and the agony of that community. I could not believe that I was in a major metropolitan area in the U.S. There was no command center arranging volunteers’ work.  There were so many volunteers, but a minimal ability to utilize them efficiently. I sat at an emergency clinic that was assembled in a school, surrounded by large amounts of medications that were about to expire. I didn’t see more than four patients in my ten hours there because few people in the community knew we were even there.

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When a disaster hits, many physicians would like to go to the front line to help those who are in need. We take the extra steps necessary, but our efforts are shattered once we face the disorganization on the ground. I couldn’t believe that I was in the United States! And in one of the biggest cities in the world! Food and clothing is what mattered the most to the affected communities during the cold days of November. Lack of electricity and communications made our efforts patchy and ineffective. This situation continued for weeks.  In an environment lacking critical resources, like electricity and water, I came to learn that my emergency relief work would be held to the same legal standards of care as those to which I am held at my hospital. This was because I was a paid employee. Had I known this before volunteering, I could have been discouraged from doing so. Our system is crippled by laws that do not protect healthcare professionals donating their time and effort to help in disasters, where a quick response time is critical. Unless it is your job or you happen to be at the site when the disaster takes place, you are just as liable for every patient you see as you would be at your hospital, despite your working under suboptimal conditions. In other words, patients you treat might sue you regardless of how terrible the conditions were or how underequipped you were.

The US immunity laws applicable to physicians are a patchwork with too many gaps and inconsistencies. No law of which I am aware comprehensively addresses liability and immunity issues for physicians responding to disasters. Only unpaid volunteers and government workers are protected. And the rest of us who are not under such protection might suffer. The rule that “no good deed goes unpunished” should not be the norm!

How do you feel about this topic? Please share your thoughts