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In this episode, we talk about…

[1:58] FIRE: Financial Independence Retire Early

If you had asked Leif 10 years ago about retirement, he would have figured he would be an empty nester in his early to mid-fifties and then maybe he would work some locum tenens positions. About 5 or 6 years ago, however, he discovered the concept of financial independence and read about people who were retiring early.  Leif figured out the math behind it, added up their investments, and realized they were in a pretty good position to retire any time.

Leif was financially independent about 10 years into his career at age 39. While he wasn’t ready to retire right then and there, it got him thinking about the possibilities and what life might look like if he wasn’t working anymore. He and his wife discussed moving back to Northern Michigan, where they left a number of years earlier in order to secure a job for Leif.  

They came up with a five-year plan for Leif to exit his anesthesia career, and Leif realized that most people writing about the FIRE movement were writing from a very frugal point of view. They shared advice about how to save as much as possible while spending very little, and Leif knew that messaging  was not really going to jive with his physician colleagues.

Although he felt like he and his wife were quite frugal compared to a lot of their peers, he thought it would be more effective to approach the FIRE concept from the perspective of living the way you want. You can save a good amount of money while being intentional with your spending.  As physicians, you might even be able to spend a low six-figure amount each year and still make work optional. He saw a lot of physicians burning out, and a lot of people trying to spend their way out of misery. That rarely works.

[4:55] Physician burnout

Physician burnout can be brought on by increasing bureaucracy, increasing hours and expectations, decreasing time with patients, pay for performance, unfair rating systems, and more.  It would not be tough to come up with a list of 101 ways a physician’s life can be made more stressful.

Leif points out that many solutions are offered to individual physicians, but the true solution needs to come from a higher or more broad standpoint.  It starts with the administration realizing the demands put on physicians and working to make their lives easier. In a lot of places, Leif thinks administration and physicians clash and feel like enemies. In reality, however, administrators wouldn’t have jobs if they didn’t have people to care for patients. The two groups need to put aside personal grievances or judgment and have empathy.

[7:08] Leif’s outlook for medicine in twenty years

Twenty years ago, Leif was a fourth year medical student doing clinical rotations and interviewing with anesthesia residencies.  He can look at what has changed in the last 20 years, and from his perspective there is a trend toward more physicians being employed and having less autonomy.  There seem to be fewer independent practices, either because they have been bought up by hospital systems or private equity. Private equity tends to give bigger payouts to partners, but then they and anyone else coming into the practice will generally have less favorable working conditions – whether it’s lower salary or leaner models, because the whole goal of private equity is to make the practice more profitable and then sell it again in a few years.

We have seen hospitals being bought up by bigger health systems, as well as health systems merging. Leif feels like there are fewer and fewer employers, and in a way that gives them more bargaining power while giving the physicians less. Burnout wasn’t really talked about 20 years ago, but it is a bigger topic of discussion now.  It was close to 20 years ago that FEA residency work hours were reduced and some time limits were put on the work week. We are also seeing title creep, as many people with advanced degrees are called doctors and other professionals such as PAs or NPs are allowed to practice independently.

In Leif’s perspective, this all ties back to larger health systems having more control, cutting costs, and increasing profits. In the future, it may be that it’s more difficult for the patient to see an actual physician for their regular medical care. There might be gatekeepers, and patients will be forced to see other professionals first. You may only be allowed to see a physician if you have a complex problem.  

Legislation could also change things, as the Affordable Care Act made it easier for people (especially those with pre-existing conditions) to find and buy health insurance. It didn’t necessarily make it any more affordable, unless you have a low income and qualify for subsidies. Leif wouldn’t be surprised, though, to see more legislation altered.  There has been talk of lowering the eligibility age for Medicare to 50 or younger, or that there might be a paid option. Single payer has been brought up, which would probably end up looking like a dual payer system where you have basic care provided by the government and private care provided for those that can afford it.  

All of those are potential possibilities, and Leif thinks it is going to be even more difficult for small practices to survive in general. With the number of different requirements with electronic health records and for insurance payers, there is a lot of overhead that wasn’t there 20-30 years ago.

One positive that has come about is, we have seen an increase in doctors going with the direct primary care (DPC) route where they are not taking insurance. They are taking a subscription, going to patients’ homes, and providing a level of service that is difficult to do when you have all that overhead and all of those regulations. It will be interesting to see how it all evolves.

[11:45] How Leif was able to retire from practicing medicine at age 43

Leif has always valued his money, and he and his wife have long been savers. In a normal year, they saved maybe half or more of their income.  It wasn’t always a “normal” year, as they moved a few times, but if Leif made $350,000-$400,000 a year and they spent a $100,000 plus taxes, there was still $100,000-$150,000 left.  Early in Leif’s career, the great recession made the cost of buying into the stock market lower and lower until it bottomed out in March of 2009. At that time, they were investing in an IRA as well as in a taxable brokerage account. Since then, the stock market has done very well which has led them to the position of financial independence.

Even a year-and-a-half ago, when the markets plummeted about 30%, it took four months to get back to where it was. It was a blip. Leif has been a simple and straightforward investor that believes in the stock market, understands the history of it, and has invested in mainly just mutual funds and index funds.

[14:05] Physicians investing in real estate

Leif’s blog discusses the economic benefits of investing in real estate. He knows physicians that have either purchased a property for them to operate out of, or an income-producing property where they occupy a portion for their practice. It can certainly work well.  He has definitely seen surgeons buying into a surgical center where they practice. On the physicians’ side, they may tend to buy the office space so they own the building and rent it out to others. The benefit is that, if all goes well, you’re sort of double dipping. You own your office space and you aren’t paying rent, but you are collecting rent from others. As long as your practices do well, then you can make great money doing that.

On the other hand, you are putting a lot of eggs in one basket. If, for whatever reason, the practice becomes not so viable, now you have the building not collecting rent while your own practice is struggling. That could be a bit of a double whammy. When it comes to investing, you may want to spread your eggs out among many baskets or put many eggs in one basket and watch it very closely.  

Going back to a general investing philosophy, you should only invest in things that you understand and can easily explain to someone else.  If you are a physician and you work in a clinic or a surgical center, you may be more familiar with healthcare real estate investment. Especially if you are in a managerial position where it’s your practice, you are making sure rent is paid and overhead is covered and employees are paid, then you are in a good position to know what is a good deal. You have an idea of when the numbers make sense and when they don’t.

As an anesthesiologist, Leif knows other anesthesiologists that have had opportunities to buy shares in a for-profit hospital.  That can be true of surgical centers as well, but Leif hasn’t encountered this opportunity in his career and therefore he has never personally invested in that space. He has, however, found passive opportunities to invest in real estate funds and different syndications. That is something he has done in the last 3-5 years, after becoming financially independent and deciding to explore other avenues that other physicians have been very high on.

[18:08] Interesting avenues in real estate investment

Leif describes syndications, where you pool together investors and go in on one deal. When the project goes well, the return can be quite good.  You can see mid-teens to 20% and higher annual returns. There is a fair amount of due diligence needed for each individual deal. Per deal, you can put in less money.  It still may be a six-figure minimum to get in, but now you’re diversified across a dozen properties so that makes it less than $10,000 each. If one fails to do well, and one does really well, then on average you will get about what you expected for your returns.

[20:38] Joint ventures with capital partners

There is a whole industry of healthcare real estate with capital partners or joint venture partners that have done several developments with physicians or physician groups.  They work well with healthcare companies to develop properties and provide ownership in the property. This way, a physician looking for some passive income does not have to manage the real estate directly.  They can partner with an experienced individual or company that brings in capital and management expertise, but they can also invest in the real estate structure.

Leif is not very familiar with this space, and has not attended to real estate as an asset class for more than the last few years. He has a couple homes that they have moved away from and used as rental properties, but looking back on the numbers he realizes that they should have sold them as soon as they moved away.

[22:12] Leif’s experience with rental properties

Leif has held rental homes, and he had a condo in Gainesville, FL, that they rented out for seven years to two different tenants. They have done short-term and long-term rentals with their homes.  He used a property manager for the condo and the short-term rental, and he personally managed the long-term rental. So he has experienced a mix of personal management and property management companies.

While his long-term tenant made it easy for him to personally manage the rental, Leif prefers to have a property manager – and he would especially prefer that if he held multiple properties at the same time.

[23:52] Whether Leif misses anesthesiology

Leif didn’t mind working, and he didn’t think he was terribly burned out. He misses some of the people, both patients and staff, but there hasn’t been a day where he woke up and wished he was going into the office.

[24:30] Leif’s first job

Leif’s first job was stocking shelves and bagging groceries at a grocery store.

[24:52] Leif’s alternative career options

Leif makes some money from his blog, and he could see himself writing a book or two. Right now, he says he only has the attention span to write blog posts. In a different vein, he could also have fun being a bartender or a brewmaster.  He enjoys home brewing beers, and he has invested in a couple breweries.

[25:44] What Leif is reading and watching  for news, information, and inspiration

Leif reads a lot of other blogs, because he does a roundup post every Sunday and links to things he thinks his readers will find interesting. He is trying to read a chapter in a book every morning. He and his wife said they would watch shows and movies after he retired, but they haven’t been very good about that yet. They did watch Stranger Things, seasons one through three, over the summer.  

[26:42] What Leif does for healthy self-care

Leif has a daily workout routine of 100 pushups, 100 situps, and 40 air squats. He also does a language lesson in Spanish on Duolingo every day.

[27:33] Whether leaders are born or trained

Leif thinks they are trained. We are all a product of nature and nurture, but whether it is a formal training or a mentorship, those experiences can be formative when it comes to leadership skills.

[28:00] Whether the inclination for healing is born or learned

Leif sees this as more of a natural inclination. He sees it in one of his sons who loves animals, and he could see him being a veterinarian, an animal trainer, or maybe a doctor. Leif’s father was a dentist and his mother was trained as a nurse, so he thinks seeing what they did for a living may have influenced him in his desire to go into healthcare.