Case 3: The Four Physicians


A Tale of 4 Physicians is a favorite post of mine by @PhysicianOnFire, who has returned to the theme several times to explore the impact of some common lifestyle choices and events.  You should at least read the original post to get some context for the plans we explore for each doctor below.

The four physicians have the same gross income, but varying levels of saving and spending.


Each physician has a goal of financial independence, following the 4% rule at their preferred level of spending.

  • Dr. A:  $2 million ($80k/year spending)
  • Dr. B:  $3 million ($120k/year spending)
  • Dr. C:  $4 million ($160k/year spending)
  • Dr. D:  $5 million ($200k/year spending)

Special Considerations

Typically, someone will set a goal and based on their financial situation will try to figure out what they need to save to reach their goal.  In this example though, each doctor has established a savings rate and wants to know what their future will look like.

That is: Given my target goal and planned savings, when will I reach financial independence?

Let’s assume their plans start the day they turn 30 years old.

Balance Sheet

Each physician starts out exactly debt free but with nothing saved for retirement.  They all make the same $300k per year, which we’ll assume merely rises at the level of inflation.  So the balance sheet, for our purposes, starts with a net worth of exactly $0.

Make A Plan

Based on their spending choices, Physician On Fire breaks down the monthly retirement contributions each doctor makes:

  • Dr. A: $12,750 per month, a net savings rate of 63%
  • Dr. B: $9,583 per month, a net savings rate of 47%
  • Dr. C: $6,417 per month, a net savings rate of 31%
  • Dr. D: $1,667 per month, a net savings rate of 9%

The author looks at 2%, 4%, and 6% real returns, so we’ll adjust the model for 6% stock returns and 2% bond returns and test three portfolios:

  1. 100% stocks (6% returns)
  2. 50/50 stocks/bonds (4% returns)
  3. 100% bonds (2% returns)


Dr A

Dr. A is the star of the show, so let’s see how her retirement plan looks with 100% stock allocation:

Figure 3.1: Dr A’s Path to Retirement – 6% Average Real Returns

Dr A is saving so much money that the best and worst case scenarios almost don’t matter to her.  The market could tank horribly, or dramatically exceed expectations and her retirement age shifts just a bit, anywhere from the expected 38.7 years (best) to 43.4 years (worst).  She could put her money in a sock drawer and still retire at Age 43.

There’s a deep and profound lesson here that I think is worth repeating:  Your Savings Rate is vastly more important than your asset allocation for all but a vanishingly small number of people.

You’ll see the same lesson repeated if we compare the 100% stock allocation above with 50-50 and 100% bond allocations:

Figure 3.2: Dr A’s Trajectory with different stock allocations

Here’s a zoomed in view of Figure 3.2:

Figure 3.3: Dr A’s Trajectory (Zoomed In)

Amazingly, even in the 10% Best Case Scenario, where a robust market provides excellent returns, Dr A’s retirement party is delayed by only 11 months when she shifts her allocation from 100% stocks (6% return) to 100% bonds (2%) return.  With expected or worse than usual returns, the differences in allocation become negligible to her retirement plans.

The Four Doctors

Now let’s just consider the 100% stock allocation and compare across Drs. A-D.  Recall that Drs. B, C and D are saving at lower rates and seeking higher account values to reach financial independence.

The picture can get a little complicated, so let’s first look at the median expected scenario and then we’ll superimpose the best case and worst case scenarios for each doctor:

Figure 3.4: Drs. A-D projected retirement savings for 100% stock allocation (6% return)

Dr. D jumps off the graph because he doesn’t have a realistic plan: he has half a chance of reaching financial independence if he maintains the status quo, gets good (6% real) returns on an aggressive asset allocation, and works until he is 90.  Dr. D has a net savings rate of 9%, which isn’t nothing, but it’s simply not good enough to maintain his expensive lifestyle in retirement. I fear his situation may be worse than the display above projects: He seems like a prime candidate to go deeply into debt in order to finance his dream house(s) and expensive hobbies.  And if he goes through a few divorces or market downturns, he may need to work another lifetime to catch up.

Let’s look at the above figure with our 10% best and worst case scenarios superimposed:

Figure 3.5: The four doctors with their 10% best and worst cases superimposed, and 100% stock portfolios at 6% average real return.

While Dr. A may have to work three more years in the event of exceptionally poor investment returns, Dr. D’s career is extended by generations.  In the best case, Dr. D can reach his retirement goal around Age 71.  However he’ll have to work another 40+ years if instead we look at the 10% worst case scenarios!


These are four high earners with identical starting conditions whose financial lives diverge dramatically.  Many people think they are like Dr. C.  They’re saving at a pretty good clip and if everything goes to plan they should be able to retire in their late 50’s.  But it’s a lot easier to slide towards Dr. D than it is to move towards Dr. A, because for most people it’s a lot easier to move up in house, car, and lifestyle than it is to curtail or reverse those desires.  This is a website dedicated to planning, but the lesson of The Four Doctors is that ultimately your saving and spending patterns are going to drive your retirement age, and not the other way around.  If you must spend like Dr. D, at least do yourself a favor and live beneath your means for a few years first.

What do you think?  Which doctor most closely resembles your retirement plans?  Share your thoughts in the comments below.

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