Dr Tim (not his real name) was reeling. Age 60, and he did not see it coming. Divorce.
It was one of those no-fault divorces. They just grew apart. It had been a grueling thirty-five years for both of them. A late entry to medicine (Tim taught first), an early entry to parenthood, one income, one large mortgage and four lots of private school fees. Separate lives. In the end the only thing they really shared was their home and some super.
She got the home. $1,500,000. He got the super. $500,000.
And he was starting from scratch, again, thirty years after he started med school.
Tim was wondering if he should declare bankruptcy: the $100,000 outstanding tax bill and $80,000 credit card seemed insurmountable. He was an unhappy chappy. Life seemed unfair.
Tim is not an unusual presentation. Late age divorce is common for doctors and it’s often accompanied by an unhealthy dose of the blues and possibly something more serious. Everyone has to tread carefully. Financial advisers included.
This is where the pay-off for all the hard work really kicks in. When you are at your lowest point. For most people, men and women, divorce at age 60 is an economic death sentence. It’s all over. And it’s too late to recover, to build up again. It’s just does not happen, and soon life on the old age pension is their reality.
But doctors are different. The height, stability, scalability and longevity of their incomes mean they can start again at age 60. At an age when most are at the end of the road the journey is just starting. The 60-year-old GP is at the peak of her powers, probably just getting good at what she does.
So what did Dr Tim do?
First up, he kept working. He had to. Most 60-year-old GPs should be cutting back, for lots of good reasons. Most of Tim’s friends were. But for now for Tim it was ten sessions a week, the same as it had always been.
And Tim is staying in the same place, at least for now. He is tethered to Box Hill: his youngest two children, age 18 and 20, are at uni and want to move between mum and dad. The kids have always come first.
A three-year cash budget showed bankruptcy was not a good idea and Tim would be back in the black before he knew it (or at least by 2019).
So there is nothing new so far. Our advice is work hard, budget well, rent comfortably, maximize super and stabilize the finances for a year or two. Be a good dad, and pay off the tax bill and that credit card. And know that it soon gets better.
Second up, in three years, once the kids are independent and the debts are cleared, it’s Tim’s turn. Finally, at age 63.
Tim had always worked in Melbourne’s eastern suburbs, paying a management fee to the practice owner. He averaged about $280,000 a year. He was surprised to learn aesthetic, pleasant, non-metropolitan areas are more lucrative and GPs easily make an extra $100,000 a year over their metro-counterparts.
It’s even more if you own the practice.
So it’s a tree change for Tim. At age 63 Tim plans to relocate to the country, and borrow to buy a beautiful home for $500,000. The same home would cost $1,500,000 in Melbourne. More again in Sydney.
He can take his choice of locations and practices. He is interviewing them, they are not interviewing him.
Practice ownership was ruled out. Too hard and too old. So Tim will stay a non-owner, and we predict he will earn $65,000 per full time day each year. So a three-day working week will generate $215,000 a year, and the stage is set for a gradual wind down over the following ten years, health permitting.
The average 50-year-old male earns around $70,000 a year. Tim is earning three times that, working only three days a week.
At age 66 Tim expects to have more than $700,000 in super. At age 66 he will withdraw $500,000 tax free and pay off the home loan, leaving more than $300,000 invested tax free, and growing fast.
His three days a week will gradually fall to two sessions a week, at a comfortable pace and space. All the while paying maximum super and feeling like he is a valued member of the community doing what he loves and does best.
The load lifted. The mood cleared. A smile was seen.
Just don’t get divorced again.