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We ultimately pay well over 50% in taxes. If I were grossing $1m a year, let’s assume I net $450k (in reality it’s less) after all the taxes we are hit with with as K1 earners. Now assume I have a $6k a month expense between mortgage and property taxes (I bet most partners pay more than me but I’m being conservative), which knocks me down to $372k. Now remove $40k for self-employed health insurance for my family… $332k.
401k removes $23.5k and backdoor Roth another $7k for my and my spouse … $294.5k.
529 plans for 2 kids: maybe $20k… $284.5k.
Now, all the living expenses (for 4-5 people) of childcare, food, clothing, cars, plus add in any “fun things” like vacations and that residual number can dwindle pretty quick to something more like $100k a year in true discretionary savings, and that’s me assuming very moderate living costs in terms of schools, car payments, and other discretionary activities.
TO BE CLEAR: none of us are going hungry nor deserving of pity, but hopefully this helps you understand why the “make partner and immediately retire” concept rarely happens in practice
SC2–for the love of Mike, please max out your 401k savings now and forever.
600k-2m
C1 — $1mm gives you 40k in safe withdrawals. Not sure how that’s enough for most people in large cities (not leanfire types).
Rising Star
The main difference is kids. Wife and I are both first year MDs with no kids. Probably HHI of $900k per year. Could fairly easily save $250-350k per year if we wanted.
100% this.
Don’t forget the Porsche 911 payments and property tax on multiple properties. Tough times my friend 🪙
I drive a 2012 Ford Focus.
Don’t forget about the pension too!