The economics of going back to medical school.

It’s not easy to walk away from a six-figure annual salary, especially if you plan on going into more debt in pursuit of your new career. However, as I previously explained, my mental health is and was worth the cost.

So what exactly was the financial cost? I will show you the math that I did to estimate that cost. There are caveats, of course. One, you can’t predict the market. Two, not everyone will work during school. Three, I did not maximize my investing early in my pharmacy career.

To make the math easier, I made several assumptions. One, maximize 401(k) or 403(b) contributions. Two, maximize Roth IRA contributions. These two assumptions are to show the maximum potential of money left on the table when making a career change.

Three, students loans are assumed to be on a 10-year repayment plan at 4.25% (based on “average” plans). Four, average market returns are assumed to be 7%. Five, the salaries will be based on national averages and without raises (to make the math easier). Six, assume that your employer does not match your 401(k); again this makes the math easier.

Pharmacist projection

Because I started medical school in 2009, let’s assume that to be year zero. The average pharmacist salary is about $120,000 per year. Then we have to subtract $18,500 for max 401(k) contributions, and reduce that new amount by ⅓ as an estimate to take into account taxes and benefits. We are left with a net income of $68,000 per year, which we then subtract $5,500 for max Roth IRA contributions (I know that it’s now $6,000 but that wasn’t the case when I originally did this).

So the monthly net income for budgeting after paying yourself is $5,208. Here’s the breakdown of the budget: $4,000 for cost of living (mortgage, utilities, food, etc), $1,025 for monthly student loan payment (total pharmacy school debt ~ $100,000), $183 for the rainy day fund into a 2% savings account.

Once the student loans are paid off in 10 years, the monthly $1025 will go into a Vanguard mutual fund (again assuming 7% returns). Now let’s take a look at years 10 (2019), 15 (2024), 20 (2029), 25 (2034), and 30 (2039) if I had kept working as a pharmacist.

  401(k) Roth IRA Savings 2% Vanguard Net Worth
2019 258,028 81,310 24,289 0 363,627
2024 469,296 147,884 38,379 72,977 581,683
2029 765,609 241,258 53,949 175,330 1,236,146
2034 1,182,235 372,221 71,156 318,885 1,944,497
2039 1,768,407 555,902 90,170 520,229 2,934,708

Anesthesiologist projection

Now let’s take a look at my current pace as an anesthesiologist. There’s a ton of salary data out there (see link above as an example), so let’s assume an annual income of $312,000 (to make the math easier). Again we will subtract the $18,500 for max 401(k) contributions and reduce this new amount by 35% to take into account taxes and benefits. After subtracting $5,500 for max Roth IRA contributions and dividing by 12, we are left with a monthly net income of $15,439 after paying yourself.

Here’s the monthly budget: $5,000 for cost of living (slight upgrade), $8,000 for twice the monthly student loan payment (pharmacy school + $250,000 for medical school), and $2,439 for the rainy day fund into 2% savings account.

  401(k) Roth IRA Savings 2% Vanguard Net Worth
2019 18,675 5,885 29,539 0 -206,123
2024 107,398 33,843 153,775 0 295,014
2029 258,028 81,310 169,932 743,215 1,252,485
2034 469,296 147,884 187,787 1,785,611 2,590,578
2039 765,609 241,258 207,520 3,247,625 4,462,012

A couple things to note: I finished my training in 2018 so I will have one year totals when looking at 2019 numbers. Once my rainy day funds reach a total greater than 6 months of my income, I will take that part of the budget and put it towards a Vanguard mutual fund, in addition to the amount that I was paying for student loans. So my monthly Vanguard contribution will be $10,439.

As you can see, it will be 20 years from the day I started medical school when I will break even and surpass my pharmacy career. I am just over one year into my career as an anesthesiology attending physician and I love my new career. Knowing what I know now, I would still make the same decision two out of three times. The other one out of three? Well, if only I had the financial knowledge that The Physician Philosopher has provided me then I probably would have done other things with my pharmacy career.

Now that you know the cost: Is your career wellness and satisfaction worth the price to you? Comment below with your questions, and let me know if I made any grammatical or mathematical errors (very likely).

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