Why Every Pharmacist Should Be a Multimillionaire
What is your first reaction to the thought of becoming a multimillionaire?
What is your first reaction to the thought of becoming a multimillionaire? Motivated? Scared? Doubtful? Excited?
I recently spoke with a group of 40 pharmacy residents about financial considerations when transitioning out of residency training. I asked how many of them were very confident in their ability to become a multimillionaire within their lifetimes, and only a few hands went up.
I’m going to make a conservative argument that every pharmacist should have at least $3 million saved by age 65. If planning early and appropriately, others could—and should—have much more.
One of the keys to winning in retirement is getting out of debt as soon as possible. This will free up your income for saving early and often.
If you have low-interest debt, then an argument can be made for balancing paying off that debt with saving for retirement. If you, like me, had many high-interest rate loans, however, then I don’t think that argument carries much weight, and I would urge you to focus on getting out of debt before focusing on retirement savings.
According to the Bureau of Labor Statistics, the median wage for a pharmacist in the United States is $116,670. Assuming that a pharmacist takes a traditional pathway of 6 to 8 years to complete the PharmD program after graduating from high school, one would enter the workforce at or around the age of 25.
Let’s put 4 conservative assumptions into place to play out the financial path of this “traditional” graduate:
Assumption 1: This individual saves 10% of his or her salary per month ($927.25) for retirement.
Assumption 2: This individual never receives a raise for the rest of his or her career. (Hopefully, this is not the case!)
Assumption 3: This individual decides to invest in moderately aggressive mutual funds that have 8% growth on average per year.
Assumption 4: This individual is in a single-income family, which we know isn’t true for many pharmacists.
Under these 4 assumptions, at age 65, this “traditional” pharmacist would have approximately $3.4 million saved.
There is usually one of 2 reactions to this example that can categorize a person as a financial underachiever or overachiever.
This pharmacist has a financial voice that sounds like “I don’t have 10% per month to save” (meaning, “I don’t have a good handle on my expenses or a budget”) or “8% growth from my investments per year is unrealistic.” This may result in individuals making a 6-figure salary their entire career, yet having to delay retirement, significantly cut their income in retirement, and/or feel worried about outliving their savings.
This pharmacist is the future multimillionaire who can retire with peace, give like crazy, and leave money to the next generation. I hear the financial overachiever saying “8%? I think I can get 10% growth in the market” and “10% of my income towards retirement isn’t enough. I’d like it to be closer to 15%.” This individual also has a plan for getting out of debt and achieve his or her long-term financial goals.
With these assumptions of 10% growth and 15% of income saved, the financial overachiever has more than $9 million saved for retirement.
Some of the skeptics may be asking, “What about management fees?” and “How can you forget about inflation?” Yes, both are very serious considerations that can eat significantly into your savings, which I will address in future articles. Even with these considerations, however, you get the point: save early and often.
What would $3.4 million at retirement look like? Better yet, what would $9 million look like?
Barring any national crises or crazy rates of inflation, it would look pretty darn secure. With $3.4 million, you could retire at age 65, diversify your funds in a conservative portfolio, take out $120,000 per year, and have more than a 95% probability that your portfolio will last until you are 95 or older.
What does this mean? It means having the ability to give money away to charities, foundations, family and/or friends like you have never been able to do before. It means having the ability to travel to the places you have always wanted to go or to buy a vacation home. It means being able to leave money to the next generation.
If you haven’t already, spend some time thinking about and writing down your long-term financial goals. It will make the day-to-day grind of paying off debt and saving for retirement that much better.
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