What is your first reaction to the thought of becoming a multi-millionaire? Motivated? Scared? Doubtful? Excited?
I recently talked with a group of 40 pharmacy residents about financial considerations when transitioning out of residency training. I asked how many were very confident in their ability to become a multi-millionaire in their lifetime. 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 the age of 65. Others, if planning early and appropriately could, and should, have much more.
Before we get further into savings at retirement, we can’t overlook the importance of getting out of debt. You can read about my personal journey and budget that allowed me to become debt free. 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, there can be an argument to be made to balance paying off that debt with saving for retirement. However, if you, like me, had many high interest rate loans (including many of my school loans at 6-7%), I don’t think that argument carries much weight and 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 US is $116,670. Assuming a pharmacist takes a traditional pathway of 6-8 years to complete the Pharm.D. program after graduating from high school, one would enter the workforce at or around the age of 25. Let’s put into place four conservative assumptions to play out the financial path of this ‘traditional’ graduate.
Assumption 1: This individual saves 10% of his/her salary per month ($927.25) for retirement.
Assumption 2: This individual never receives a raise the rest of his/her career (hopefully 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 the age of 65, this ‘traditional’ pharmacist would have approximately $3.4 million saved.
There is usually one of two reactions to this example that can categorize one into a financial under- or over-achiever.
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