As I mentioned in my introduction post, I would like to accumulate enough (or almost enough) money to live off of before I become a doctor. Is it possible to accumulate enough money by age 30 to last me the rest of my life (~95)? If say, I needed 15k per year from age 31, how much would I need to save/invest per year starting now? I am 19 and a half. I'm aware there are a lot of variables-- I'd just like a ballpark to work from.
I hope that's not too complicated...
All the best,
Alicia
How much would I need...?
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jacob
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Ballpark --- To get 15k/year, you need around 500k in present dollars. This corresponds to a 3% withdrawal rate. Simply divide 15/0.03=495.
In an unoptimistic case, you need to save 50k/year. You may be lucky to get a boost from capital gains. As we've seen from the past 10 years, though, capital gains didn't help much at all.
In an unoptimistic case, you need to save 50k/year. You may be lucky to get a boost from capital gains. As we've seen from the past 10 years, though, capital gains didn't help much at all.
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GetLaidOff
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Concojones
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Alicia,
it all depends on what investment returns you're assuming. Rehashing some of the earlier comments, a higher return means your money will grow faster and you can retire on less. The problem is that every investment has better and worse performing periods, so if you have bad luck you may have to work for some extra dollars for a while. If you can't live with that risk, Jacob gave a good ballpark figure to shoot for. If you're like me and you believe you can get 4-5% investment returns on top of inflation, then 23k savings a year would get you to 375k by age 30 (all figures in today's dollars).
In any case, I'd do something I love rather than chose a job for the money. Even if you only plan to work till you're 30. You don't want to start living at 30, you want to live now. If only because it's a learning process and you don't want to delay it.
P.S. How does a 19 y/o end up on such a serious website like this
it all depends on what investment returns you're assuming. Rehashing some of the earlier comments, a higher return means your money will grow faster and you can retire on less. The problem is that every investment has better and worse performing periods, so if you have bad luck you may have to work for some extra dollars for a while. If you can't live with that risk, Jacob gave a good ballpark figure to shoot for. If you're like me and you believe you can get 4-5% investment returns on top of inflation, then 23k savings a year would get you to 375k by age 30 (all figures in today's dollars).
In any case, I'd do something I love rather than chose a job for the money. Even if you only plan to work till you're 30. You don't want to start living at 30, you want to live now. If only because it's a learning process and you don't want to delay it.
P.S. How does a 19 y/o end up on such a serious website like this
Nice to meet you, Concojones.
I Started reading ERE when I was ~16/17 =D I'm the kind of person who tends to think about and plan for my future a lot, whether that's good or bad. I also tend to be on the extreme side, so if I'm going to do something I will put all of me effort into it (like saving 70% of my money rather than 10%). As I mentioned in my introduction post, I've re-discovered ERE over and over again throughout the years simply by googling early retirement/extreme saving as my interest in the subject became re-ignited.
I actually can't work at the moment. I have a chronic illness so I can't handle much more than school. What I have done is secure myself an (almost) full scholarship to college so I don't have to worry about debt. When I am well enough to hold down a job, I don't think I will be doing it for the money, but rather for experience (most likely in the medical field). I'll just make sure to save whatever money I make no matter how little.
On a side note, I'm sure I'd be able to make supplemental income after I become a doctor as a professor or something. I know a few doctors who do that.
I Started reading ERE when I was ~16/17 =D I'm the kind of person who tends to think about and plan for my future a lot, whether that's good or bad. I also tend to be on the extreme side, so if I'm going to do something I will put all of me effort into it (like saving 70% of my money rather than 10%). As I mentioned in my introduction post, I've re-discovered ERE over and over again throughout the years simply by googling early retirement/extreme saving as my interest in the subject became re-ignited.
I actually can't work at the moment. I have a chronic illness so I can't handle much more than school. What I have done is secure myself an (almost) full scholarship to college so I don't have to worry about debt. When I am well enough to hold down a job, I don't think I will be doing it for the money, but rather for experience (most likely in the medical field). I'll just make sure to save whatever money I make no matter how little.
On a side note, I'm sure I'd be able to make supplemental income after I become a doctor as a professor or something. I know a few doctors who do that.
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jacob
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http://en.wikipedia.org/wiki/Drinking_the_Kool-Aid
, where the kool-aid is: go to college, buy a car, get married, get a job, buy a big house, work for 30 years, retire.
, where the kool-aid is: go to college, buy a car, get married, get a job, buy a big house, work for 30 years, retire.
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Concojones
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futuredoctor
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Futuredoctor, I'm not trying to be discouraging here, just presenting what I think are some realities to highlight the difficulties you'll face in accumulating $500k and finishing medical school before age 30 (i.e. in essentially 10 years). Just so you know where this is coming from, I am a doctor.
If you want to get to $500k in 10 years it will likely take saving around $45k per year to do that. Certainly the required saving amount per year (what I have estimated at $45k) depends on your rate of return. There are two very important things that nip away at your rate of return, taxes and inflation (ok fees too, but in conversation many people quote rates of return after fees, but before taxes and inflation). If you can manage to make 2% per year on your investments AFTER taxes and inflation, you'll make it to $500k with 10 years of saving $45k per year. On the surface, 2% seems very small, but currently it isn't easy to reliably earn that much over a 10 year period after taxes and inflation-- particularly for someone who doesn't have much experience investing, and who will be in a reasonably high tax bracket.
The reason you'll be in a reasonably high tax bracket is that you'll need to be earning a decent amount in order to save $45k per year AND cover your medical school and living costs, which will probably be around $45k per year (assuming you go to an in-state, public school). You might be able to whittle something off of the $45k for medical school by being very frugal-- perhaps you could get it down to $40k or so.
I know there are scholarships available to cover medical school costs. The truth is you'll probably get several small scholarships, but still end up paying for about 90% of your education. I graduated at the top of my class, and this was how it worked out for me. Many people get small scholarships in medical school ($500-$5000 per year), but very, very few get a full ride outside of MSTPs or MD/PhD programs (though some do, hopefully you will). I would guess that greater than 80% of those who I went to medical school with had full scholarships for their undergraduate education.
If we figure that you're going to need $85k after taxes (45k for saving, and 40k for school and living), you're probably going to need to earn somewhere around $100k-$130k per year while in medical school, which means that you're going to need to be able to earn that money without spending much time doing it. Specifically, you'll need passive income, and a lot of it. The good news is this: if you can figure out how to passively earn that amount of money in the next few years, I doubt you'll ever have any significant financial problems, and your life should be an absolute blast.
If you expand your time frame a bit, stay frugal, and make certain choices you could get to $500k relatively quickly AFTER medical school. For instance, if you chose a residency that allows moonlighting you could moonlight like mad in residency and get your income up to $120-$150k while still in residency. So, if you start medical school at 22, and do a 3 year residency that allows moonlighting, you could very likely be debt-free and earning north of $200k by age 29-30. It wouldn't take too long to accumulate $500k from there, perhaps 2-3 years. You would have to work like an absolute madman to do this though, meaning 120-130 hour weeks during residency. Alternatively, you could do an MD/PhD program and follow Jacob's model-- reduce your expenses significantly and save your stipend money.
In my opinion, you're likely to have a greater net worth at age 30 by becoming a dental hygienist than by going to medical school.
If you want to get to $500k in 10 years it will likely take saving around $45k per year to do that. Certainly the required saving amount per year (what I have estimated at $45k) depends on your rate of return. There are two very important things that nip away at your rate of return, taxes and inflation (ok fees too, but in conversation many people quote rates of return after fees, but before taxes and inflation). If you can manage to make 2% per year on your investments AFTER taxes and inflation, you'll make it to $500k with 10 years of saving $45k per year. On the surface, 2% seems very small, but currently it isn't easy to reliably earn that much over a 10 year period after taxes and inflation-- particularly for someone who doesn't have much experience investing, and who will be in a reasonably high tax bracket.
The reason you'll be in a reasonably high tax bracket is that you'll need to be earning a decent amount in order to save $45k per year AND cover your medical school and living costs, which will probably be around $45k per year (assuming you go to an in-state, public school). You might be able to whittle something off of the $45k for medical school by being very frugal-- perhaps you could get it down to $40k or so.
I know there are scholarships available to cover medical school costs. The truth is you'll probably get several small scholarships, but still end up paying for about 90% of your education. I graduated at the top of my class, and this was how it worked out for me. Many people get small scholarships in medical school ($500-$5000 per year), but very, very few get a full ride outside of MSTPs or MD/PhD programs (though some do, hopefully you will). I would guess that greater than 80% of those who I went to medical school with had full scholarships for their undergraduate education.
If we figure that you're going to need $85k after taxes (45k for saving, and 40k for school and living), you're probably going to need to earn somewhere around $100k-$130k per year while in medical school, which means that you're going to need to be able to earn that money without spending much time doing it. Specifically, you'll need passive income, and a lot of it. The good news is this: if you can figure out how to passively earn that amount of money in the next few years, I doubt you'll ever have any significant financial problems, and your life should be an absolute blast.
If you expand your time frame a bit, stay frugal, and make certain choices you could get to $500k relatively quickly AFTER medical school. For instance, if you chose a residency that allows moonlighting you could moonlight like mad in residency and get your income up to $120-$150k while still in residency. So, if you start medical school at 22, and do a 3 year residency that allows moonlighting, you could very likely be debt-free and earning north of $200k by age 29-30. It wouldn't take too long to accumulate $500k from there, perhaps 2-3 years. You would have to work like an absolute madman to do this though, meaning 120-130 hour weeks during residency. Alternatively, you could do an MD/PhD program and follow Jacob's model-- reduce your expenses significantly and save your stipend money.
In my opinion, you're likely to have a greater net worth at age 30 by becoming a dental hygienist than by going to medical school.