...unless I'm seriously proactive about this wealth-building business.
That was what was running through my head during most of "The Millionaire Next Door".
To start off, I'm a gal. Big disadvantage, right then and there, in terms of earning potential. The statistics show that women earn 50% - 60% of what men earn (p. 181), regardless of field or level of experience. Fabulous. Oh, and I live longer, so I need to save more for retirement. Double-whammy. (Not complaining about the longer life expectancy, just... makes things marginally harder.)
Next, many millionaires are self-employed entrepeneurs. That's something I'll never be. What am I? An academic. A research scientist. One of those chronically underpaid thankless professions fueled by love and passion rather than monetary returns. (Again, not complaining about my chosen profession, just... this is a statement of fact.)
Right now, I'm making a little over $30K/year (pre-tax) as a technician. If I stay in academia, I'll need to spend five to six years in graduate school, getting my doctorate. During that time, I'll be living off an extremely low stipend ($20K/year?), and possibly getting more into educational debt.
After I graduate, I'll be floating around, doing postdoc after postdoc for around the same salary as I'm making right now. None of the postdocs in my lab are saving for retirement. I'm the ONLY ONE. Granted, most of them are foreign nationals, but even the ones who are here for good are putting off contributing to their 403(b)'s.
And then if you're incredibly lucky, you might land a position as an assistant professor. Your salary jumps to, oh, $65K/year. But by then, you're 35, at the very least. And if you don't get tenure after a few years, you must leave your university, move on, and start all over.
And this timeline hurts, financially. A lot. The book states:
"For all high-income earners (those earning at least $100,000 annually), the relationship between education and wealth accumulation is negative. High-income PAWs are significantly less likely than UAWs to hold graduate degrees, law degrees, or medical degrees." (p. 74.)
Why? Because:
"Well-educated professionls get a very late start in the earnings race. It is difficult to accumulate wealth when one is in school. The longer one stays in school, the longer one postpones producing an income and building wealth." (p. 74.)
It doesn't help that professors don't even earn in the "high-income" category.
So where does that leave me? Totally screwed, financially, if I choose the academic path. Either I aggressively save and invest now, during my two years of employment before grad school, and hope that time is on my side enough to grow this seed money, or I bust. It doesn't matter if my dream career is to be a successful research scientist. I'm not exactly willing to starve for the privilege of having my name on landmark papers published in Science or Nature. Am I?
Alternatively, I can put off graduate school for longer--until I'm 30 or so--and earn during my prime saving and investing years. I feel like the more I earn now and invest, the better off I'll be. I need to find the formulas and crunch the numbers for some concrete projections, but this seems to be the case.
I can also give up academia, and go into biotech. The salary there is $65K/year to start, although I may need a Master's to qualify for those positions. Then, I'll have a good ten year head-start on the folks heading down the professorial path, and that's a significant difference.
None of this even *begins* to take into account a possible family life. I don't even want to think about it.
But tons of people who are in this field *are* making it, right? And I know I don't necessarily need to measure my success by whether or not I make it to millionaire status--because honestly, what would I *do* with all those assets--but I'd really prefer to have too much than too little.
Damn, this is going to be harder than I expected.
I think I'm kind of screwed
September 3rd, 2006 at 07:23 pm
September 3rd, 2006 at 08:10 pm 1157310622
Too much over too little wins every time in my book! YMMV.
September 3rd, 2006 at 09:05 pm 1157313933
September 3rd, 2006 at 09:11 pm 1157314272
September 3rd, 2006 at 09:35 pm 1157315759
September 4th, 2006 at 01:02 am 1157328162
You may or may not want to eventually go into academia. It has its upsides and its downsides. (FYI, I am a "failed" academic, having landed on the adjunct track after not publishing enough and "perishing" at a research university). You have time to decide, and with the tech career possibility, plenty of options. Yes, women traditionally don't do as well as men financially OR in terms of academic career success (although I count among my mentors and their peers at least two women who are Presidents of major research universities). But the time advantage trumps all. You are hardly "screwed."
By the way, since you are quantitatively oriented, you might want to get a business calculator (I like the TI BA IIPlus for $35) and learn how to do "time value of money" calculations. Very useful for making these kinds of projections.)
September 4th, 2006 at 06:24 am 1157347483
ima saver: Well, my family considers education to be one of the best investments one can have, so they're really pushing me to get my doctorate ASAP. It does increase your earning potential, although it does so at the cost that is discussed above.
The problem with academia is that there isn't enough funding or professorial positions to support the research of all the graduating doctorates. But it is still crucial that research gets done. I think the work environment really needs to be made more favorable for research scientists. Otherwise, the field might lose even more talent.
boomeyers: My concern with pursuing academia after I've established my "home and hearth" is the lack of stability. I've seen two professors I know with families get denied tenure, and have to move on. You cannot count on settling down.
And there is also the issue of discrimination against women in the academic sciences who have families, because it is seen as a conflict of interest. Most women scientists marry male scientists, but most male scientists marry housewives. So males scientists can have families because their wives will care for them. But women scientists don't have stay-at-home-husbands to care for their children. And they get denied tenure because they're not seen as productive enough.
LuckyRobin: Actually, I have read Automatic Millionaire. It's sort of why I feel a sense of urgency when it comes to saving for retirement early. I remember being amazed at how much difference starting early makes, and thinking that I don't want to squander my early years. I'll have to check the charts again (or find the formula so that I can generate the chart myself based on my own parameters). I would love to see what I need to do in order to have enough to do what I want for the rest of my career, rather than what pays best. Doesn't everyone, after all?
Dido: Wow, fabulous calculations... Thank you. It's exactly what I wanted to know--that is, how much would putting off grad school now and spending a few extra years in the workforce help me in reaching my retirement savings goals. If it looks live five years might be enough do it, then that is quite reasonable, since it's only three more years than I'm currently planning to take off. Heck, if I go into biotech after two years and kick up my salary for three years, I'll even be able to fully fund my house fund. It's selling this delay to my parents that will be hard, heh.
~mimi
September 4th, 2006 at 08:09 am 1157353798
One little realization I made about their UAW, AAW, and PAW calculation, which I figured that you would appreciate. Their calculation about net worth is (age*salary)/10 is a linear function. But most of the strategies for increasing net worth like buy and hold, compounding interest, etc is slightly exponential. It means that for many of your saving years you will look like a UAW or an AAW. You only "turn" into a PAW as your savings round that curve and turn exponential. It means save, spend conservatively, stay the course and don't freak out. I should blog about this....
September 4th, 2006 at 08:44 am 1157355879
Re: the [_]AW calculations... After discovering that I fell way short of PAW (and even AAW) on both my current salary and my college work-study salary, I realized that I needed to interpret their net worth calculator "in spirit", so to speak--as in, you should be saving at least 10% of your income every year, which I think I'm doing okay on. The time it takes for your investments to experience exponential growth makes sense, too--thanks for pointing that out!
I do wonder what the multivariate-based equation version of the calculator is, though. I bet it's more accurate.
~mimi
September 5th, 2006 at 01:41 am 1157416888
I. Lump Sum Calculations
a. Future Value of a Lump Sum
FV = PV(1+k)n
where PV = present or current value, FV = future value, k is the interest rate expressed in decimals (e.g., 5% interest is k=.05) and n is the number of periods.
Simple example: $100 invested in a 5%/year bank account in one year FV = 100*(1.05)^1 = $105, in two years = 100*(1.05)^2 = 110.25, etc.
b. Present Value of a Lump Sum PV = FV/(1+k)*n
you'd use this if you know the future value you want and want to figure how much you need to save. E.g., if you want $1,000,000 to retire in 40 years and you think you can earn 8% interest, PV = 1,000,000/(1.08)^40= $46,031 invested today at 8% will be worth one million in 40 years.
The equations for annuities are hard to read when I type them out here...
here's a site that has them written out better than I can.http://www.frickcpa.com/tvom/
September 6th, 2006 at 05:28 am 1157516892
~mimi
September 6th, 2006 at 01:09 pm 1157544563
September 6th, 2006 at 04:17 pm 1157555875
I am 33. Last year, I decided to go back to school and work on my Masters/PhD in philosophy so that I could teach at a college level -- and becasue it was a lifelong dream. Well, it was difficult for me to even get accepted into a program -- and forget assistantships. Do you want to know why? Because I am too old! Really! The retiring professor who I spoke to revealed that it was a huge factor against me. I am too old and interested in teaching instead of research and writing to earn the school critical acclaim for years to come. Da*n I hate the politics of academia.
So, if you really want to pursue the education. Do it. It will be harder later. A lot harder. No, your life wealth may never add up to what others have, but if you have enough, does that really matter? Okay, that's probably way more than 2 cents. I wish you luck!
September 6th, 2006 at 05:30 pm 1157560227
(My parents also want me to speed it up because they're afraid that I'll be too old to have babies by the time I'm done with school. Urg.)
I'm 21 now (turning 22 before the end of the year). If I stay at my current position for two years (and put away $20K total into retirement), and then switch to industry for another two years (and put away $30K into retirement), I'll be 25/26, and have enough in retirement to earn a million by age 65. That should be enough.
If I get into grad school then and put the petal to the metal, I can get my doctorate by age 30. Okay, probably early 30's. And then it's back into the workforce for me, hopefully with a higher salary.
As for teaching philosophy, I assume you're looking at liberal arts colleges? Because they place a greater focus on professors who are teacher-scholars. Maybe you can capitalize on the teacher part.
I studied philosophy (and the humanities) for the majority of my college career at a liberal arts college. It is really, really tough to make it, even without the age factor. I saw two great professors of mine denied tenure. Although I know one of them ended up the chair of the philosophy department at his new institution, so there's still hope.
best,
~mimi
September 6th, 2006 at 05:38 pm 1157560683
It's easier to juggle a job & school when you don't have anyone else to take care of. You'll also have plenty of years ahead of you to pay back the student loans.
I'm also going to go out on a limb and suggest that you consider getting an MBA. Something tells me you might really like it (perhaps an MBA in Health Care management?).
September 6th, 2006 at 06:55 pm 1157565340
The reason why I'm concerned about having enough money in retirement before I go to grad school is because I'm still not 100% sure if I want to go the academia route. I want to have this insurance that even if I change my mind and drop out or change fields, I'm still set for retirement, I haven't wasted too much time.
As far as having a family goes, I have my doubts that it'll happen. I'm just not sure my relationship (if it somehow revives itself and survives the year, heh) is heading in that direction. I just don't know how I can take something so uncertain into account.
I haven't really thought about an MBA. I've only been learning about finances for, oh, a month? But who knows, you could be right! I'll take a look at what that entails when I get a chance.
~mimi
September 7th, 2006 at 02:20 pm 1157635245
I will note that I have sat on graduate school admissions committees at a couple of universities, and I've never heard of age being considered as a criterion for admission. Of course, the oldest candidates were about 40--and those people *did* have a harder time getting hired in academia once they'd completed their degrees. They ended up combining their pre-grad school experience with their Ph.D.s and getting administrative/supervisory positions in non-profit organizations.
For applicants in their 30s, their life experience was usually considered a bonus. I know that I'm not the only one who is a little bit wary of candidates coming in fresh from college. Compared to people who have taken at least some time off to work, those who go straight through seem more likely to change course. If you're applying to graduate school later, you're more likely to have tested the waters and to be sure that this is what you *really* want to do.
One thing that definitely counts *against* grad school admission at a research university, and so in the sciences, is to have *teaching* be your main goal. What professors are looking for, in my experience, are students who will help them accomplish a lot of research and develop research reputations themselves, adding to the supervisory professor's luster. When I started my PhD program, my advising professor told me that she would not work with any student who wasn't intending a research career at a university--if I wanted to go the applied route, I should find another advisor. (Teaching alone as an option wasn't mentioned.) When I was a post-doc at Stanford, I remember walking into a professor's office to introduce myself, and, saying, "I'm a new post-doc here," the resonse was, "Not with ME, you're not!" because post-doctoral fellows don't add to the reputation of their advisor in the same way that grad students do--at least in my field, in the field, people are always aware that you were such-and-so's student, at least until you get into your 40s.
So in my experience, it's not age, but stated career goals, that have a greater influence on grad school admissions.
September 8th, 2006 at 05:01 pm 1157731262
Hence, I'm taking two years off to work as a tech. If I'm lucky, I might even get my name on a publication. That's my hope, anyway, although I won't be holding my breath. There's already much competition over who gets to do what project and who gets credit for what results, and while there are nice folk in my lab, too, they usually aren't the ones who get their way.
I don't think teaching is my main goal (I'll teach in grad school to see how good I am at it, I guess), although it's hard to say what *is* my goal. I'm still trying to get my specific research interest down, much less an extended career path. I really couldn't tell you if I want to be a teaching professor, research professor, work for industry, or completely change my research focus (although I'm very set on biology). Right now, my main concern regarding academia is the noncompetitive pay (not as important if I can get my investments set up early), competitive co-workers (I'm very easygoing and cooperative, so this attitude is a huge turn-off), and possibly also the politicking (the recent spat at MIT regarding Susumu Tonegawa intimidating Alla Karpova made me feel ill).
If I can do fulfilling research while retaining some semblance of balance for my personal life, I think that's what I would like. And I think that's reasonable. But I'm not sure where I can find that, yet.
~mimi
September 9th, 2006 at 12:23 am 1157757825
Also remember that academia has sabbaticals for those lucky people in tenure-track positions. That's a good balancing perk in itself.
September 9th, 2006 at 03:17 am 1157768257
I didn't have any children, so that wasn't an issue. But going from having some money to none meant I needed to be determined to finish as fast as I could. I called it my "vow of poverty". BTW, when you go back you can keep checking with the profs to see if they know of any company looking for part time highly educated help. I did that and within a few months I had a job that would let me have flexible hours to work on my classes and assistantship, and earned about 3 times minimum wage at that time. I could only do 20-25 hours per week, but they were happy with me, and the money meant I didn't go into (much) debt while I was in school.