Did I calculate my opportunity costs correctly?

[hckyplyr]

Hello all, I'll try to be as brief as possible. I'm a PA working in gastroenterology, I'm going to med school this year, starting in July. I've been trying to calculate my opportunity costs, please let me know if I've done this correctly. Note: The numbers I'm using are rounded/ball park numbers to make it easier. I will be 32 when starting. Here it goes:

Continue to work as a PA until age 65:
65-32 = 33 years to work
33 years x $100,000/yr salary = 3.3 million

Go to med school, 4 year residency. (I know this doesn't mean much now, but I plan to do ER, anes,Rads)
The school I got into will be $32,000/yr. So, 32,000 x 4 years = $128,000. However, I'll just round up, considering expenses,etc. So, total cost of med school = $150,000
Age 32 now, 4 years med school + 4 years residency = 40yrs old before I'm an attending. However, 4 years of residency at $50,000/yr salary is $200,000
I would have 25 years to work (retire at 65, start at 40).......Attending salary $250,000/yr............So, $250,000/yr x 25 years = 6.25 million
$6.25 million + $200k (salary made in residency), puts me around $6.5 million
However, subtract tuition of school $150,000. But, paying this off in 10 years is more like a total of $207,000. ($57,000 interest at 6.75%)
$6.5 million - $207,000 puts me around $6.3 million

Total made as a PA until age 65: $3.3 million
Total made as a Dr until age 65: $6.3 million.

Seemingly, it would definitely be worth it from a financial standpoint by going to med school. Like I mentioned, these are gross estimates, but did I pretty much do the math right, or did I leave out/forget some big things? Thanks to whomever made it to the end of this post.

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[Psai]

you'll be paying more than 150k back for borrowing 128k
also tuition will not stay at 32k, it will go up by around 5% a year and who knows what the interest rate will be
total cost of medical school = 200k if not 250

besides that, your math sucks. at the very basic level, you don't take taxes into account or dollars earned per hour. also the amount of stress and bs you will deal with. how much is that worth?
i'd say just be a pa and keep it at that especially if your plan is er, anesthesia or rads.

 

[Cytarabine]

There's a lot to factor in. Think if you started investing as a PA vs when you'd be able to begin investing as a physician.

I'll leave the detailed discussion to people smarter with the numbers. My opinion - you would probably increase your net income potential as a physician, but I don't think to enough of a degree to justify the added burden of becoming a physician (decreased QoL during med school and residency +/- fellowship) if that's your sole reason for becoming a physician. Those other reasons you might want to be a physician aren't so quantifiable. So, personal decision!

 

[hckyplyr]

you'll be paying more than 150k back for borrowing 128k
also tuition will not stay at 32k, it will go up by around 5% a year and who knows what the interest rate will be
total cost of medical school = 200k if not 250

besides that, your math sucks. at the very basic level, you don't take taxes into account or dollars earned per hour. also the amount of stress and bs you will deal with. how much is that worth?
i'd say just be a pa and keep it at that especially if your plan is er, anesthesia or rads.

Your reading comprehension sucks, I said $150,000 paid off over 10 years will be approx. $207,000. I live with my fiancé, I'm not paying food, board, medical, etc. But, I'll give you the benefit of the doubt for missing that, considering my post was long and boring.
I didn't take taxes into account bc it's 28% for my current tax bracket, physician salary would be 33%, but like I said I'm doing gross estimates. I wasn't trying to calculate dollars earned per hour. If I did that, PA school wouldn't be worth it either, considering I was doing rotations 60-80hrs a week for 1 1/2 years for no pay. However, I still appreciate the input.

There's a lot to factor in. Think if you started investing as a PA vs when you'd be able to begin investing as a physician.

I'll leave the detailed discussion to people smarter with the numbers. My opinion - you would probably increase your net income potential as a physician, but I don't think to enough of a degree to justify the added burden of becoming a physician (decreased QoL during med school and residency +/- fellowship) if that's your sole reason for becoming a physician. Those other reasons you might want to be a physician aren't so quantifiable. So, personal decision!

Agreed. There's no doubt my net income potential would be greater as a physician. I've been heavily investing in stock market since age 18, day trading, calls, puts, options, etc. I will have to run the numbers on how much I would be losing by missing out on 4-8 years of compounding interest. (8% return yearly is very optimistic when you take out the last couple years in market) Although, my main reason for going back to school isn't for money, my reasons (like you mentioned) are certainly not quantifiable. It is reassuring that my decision will not be a financial loss, based on the criteria I value. Thanks for the help

 

[pathologyDO]

. Nvm

 

[sazerac]

Yes you ran the numbers correctly.

While the calculations are individual and multi-factorial, the SDN rule of thumb for any career switcher is that you die with more money as long as you matriculate to medical school before age 40. At age 40 it is a tie, and beyond age 40 you die with less money.

I matriculated after age 40 myself, and I'm still glad I did. I may die with less money, but when you get to be 40 you will realize there is more to life than who dies with the most money.

 

[Apoplexy__]

The numbers look good. It's a financially advantageous decision.

Even if you only worked until 55 with those numbers, med school would have a slight financial advantage. Even if you made $200k/yr on average working until 65, as well.

Notably, it becomes somewhat of a wash when you attempt the calculation with some of the lower salaries such as $150k/yr. You may find yourself unhappy if you end up having to choose primary care for whatever reason (not suggesting you won't be competitive enough, just thinking of risk) -- similar lifetime income, similar lifestyle but with 8 years of stress (school+residency) added.

 

[IlDestriero]

Don't forget that you may also be able to cut back how much you work as a physician as you approach retirement and still make more than you would make a PA. It may decrease your lifetime income, but significantly increase the quality of your life. My father came out of retirement to work a Tu-Fri job for another 10 years. 52 long weekends a year changes your perspective.
Fortunately in my field, anesthesia, it is easy to decrease to 80 or 60% because of the nature of the job. That's something I'll be looking to do at 50-52.

 

[beachside]

Hello all, I'll try to be as brief as possible. I'm a PA working in gastroenterology, I'm going to med school this year, starting in July. I've been trying to calculate my opportunity costs, please let me know if I've done this correctly. Note: The numbers I'm using are rounded/ball park numbers to make it easier. I will be 32 when starting. Here it goes:

Continue to work as a PA until age 65:
65-32 = 33 years to work
33 years x $100,000/yr salary = 3.3 million

Go to med school, 4 year residency. (I know this doesn't mean much now, but I plan to do ER, anes,Rads)
The school I got into will be $32,000/yr. So, 32,000 x 4 years = $128,000. However, I'll just round up, considering expenses,etc. So, total cost of med school = $150,000
Age 32 now, 4 years med school + 4 years residency = 40yrs old before I'm an attending. However, 4 years of residency at $50,000/yr salary is $200,000
I would have 25 years to work (retire at 65, start at 40).......Attending salary $250,000/yr............So, $250,000/yr x 25 years = 6.25 million
$6.25 million + $200k (salary made in residency), puts me around $6.5 million
However, subtract tuition of school $150,000. But, paying this off in 10 years is more like a total of $207,000. ($57,000 interest at 6.75%)
$6.5 million - $207,000 puts me around $6.3 million

Total made as a PA until age 65: $3.3 million
Total made as a Dr until age 65: $6.3 million.

Seemingly, it would definitely be worth it from a financial standpoint by going to med school. Like I mentioned, these are gross estimates, but did I pretty much do the math right, or did I leave out/forget some big things? Thanks to whomever made it to the end of this post.

Your numbers look good; they're similar to the numbers I ran before going to med school. Of course, counting on a $250,000 income permanently is probably a tad high. There's the risk that you'll end up in primary care, of course, and there's also the risk that you'll decide to go academic or part-time in order to have a better quality of life. If you look at these numbers by Medscape, you'll see significantly lower salary figures that you would by looking at 6-year average attending salaries. Why? I don't know for sure, but my guess is that young physicians tend to put in a lot longer hours, and less lifestyle-friendly positions. Over the long term, you'll want to go with the lower number, just to ensure that your decision still makes sense. You'll also want to consider the primary care numbers as well, because you can never predict how well you'll do in medical school.

I'd also take a fudge factor of say 25% off your final number, due to political uncertainty about physician compensation in the future. The government could lower physician pay, raise taxes significantly on the "wealthy" (it used to be 70%!), or even nationalize the healthcare system altogether. Of course that's all very far into the future, but so are our careers. Politics is cyclical, so the next big democratic healthcare or tax reform could come in as few as 10-14 years, depending on who wins the next election, and smaller reforms far sooner than that.