For PHARMACISTS eyes only

[ohiopharmacist]

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I have been working for 8 months now, my question to my fellow colleagues is what happens to the money AFTER 401k and expenses?

I'm 24,single,rented a townhouse, paying like $1100 for my 125k loans every month(sometimes more). I need some inputs on making sound investment which I don't have to wait till age 65 to enjoy it. I feel like I should do something with my money instead of just letting it sit in the bank.I have done some research on buying a property and renting it and stocks. But what did you do? Please share your insights and your successful stories,maybe it will help me figure out if I am heading the right way?

Please I repeat,this question is for PHARMACISTS only? I think they will be able to relate, no offense intended to rest of the crew.

 

[WVUPharm2007]

I'm in almost the same boat. I even work overnights.

What you need to do is put away as much into your 401k as CVS will match. That's first and foremost. Reason being, what they match is LITERALLY free money and an instant 100% profit on investment. Matching your employers contribution is the #1 thing everyone should do. Period.

What I'm doing is paying of my student loan as fast as I can. Consider whatever your APR is as a return on investment.

THEN look into a house...maybe, if you want. I think its an overrated "investment". Especially if you live somewhere with really high property tax rates.

 

[ohiopharmacist]

Thanks man for the input, Cleveland property taxes are lower than most states. Matching starts after 1 yr w/ CVS so I am not putting 5% yet to my 401k.

To be honest, I just dont want to wait till 65 to see my money. I plan to put whatever they match to 401k but also would like steady return that I can enjoy now. I hope I making some sense lol

 

[pharmschooler]

I know I'm not a pharmacist, but I do probably have more work and investment experience than you if you're just 24. I'm getting a good return in the stock market right now, but that's always dicey and unpredictable. You have plenty of time left before retirement though, so now might be a good time to get in. Maxing out 401k contributions is good if you have employer matches. Most things besides the market are getting terrible returns right now...which is a bummer.

I'd really recommend you start listening to Marketplace Money podcasts (from American Public Media). I listen while driving or doing dishes; I learn a ton about investing and what to do with money and taxes this way. It's really really helpful and I think most of us could benefit from it.

Good luck!

 

[Dr Wario]

I'd look harder into maxing your 401k because remember, as a single pharmacist you will ht high tax brackets and will see approx 1/3rd of the money you put in back. Funding your 401k also has the additional benefit of lowering your AGI which may qualify you for other tax deductions that may have otherwise been unavailable. As an example, the firsttime homebuyers tax credit completely phased out at an AGI of about 140,000, starting at about 125k. Last year my gross income was 142k but because I maxed my 401k ($16,500) I was not excluded from the program and got $8000 directly off my tax bill.

As a cvs employee, you may also want to look into the employee stock purchase plan, it is a pretty good deal. You select a certain percentage of your income to be invested (max 15%) and you essentially put the money into an account with BNY mellon. Every 6 months, the assets in the account are used to buy CVS stock, however this comes with 2 fairly nice perks. First of all, you get a 15% discount on the stock price, but you also get the lower of the stock prices on the first and last day of the 6 month trading period.

For example, trading period is from Jan 1 to June 30th, the price is $30/share on Jan 1 and $35/share on June 30th. Your price is $30/share - 15% = $25.50/share while the current market value is $35/share. You must keep the stock for at least 2 years from the purchase day (thus some of your money will be tied up for 2 years 6 months). I've done pretty well with this plan so far as I've been with CVS for 1.5 years as a pharmacist, invested 30k in cvs stock with a current market value of about 40k. I'll likey sell the stock as soon as my required time has expired and find other investments.

You also may want to look at accelerating your student loan payments depending on interest rate, remember the interest is not tax deductible at your income level so your interest rate = net return.

 

[CUpharmD2013]

Never mind, Dr. W beat me to it.

 

[Momus]

For the past 3 years, I have been maxing out my 401k early with annualized return of 28% (more gain when S&P rally). Last week paycheck maxed my 401k out for this year at $16,500.

Just hope for the ride, as long as middle east calms down, we will see at least 10-15% increase in S&P 500 this year. If **** hits the fan in the middle east, stock will stagnant or come down hard... I hedge this by having a 20% of my networth in BP (21% return so far, bought in August 2010). If you worry about increasing gas price, buy Exxon. If you like to eat burger, buy McDonald. Most of the time, what you like and what other people like are the same; you are not that much different from your next door neighboor. This is how you find a good company to invest in. Know the market, buy during the pull back, and get in early this year to maximize gain.

If you are risk averse tho, dollar cost averaging until the end of the year might be your best bet.

Aside from 401k, there is no investment that gives you a quick buck. It's all delayed gratification. Well, there is (i.e put all your money in 1 basket, find a company such as google, netflix, priceline, apple, chipotle early) but the risk of losing part or all of your money is also great. Too little diversification, can make or break you. Too much, you'd see average return or worse trail the market.

 

[Momus]

I've done pretty well with this plan so far as I've been with CVS for 1.5 years as a pharmacist, invested 30k in cvs stock with a current market value of about 40k. I'll likey sell the stock as soon as my required time has expired and find other investments.

Just to point out, this is an easy profit at 15% discount. This is ok as long as you keep selling the your employer stock. As a general rule, you never invest most of your money into the company you are working for. If the company goes bust, you'd lose the job, and your invesment goes in the tank. You will leave with nothing. And, don't think this can't happen in a blink of an eye... Imagine if you are a Lehman Brothers employee with all your money invested in the company.

 

[CUpharmD2013]

For the past 3 years, I have been maxing out my 401k early with annualized return of 28% (more gain when S&P rally). Last week paycheck maxed my 401k out for this year at $16,500.

Just hope for the ride, as long as middle east calms down, we will see at least 10-15% increase in S&P 500 this year. If **** hits the fan in the middle east, stock will stagnant or come down hard... I hedge this by having a 20% of my networth in BP (21% return so far, bought in August 2010). If you worry about increasing gas price, buy Exxon. If you like to eat burger, buy McDonald. Most of the time, what you like and what other people like are the same; you are not that much different from your next door neighboor. This is how you find a good company to invest in. Know the market, buy during the pull back, and get in early this year to maximize gain.

If you are risk averse tho, dollar cost averaging until the end of the year might be your best bet.

Aside from 401k, there is no investment that gives you a quick buck. It's all delayed gratification. Well, there is (i.e put all your money in 1 basket, find a company such as google, netflix, priceline, apple, chipotle early) but the risk of losing part or all of your money is also great. Too little diversification, can make or break you. Too much, you'd see average return or worse trail the market.

Always bet on black. 👍

 

[Clavulanic]

I like reading these kinds of threads every now and then just to see how other people are dealing with a situation that I will be in pretty soon. I honestly wasn't sure what a 401k was until reading this hah... but then again I've only worked 2+ years and only part-time. Some good advice, especially the point about putting into it so the company matches.

Also, a lot of non-pharmacists here know a lot more than some of the pharmacists here about this type of thing. Just saying, lot's of knowledgeable people out there.

 

[PumpkinSmasher]

I like reading these kinds of threads every now and then just to see how other people are dealing with a situation that I will be in pretty soon. I honestly wasn't sure what a 401k was until reading this hah... but then again I've only worked 2+ years and only part-time. Some good advice, especially the point about putting into it so the company matches.

Also, a lot of non-pharmacists here know a lot more than some of the pharmacists here about this type of thing. Just saying, lot's of knowledgeable people out there.

I thought the title was funny too, having a pharmacist license does not guarantee you have superior financial skills or ingenuity over any health professional student or pre-pharm student on these forums. I think my financial/investment knowledge is greater than a number of my preceptors but that is anecdotal and just my opinion.

 

[pharmschooler]

Another thought -- if you have a Flexible Spending Account (FSA) option, definitely exercise it!

Plan out what you expect as your medical expenses for the year (nearly anything qualifies -- OTC meds for colds, doctor visit copays, contact lenses & glasses) and put that money in when you have the chance (usually around October). They don't pull it all out of your paycheck at once, but you can use it right away on January 1st.

It's all deducted before taxes, so it's 100% of the income you've earned. I think it may decrease your taxable income as well, which is a second huge plus.

One year I maxed mine out when I had foreseen large health bills (long story...expensive surgery recuperation). I used my FSA totally quite early on that year. I parted ways with my employer halfway through the year, and was astounded when they didn't expect me to pay them back for the FSA. Amazing. These things can really work in your favor.

 

[Dr Wario]

Just to point out, this is an easy profit at 15% discount. This is ok as long as you keep selling the your employer stock. As a general rule, you never invest most of your money into the company you are working for. If the company goes bust, you'd lose the job, and your invesment goes in the tank. You will leave with nothing. And, don't think this can't happen in a blink of an eye... Imagine if you are a Lehman Brothers employee with all your money invested in the company.

Good point Momus, I do of course have other investments as such, cvs stock only represents about 13% of my net worth. Btw I would probably only put money into CVS stock after maxing your 401k and never own cvs stock (or any individual company) in your 401k.

 

[Dr Wario]

Another thought -- if you have a Flexible Spending Account (FSA) option, definitely exercise it!

Plan out what you expect as your medical expenses for the year (nearly anything qualifies -- OTC meds for colds, doctor visit copays, contact lenses & glasses) and put that money in when you have the chance (usually around October). They don't pull it all out of your paycheck at once, but you can use it right away on January 1st.

It's all deducted before taxes, so it's 100% of the income you've earned. I think it may decrease your taxable income as well, which is a second huge plus.

One year I maxed mine out when I had foreseen large health bills (long story...expensive surgery recuperation). I used my FSA totally quite early on that year. I parted ways with my employer halfway through the year, and was astounded when they didn't expect me to pay them back for the FSA. Amazing. These things can really work in your favor.

Agreed, FSA accounts are great for people that have moderate to high out of pocket heathcare expenses. Be warned though, you will lose any money that you do not use. This year it will be more difficult to use all of the money because most OTC products, including pain relievers, cough/cold, etc. will require a prescription that you must submit, along with the register receipt, to your FSA administrator.

 

[PharmDstudent]

If you have any questions about day to day spending, my SO calls me Miss Money Bags Never buy anything at full price!

 

[ohiopharmacist]

I thought the title was funny too, having a pharmacist license does not guarantee you have superior financial skills or ingenuity over any health professional student or pre-pharm student on these forums. I think my financial/investment knowledge is greater than a number of my preceptors but that is anecdotal and just my opinion.

My intention was not to prove pharmacist are better w/financial skills but I think they know exactly what I am talking about. If you're a student and knowledgeable,your input is also appreciated.

Dr.Wario,thank you for the specific details. I am expecting huge tax return this year since its my first yr out of college and my GAI is around 60k. I haven't filed it yet but my friend did and is expecting $4200 back. As far as trading and stock options,what do you recommend,etrade,scottstrade? I have heard that when you report your gains to IRS,it significantly reduces your profit since its taxable,any idea how much? I also have Roth IRA w/T Rowe mutual fund (health sciences and retirement2050),I think everyone should have one.

As far as student loans, somebody recommended instead of putting a lot of money in monthly payments,why not just make minimum payments(15 or20yr repayment plan) and invest the rest. At the end of the year,put 80% of profit you earned towards loans (assuming everything goes well) Any thoughts?

Again,thank you everyone for the helpful tips,you guys rock! 🙂

 

[ohiopharmacist]

I thought the title was funny too, having a pharmacist license does not guarantee you have superior financial skills or ingenuity over any health professional student or pre-pharm student on these forums. I think my financial/investment knowledge is greater than a number of my preceptors but that is anecdotal and just my opinion.

My intention was not to prove pharmacist are better w/financial skills but I think they know exactly what I am talking about. If you're a student and knowledgeable,your input is also appreciated.

Dr.Wario,thank you for the specific details. I am expecting huge tax return this year since its my first yr out of college and my GAI is around 60k. I haven't filed it yet but my friend did and is expecting $4200 back. As far as trading and stock options,what do you recommend,etrade,scottstrade? I have heard that when you report your gains to IRS,it significantly reduces your profit since its taxable,any idea how much to expect? I also have Roth IRA w/T Rowe mutual fund (health sciences and retirement2050),I think everyone should have one.

As far as student loans, somebody recommended instead of putting a lot of money in monthly payments,why not just make minimum payments(15 or20yr repayment plan) and invest the rest and at the end of the year,put 80% of profit you earned towards loans (assuming everything goes well) Any thoughts?

Again,thank you everyone for the helpful tips,you guys rock! 🙂

 

[DYSF777]

If you have any questions about day to day spending, my SO calls me Miss Money Bags Never buy anything at full price!

This! I buy everything I need on Groupon.

 

[CUpharmD2013]

This! I buy everything I need on Groupon.

👍

If you can believe it, my wife is getting frustrated by all the deals that I send her every day now that I learned about Groupon. That place is great!

 

[lauradiddle]

Another thought -- if you have a Flexible Spending Account (FSA) option, definitely exercise it!

This. Unfortunately most OTC meds don't count anymore unless it has a prescription. If I remember correctly, contact solution and condoms still count though. 🙂 Yeah, if you don't use it, you "lose it" but anything like annual doctors appts. and prescriptions you know you'll buy anyway (e.g. contacts, birth control) can help you smartly estimate what to put on the account, and it can really pay off. The money I put in mine kept me at a lower tax bracket this year.