How long will it take to pay off debt in this situation?

[Adapt]

I didn't know where to post this question but I guess I'll post it here since I figure I will get the most responses here.

Basically, I'm going to have to borrow everything for medical school so I'll be about $250,000 in debt. I want to enter into family practice so I figure my salary will be around 120K a year.

Assume I live in an apartment for a couple of years post-residency, have a wife, and have a kid a couple of years post-residency.

I figure I can pay larger loan payments the first couple of years post-residency since I'll live in an apartment without a kid yet.

How long do you think it would take for me to pay this debt off after residency?

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[camstah]

same situation here....and from what i calculated, i'll be paying off debt until ummmm, i die......too bad my husband won't be around to see that last payment made, since he'll probably have a shorter lifespan than I will......that's only an approximation mind you.....i may pay it off by retirement....

 

[Adapt]

Originally posted by camstah
same situation here....and from what i calculated, i'll be paying off debt until ummmm, i die......too bad my husband won't be around to see that last payment made, since he'll probably have a shorter lifespan than I will......that's only an approximation mind you

I certainly hope I can pay it off before I die.

 

[Sharkfan]

This might help everyone out; found it in the financial aid forum.


http://forums.studentdoctor.net/showthread.php?threadid=101742

 

[Adapt]

Originally posted by Sharkfan
This might help everyone out; found it in the financial aid forum.


http://forums.studentdoctor.net/showthread.php?threadid=101742

Thanks. I actually found that post awhile ago and posted on it as well. It was very helpful. The only problem I have with the calculations is that it is for a single person.

It doesn't take into account having a wife and kids. I was just curious if anyone had any other opinions other than what was posted there. Perhaps Dr. Doan could factor in kids to the calculations. For those that may be curious to what I'm talking about it is this...

Originally posted by Andrew_Doan
First, I recommend you read the book "The Millionare Next Door". You'll feel comforted that wealth is built upon how you live your life and value money, not by how much you make.

Let's consider some calculations. FP on average, makes $136K/year (http://stats.bls.gov/oes/2002/oes_29He.htm)

This is after malpractice and other business expenses.

Taking the deduction of ~$30,000 (this includes a mortgage for a $300K house, work expenses, taxes paid, etc...), a single person, self-employed making this much should take home about ($136K - $24K federal tax - $15,000 self-employment tax - ~$10,000 state tax.) = about $87K/year or $7250/month.

$7250/month
___________
-$2000 mortgage for the $300K home @ 6%, no down, 30 years, property tax

-$2000 student loan payment @ 4% 10 year plan

-$300/month medical/dental insurance (included in above deductions)

-$400/month work expenses (included in above deductions).

You're left with about $2500/month for food, car payment, savings, retirement savings, entertainment, clothing, etc....

The above is a rough estimate, but under the right financial budget and mindset, a FP can pay back $200K in student loans and still have a decent lifestyle. The real problem is saving for retirement. You'll have to force yourself to save as much as possible of the $2500/month for retirement, but after 10 years when the student loans are paid off, you'll have another $2000/month free to put towards retirement. In addition, you're going to have financial difficulty living in LA, New York, Chicago, or SF. Physicians who work in smaller towns/cities will definitely have more money than those who pick larger, over-saturated markets. Also, if you pick a state like FL or TX where there is no State Income Tax, then you'll have an extra $10,000/year.

My advice is the same as moniagrl's: don't pick a specialty b/c of money. If you do what you love, then the money is only a big bonus.

Regardless of specialty, you'll be able to pay off a big student loan debt.

I hope this helps.

Addenum:
I know someone is going to ask about retirement. Let's assume the average FP will be 30 when starting practice. You're able to set aside $200/month for 10 years, and then $2,000/month there after. Let's plan on retirement being at age 60.

With an average investment return of 6% (which is worse than the S&P 500 historically), at age 60 you'll have: slightly over $1 million

with 8% return, at age 60 you'll have $1.3 million

This is probably not enough to retire, but you'll also have to consider that you'll be able to sell your practice or you may work for another 5 years until age 65, which will allow the $1.3 million grow closer to $2 million. If you work in academics, then you'll probably have double this amount b/c most programs match dollar per dollar. If you work for the military, you'll have this amount AND your military retirement (currently worth about $1 million dollars alone for those serving 20 years).

You can play with this calculator:
http://www.bygpub.com/finance/InterestCalc.htm

 

[ms. a]

Just remember there's a lot more that goes into monthly spending that what is outlined above, especially when you're owning a home and have kids. For instance - home owners insurance, anyone? And I'd have to say that the estimate for a mortgage and property tax on a 300K house with only 6% down (so you'll be paying PMI) is a low estimate, especially when you consider that interest rates are almost definitely not going to stay this low, even till the end of this year. And don't forget the utilities that go along with a house, which are much more than an apartment.

Then if there are kids, you'll have to factor in childcare (~$800 for day care per month, per kid; much, much more for a nanny - usually I hear upwards of $2000 per month for a nanny), plus all the expenses they require (car seat, crib, clothes, strollers), plus an increase in medical insurance to cover the kid(s) and spouse. Plus all the routine home-care expenses, plus auto insurance, dues to professional organizations (you really can't get away from them), and much more.

I don't mean to scare anyone, I just think that the above calculation is not very realistic and gives you a bit of a skewed sense of what to expect. Although, if you plan on being single and living pretty frugally, it's not too far off. My husband did that for about a decade out of med school and was able to pay off his debt slightly ahead of time. This was before we got married and had a kid, though.

 

[fun8stuff]

Originally posted by Slickness
I didn't know where to post this question but I guess I'll post it here since I figure I will get the most responses here.

Basically, I'm going to have to borrow everything for medical school so I'll be about $250,000 in debt. I want to enter into family practice so I figure my salary will be around 120K a year.

Assume I live in an apartment for a couple of years post-residency, have a wife, and have a kid a couple of years post-residency.

I figure I can pay larger loan payments the first couple of years post-residency since I'll live in an apartment without a kid yet.

How long do you think it would take for me to pay this debt off after residency?

Dude, you will never pay this off. You better find a new profession (just getting you back for your post about institutional action)!

 

[Adapt]

Originally posted by fun8stuff
Dude, you will never pay this off. You better find a new profession (just getting you back for your post about institutional action)!

Fair enough.

Ms. a, you make some good points. So is 10 years unrealistic in paying the debt off with a family? I want to try and pay off the debt in 5 years if I can.

 

[fullefect1]

Get the military scholarship.

 

[kito]

If you get a 5% rate and pay up $1300 per month you'll be done in 30 years. If you pay $1700 a month you'll be done in 20 years. If you pay $2000 a month you'll be done in 15. Hope this helps. Remember that interest is tax deductible.

 

[Adapt]

Originally posted by ankitovich
If you get a 5% rate and pay up $1300 per month you'll be done in 30 years. If you pay $1700 a month you'll be done in 20 years. If you pay $2000 a month you'll be done in 15. Hope this helps. Remember that interest is tax deductible.

15 years at $2000 a month? That seriously sucks. Is this was medicine has to offer to us future physicians?

 

[kito]

But remember that anywhere from a third to half of your payments will be interest, and will be deductible.

 

[antoniodlc]

Originally posted by ankitovich
But remember that anywhere from a third to half of your payments will be interest, and will be deductible.

unfortunately, student loan interests are only deductible if you make under 65k a year as of now.

 

[Jim Picotte]

And only up to $2500 a year is tax deductible. It starts to phase out with an AGI of $50,000 if single and $100,000 if married and you can't claim it at all if your AGI is over $65,000 if single or $130,000 if married. You'll most likely not be able to take advantage of this once you're an attending. I've been paying most of the interest on my loans now and it is a nice little break to have the deduction during residency.

 

[meanderson]

slickness, if you're looking at going to a private med school(200-250k) and then looking at FP, why not consider the military? Yeah, you have to move around once or twice for your 4 years post-residency(or 3 if you decide to do it only years m2-m4). Is that inconvenience worth 250,000 dollars? For some people, the military makes a lot of sense financially. But I know it's not for everyone....

From my perspective, borrowing 250k and entering into FP is a huge gamble financially. Yes, FP's are making 120-170k now, but we really don't know what they will be making for most of your practice years. But we don't know that for any field really. Too many variables not in our control.

 

[Adapt]

Originally posted by meanderson
slickness, if you're looking at going to a private med school(200-250k) and then looking at FP, why not consider the military? Yeah, you have to move around once or twice for your 4 years post-residency(or 3 if you decide to do it only years m2-m4). Is that inconvenience worth 250,000 dollars? For some people, the military makes a lot of sense financially. But I know it's not for everyone.

Ok now I'm curious about this military thing. I don't know much about it. Could someone explain what it is and if it's easy to get.

I looked at the NHSC scholarship but it's competitive and you have to interview for it so I decided to forget about that. Anyways, so what is the military thing? Would I have to train in the military?

 

[Adapt]

Originally posted by Mr Reddly
Hey Slickness,
You should probably take a look into it.
My understanding is that yes, it is competetive, but if you understand what it is, are still interested, and apply early, it is absolutly do-able! You just need to look into it really well to be certain it is for you. If it is, then it can be an awesome deal. If not, then it isn't worth it. To me, it sounds much better than the primary care loan programs at least.

Yea I guess I'll look into. I already looked into the primary care loans and unless you're disadvantaged, you probably won't qualify.

Actually I'm curious about something and maybe someone could answer it. If I get about $50,000 in loans per year, that would be $200,000 just in principal. When you add interest on top of that with a 5% rate, how much would that be in total. Around $250,000 or more?

 

[Adapt]

Originally posted by Mr Reddly
Most will be unsub. I think only up to 30,000. After that, higher interest loans... So lets assume 0.05 and unsub during med. Also, lets assume you don't pay anything back during res.

0 - $50,000 <-- paid before year 1 actually starts.
1 - $102,500
2 - $157,625
3 - $215,506
4 - $226,281
5 - $237,595
6 - $249,475
7 - $261,949

How fast you planning on paying it off after res?

Don't worry about it though! Look at it this way. If you pay the loans off slowly over 30 years, you have to pay $20,000 per year. That means that your pre tax salary of $130k becomes $100k per year. Is that such a big deal? And besides, by the time you are out of residency, FP docs will average more than $130K... inflation. Also, if money is needed, I'm told there are ways to suppliment your income... even as a FP doc.

Oh ya... why would you want to extend the loan to 20-30 years??? If it's a 5% loan, put your money into something that gives you more than 5% in interest instead... you end up making more.

So I guess the question you have to answer is the following: " Would you go into this if you had no loans to worry about but you only made $100k?" If so, then don't worry about the loans. Everything will be just fine!

Wow that was really helpful Mr. Reddly. Thanks alot. I guess stretching it over 30 years may not be such a bad idea. I'll definitely consider that.

Cheers to large debt.

 

[rogersce]

Originally posted by Mr Reddly
Now you sound like the California legislature!

or George Bush

 

[jwin]

another thing ommited from the estimate is college savings for any children. you are looking at a thousand a month for two kids from the day they are born.

also 1 million for retirement is a joke. to have around a 70K income during retirement, you are going to need closer to 6 million in the bank.

 

[BaseballFan]

1 million bucks in a conservative investment will earn 7% interest per year - 70k

With a million dollars invested, a person could live off of the interest alone for many years.

 

[jwin]

Originally posted by BaseballFan
1 million bucks in a conservative investment will earn 7% interest per year - 70k

With a million dollars invested, a person could live off of the interest alone for many years.

you are not taking into account inflation or taxes. you think uncle sam lets you take home all 70K, LOL. capital gains tax is 20%. you also need to take into account that your investments need to rise with inflation, you will probably be retired 20-30 years. so subtract 3% from 7%. to live on what is the lifestyle of 70K now, you will likely need at least 2 or 3X that in 40 years. hence my rough estimate of 5 or 6 million to retire.

 

[pathstudent]

15 years at $2000 a month? That seriously sucks. Is this was medicine has to offer to us future physicians

And on top of that docs only make about 1/2 of what they did in the late 80s. And lately it seems like each year medicare is reducing compensation to docs, the cut for the last year was 5%. And most of the insurance companies follow medicares lead.

I think there is reason to believe that it will only get worse.

Oh well, it will still be a great and fun and interesting job (most of the time).

 

[meanderson]

Originally posted by jwin
another thing ommited from the estimate is college savings for any children. you are looking at a thousand a month for two kids from the day they are born.

also 1 million for retirement is a joke. to have around a 70K income during retirement, you are going to need closer to 6 million in the bank.

6 million for a 70k retirement? That's absurd. I'll pick a modest investment number just to be fair since some try and throw out an optimistic number. Let's say 4.5%. 4.5% at 2 million dollars would be 90,000 dollars a year.

Also, this college saving nonsense isn't correct either. If you are putting up $500/kid a month to send them to college from the time they are born, then that's going to be ~175,000 dollars/kid saved for college. If you are in an income situation where you *have* to save for kids college in the first place, then you don't need to pay out $350,000 on your two kids undergraduate educations.....that's crazy and nobody middle class does that. That $350,000 needs to go into retirement funds and your kids need to get huge grants or go to their state school. Millions of students are being sent to college by their parents today, and a miniscule % of them are recieving that sort of support.

 

[meanderson]

Originally posted by Mr Reddly
Ie, they own your butt for 7 years after school. Aren't there a couple of 2 year follow-ups after that too? (ie reserves).
.

I don't think you are likely to move anywhere during your residency. And if you do have to transfer to another location to train, I'm pretty sure that means you're less likely to be sent somewhere after residency. So it's probably more like 4 years....

 

[meanderson]

Originally posted by Slickness
Ok now I'm curious about this military thing. I don't know much about it. Could someone explain what it is and if it's easy to get.

I looked at the NHSC scholarship but it's competitive and you have to interview for it so I decided to forget about that. Anyways, so what is the military thing? Would I have to train in the military?

Apply for the HSTP scholarships. Separate application for each branch. Most anyone who is physically capable and is holding a US acceptance(MD or DO) will be able to get into one branch if they want to. Your tuition is paid and they give you enough money to live on as a single person if you live modestly(maybe 1300 dollars/month?). It's a strict one for one trade off post residency. If you do a longer residency, it gets a little more complicated in terms of payback, but you wouldn't have to worry about that doing FP.

Most people who do HSTP do their residency in the military while a lower % do their residency elsewhere. It all depends on need and # spots. I'd guess that most people doing FP end up doing military residencies. I might be wrong here, but I think if you do a military residency you will be paid a little more than most residents at academic centers because you're an officer(maybe 50k vs. 38k).

I think the HSTP deadline for the 2004-2005 school year has just passed. Might be wrong though. You could always sign up for 3 years though starting your m2 year. Then if you did FP you would only owe the military 3 years post residency.

If you decide to bypass the military option or special underserved primary care options, I woudn't obsess over the loans. It's a *long* time before any of us start residency much less enter our own practice, so it's hard to say exactly when and how we will be able to pay off loans. I don't think it's feasible to pay off 250k of debt in 5 years as a family practioner just out of residency though.

 

[jwin]

Originally posted by meanderson
6 million for a 70k retirement? That's absurd. I'll pick a modest investment number just to be fair since some try and throw out an optimistic number. Let's say 4.5%. 4.5% at 2 million dollars would be 90,000 dollars a year.

Also, this college saving nonsense isn't correct either. If you are putting up $500/kid a month to send them to college from the time they are born, then that's going to be ~175,000 dollars/kid saved for college. If you are in an income situation where you *have* to save for kids college in the first place, then you don't need to pay out $350,000 on your two kids undergraduate educations.....that's crazy and nobody middle class does that. That $350,000 needs to go into retirement funds and your kids need to get huge grants or go to their state school. Millions of students are being sent to college by their parents today, and a miniscule % of them are recieving that sort of support.

whatever. you can argue with the professor of personal finance at my undergrad university. these are his numbers, and i am quite sure he is correct. the equivalent of a net income of 70,000 dollars today will take around 5 million dollars by the time we retire. i could calculate it for you, but you probably wouldn't believe me then either.

as for college, if you are making 150K a year or whatever its equivalent is in 25 years when your kids go to college, they are not going to qualify for any aid. your expected family contribution is going to be super high. college tuition is currently rising anywhere from 6-10% a year, so i don't think my figure is too crazy. so yeah, you can give them the shaft if you want, but i don't plan on doing that to my children. of course, maybe your kid will have a 52 inch vertical and won't have to worry about tuition.

 

[Adapt]

Originally posted by meanderson
Apply for the HSTP scholarships. Separate application for each branch. Most anyone who is physically capable and is holding a US acceptance(MD or DO) will be able to get into one branch if they want to. Your tuition is paid and they give you enough money to live on as a single person if you live modestly(maybe 1300 dollars/month?). It's a strict one for one trade off post residency. If you do a longer residency, it gets a little more complicated in terms of payback, but you wouldn't have to worry about that doing FP.

Most people who do HSTP do their residency in the military while a lower % do their residency elsewhere. It all depends on need and # spots. I'd guess that most people doing FP end up doing military residencies. I might be wrong here, but I think if you do a military residency you will be paid a little more than most residents at academic centers because you're an officer(maybe 50k vs. 38k).

I think the HSTP deadline for the 2004-2005 school year has just passed. Might be wrong though. You could always sign up for 3 years though starting your m2 year. Then if you did FP you would only owe the military 3 years post residency.

If you decide to bypass the military option or special underserved primary care options, I woudn't obsess over the loans. It's a *long* time before any of us start residency much less enter our own practice, so it's hard to say exactly when and how we will be able to pay off loans. I don't think it's feasible to pay off 250k of debt in 5 years as a family practioner just out of residency though.

Thanks for the info. I will look into that maybe for my year 2.

Also, about paying off 250K in 5 years. I think it's doable. Given that I will have around $7,250 net a monthc I can pay $5,000 a month in loan payments. That leaves $2,250 for living expenses. If I pay $1000 for rent, I have $1,250 for food and entertainment a month.

If I have a wife who is making a decent income also, she can help with the living expenses.

 

[Sharkfan]

Originally posted by Slickness
Given that I will have around $7,250 net a monthc I can pay $5,000 a month in loan payments. That leaves $2,250 for living expenses. If I pay $1000 for rent, I have $1,250 for food and entertainment a month.

Minus car payments, car insurance, gas, utilities, etc.

But yeah, the working wife will help.

 

[Adapt]

Originally posted by Sharkfan
But yeah, the working wife will help.

Maybe I can get her to shoulder most of the monthly loan payments. jk

 

[meanderson]

Originally posted by jwin
whatever. you can argue with the professor of personal finance at my undergrad university. these are his numbers, and i am quite sure he is correct. the equivalent of a net income of 70,000 dollars today will take around 5 million dollars by the time we retire. i could calculate it for you, but you probably wouldn't believe me then either.

as for college, if you are making 150K a year or whatever its equivalent is in 25 years when your kids go to college, they are not going to qualify for any aid. your expected family contribution is going to be super high. college tuition is currently rising anywhere from 6-10% a year, so i don't think my figure is too crazy. so yeah, you can give them the shaft if you want, but i don't plan on doing that to my children. of course, maybe your kid will have a 52 inch vertical and won't have to worry about tuition.

I don't believe you or your finance professor because half the people on this forum probably have grandparents or relatives who earn > 70k through their retirement investments, dividends, etc and very few if any have a 5 million dollar nest egg. So I'm not interested in any calculations....I have plenty of examples from my own life.

And yeah your college figure is crazy. Many private schools give lots of institutional grant money that is non-need based. And if my kid doesn't get this, well he'll just have to go to a state university. There are plenty of good ones around and that won't be giving him the shaft in any way. The average state school runs maybe 5-7k/year for undergrad. Less in my state, but more in others.

 

[jwin]

Originally posted by meanderson
I don't believe you or your finance professor because half the people on this forum probably have grandparents or relatives who earn > 70k through their retirement investments, dividends, etc and very few if any have a 5 million dollar nest egg. So I'm not interested in any calculations....I have plenty of examples from my own life.

And yeah your college figure is crazy. Many private schools give lots of institutional grant money that is non-need based. And if my kid doesn't get this, well he'll just have to go to a state university. There are plenty of good ones around and that won't be giving him the shaft in any way. The average state school runs maybe 5-7k/year for undergrad. Less in my state, but more in others.

5 million 40 years from now, please read more carefully. i am also impressed that you are more financially wise than a professor of economics and mathematics who runs a financial planning business on the side, quite impressive i must say.

the average state school is not 5K unless you live in a cardboard box next to the dorms. get with the program buddy.

 

[Andrew_Doan]

Originally posted by jwin
5 million 40 years from now, please read more carefully.

This assumes that inflation will require people to take home $350,000/year in 40 years. Seems a little high, but who knows, I'll be 72 by then.

Basically, you're saying that $70,000 today is equivalent to $350,000 in 40 years.

 

[meanderson]

Originally posted by jwin
5 million 40 years from now, please read more carefully. i am also impressed that you are more financially wise than a professor of economics and mathematics who runs a financial planning business on the side, quite impressive i must say.

the average state school is not 5K unless you live in a cardboard box next to the dorms. get with the program buddy.

I'm not going to read more carefully concerning this when it doesn't make any sense. Why would you want to use inflation adjusted figures? First, we don't really know what inflation will be like from 2004 to 2040. Second, earnings won't remain stagnant over the same time period, and we certainly don't know how earnings will compare relative to inflation. Third, when people speak about money and how much they will earn someday, they almost always use today's dollar and just assume the reader is intelligent enough to understand that is the assumption. Otherwise, people would have to make awkward disclaimers in all of their projections: "Well I guess as a pathology attending in the year 2030 I'll make about $940,000. Now at X.Y% inflation I would expect to make about $1.2 million, but at Z.X% inflation only $840,000."

But sure, I should read more closely. Now my response to the $5 million dollar figure is that I have no idea what that really means. Is that a lot in 2040? A little? Who knows.....I'm certainly not going to get out my financial index translator and try to figure out.

Concerning state schools.....I wasn't including living expenses. Here are a few novel concepts though: get a roommate, get a (gasp) part-time student job. The fact remains that millions of students go to both state and private colleges in this country today, and the vast majority of those students aren't recieving hundreds of thousands of dollars in support from their parents for their education.

 

[Andrew_Doan]

Originally posted by ms. a

I don't mean to scare anyone, I just think that the above calculation is not very realistic and gives you a bit of a skewed sense of what to expect. Although, if you plan on being single and living pretty frugally, it's not too far off. My husband did that for about a decade out of med school and was able to pay off his debt slightly ahead of time. This was before we got married and had a kid, though.

I think the key here is frugality. The above calculations are very realistic and can be done. With all the mandatory loan payments (including your house payment), there's $2500/month left over. That's $30,000/year after taxes. Most of America can live off this.

$2000 for a $300K house is about right. Without anything down, 6% interest, and no PMI, the monthly payment is ~$1800/month. Put 5% down and add in PMI, this will bring it up to close to $2000. If interest rates go up, then get a cheaper house.

Children cost money, but if someone is paying $2000/month for a nanny or $800/month for childcare, then the other spouse must be working. Their employment should easily pay for these extra costs. Also, the working spouse should be able to help with the additional costs of having children.

 

[jwin]

\

Originally posted by meanderson
I'm not going to read more carefully concerning this when it doesn't make any sense. Why would you want to use inflation adjusted figures? First, we don't really know what inflation will be like from 2004 to 2040. Second, earnings won't remain stagnant over the same time period, and we certainly don't know how earnings will compare relative to inflation. Third, when people speak about money and how much they will earn someday, they almost always use today's dollar and just assume the reader is intelligent enough to understand that is the assumption. Otherwise, people would have to make awkward disclaimers in all of their projections: "Well I guess as a pathology attending in the year 2030 I'll make about $940,000. Now at X.Y% inflation I would expect to make about $1.2 million, but at Z.X% inflation only $840,000."

But sure, I should read more closely. Now my response to the $5 million dollar figure is that I have no idea what that really means. Is that a lot in 2040? A little? Who knows.....I'm certainly not going to get out my financial index translator and try to figure out.

Concerning state schools.....I wasn't including living expenses. Here are a few novel concepts though: get a roommate, get a (gasp) part-time student job. The fact remains that millions of students go to both state and private colleges in this country today, and the vast majority of those students aren't recieving hundreds of thousands of dollars in support from their parents for their education.

all financial planners use inflation adjusted figures. when you do retirement planning, you use inflation adjusted figures. it is the standard. you do not set a goal for retirement with today's dollar values because they will not be what you need in retirement.

i had no idea about the roomate and part time job phenomena. simply amazing, how resilient.

 

[Andrew_Doan]

Originally posted by jwin
\

all financial planners use inflation adjusted figures.

Being in the military, my salary and retirement will be adjusted by the inflation index. That means a young military physician will be paid $550,000/year in 40 years based on your estimate, and a retired O-6 will receive ~$200,000/year during retirement.

Seriously, your inflation estimates seem too high. If $1 million is equivalent to $5 million 40 years from now, then that's an inflation rate of 12.5%/year. Recent inflation rates have been under 4%/year; however, during the Great Depression in the 1920s, inflation rates were in the 20%, and in the 1980s, it was in the teens. My point is that inflation rates are difficult to predict; thus, it's difficult to determine what the inflation rate will be over a 40 year span.

http://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp

Also consider this:
"An analysis of 20-year holding periods between 1926 and December 31, 2002 found that the average annual return for a portfolio comprised exclusively of stocks in Standard & Poor?s Composite Index of 500 Stocks was 12.19% ? well above the average inflation rate of 3.14% for the same period."


http://www.axaonline.com/rs/3p/sp/5015.html#inflation

 

[meanderson]

Originally posted by jwin
\

all financial planners use inflation adjusted figures. when you do retirement planning, you use inflation adjusted figures. it is the standard. you do not set a goal for retirement with today's dollar values because they will not be what you need in retirement.

i had no idea about the roomate and part time job phenomena. simply amazing, how resilient.

Of course you incorporate all of these things into your retirement planning. You said earlier:

"the equivalent of a net income of 70,000 dollars today will take around 5 million dollars by the time we retire. "

My argument is that if we use inflation adjusted figure we don't even know what 5 million dollars means since most of our retirement savings won't be accumulated in the next few years. Is that equivalent to about 2 million dollars? 1? 3? Who knows. n 25 years how easy it will be to accumulate 5 million dollars. If we have carter-like inflation from the years 2020-2030 and I'm investing heavily into bonds during those years with my income then 5 million dollars would be a total breeze. 10 million wouldn't be unreachable. the bottom line is that if you are a physician and invest and save wisely between the ages of 35 and 55-60 you will have a very nice retirement relative to the rest of the population.

And I'm sorry if I came off as being blunt on the college issue, but that strikes a nerve because of hyped up media coverage devoted to the issue. I come from a single parent home with an income of ~40,000 dollars year and me and my sister were both able to go to college for four years without taking out any loans on our own, recieveing any huge institutional grants/scholarships, or recieving any pell grant money. When Time magazine comes out with an article that says you need 200,000 dollars to send your kid to college now, that's such BS. 90-95% of all american families don't have that kind of money to send their kids to college, yet it's being done. The average parent(s) of graduating students probably spend 15-25k/kid on college.

 

[Adapt]

Well I worked out my plan now to pay off my debt. I will pay $5,000 monthly payments to hopefully pay it off in 5 years. I will also get a wife who makes at least 50K a year after taxes to help with the other expenses.