Have you ever wondered whether an OD degree is worth it financially? Unless you're getting a free ride from someone or somewhere, you're probably going to graduated with a good sized six-figure student loan.
According to startclass.com, the lowest in state tuition for U.S. optometry school is $16,626 at Northeastern State University and the highest is $41,902 at MCPHS. Note that this does not include fees, books, equipments, or room and board; therefore, it's not uncommon for the average total amount of student loans after four years to be $150,000 to $200,000, not counting undergrad.
Not to fret, salary.com reports that “the median annual optometrist salary is $115,015, as of August 29, 2016, with a range usually between $101,837-$127,443.” Cool! But we all know it's not about how much you make that matters. It's what you get to keep that's important.
In general, many financial college experts recommend this rule of thumb for safe student loans borrowing:
“Your total college debt should not exceed your total annual income after graduation and that your monthly loan payment should be less than 10% of gross income.”
Maybe you know something that I don't, but I have yet to see any OD job offer with a salary of $150-$200K for a new or seasoned doctor. EVER! Obviously, many students choose to ignore this rule completely and it has proven to make the financial reward of being an optometrist a lot less appealing.
So, how much do optometrists REALLY take home?
Let's look at a case study*: Warning: A lot of details and number crunching ahead.
*I try using the most realistic average numbers to reflect the majority of CA optometrists' real life experiences:
Dr. Jane is a recent graduate who works 5 days a week as an independent contractor (1099) at multiple offices with a rate of $375/day (average per diem rate in CA). Because she was frugal in school, she has only $150K in student loans at 6.8% interest rate, 20 years term. This means her loan payment is $1,145.01 per month or $13,740.12 annually.
Gross Income: $375/day x 5 days/week x 50 weeks/year = $93,750
(I use 50 instead of 52 weeks because of no paid holidays and time off for continue education).
Hidden costs of maintaining your license. Luckily these are deductible expenses: (yearly)
Malpractice insurance: $425
DEA License: $243.67
OD License renewal: $218.50
Continue education courses: $625
Business Travel/Hotels for CE: $1000
Business meals: $100
Equipment depreciation: $1000
Health insurance: $3,360
Total deductible expenses: $6,972.17
Total Net Business Income: $86,777.83, I use this number to calculate the federal, state, and self employment tax due. Calculator used: https://www.dinkytown.net/java/Tax1040.html
Summary:
Gross Income: $93,750
Total deductible expenses: $6,972.17
Net earnings: $86,777.83
- Self employment Tax: $12,261
- Federal Income Tax: $13,346
- CA State Income Tax: $4,601 ( I used the AGI as the household income for the calculation)
- Yearly Student loans Payment: $13,740.12
Total take home (after taxes, business expenses and student loan payments): $42,829.71 per year or
$171.32 per day or $21.41/hour!
That's right! Your future doctorate degree will earn you $21.41 an hour! Don't forget to include the opportunity cost for the extra four years in school but I think you're depressed enough already.
Feel free to use your own numbers in the calculation. I'm sure it'll be quite an eye opener!
I should also clarify some assumptions that I've made to the case study above:
1) Dr. Jane is a hypothetical example of the lucky few who could find a steady 5 days a week job after graduation. The truth is the majority of new or recent grads are only able to piece together 3-4 days/week due to lack of jobs or childcare needs. Also, many of the job openings usually want the OD to work on the busiest days of the week: Fridays and Saturdays. Social life aside, there are only so many Fridays and Saturdays you have per week, so choose where you work wisely.
2) Because the competition is fierce in urban areas and city centers, many doctors have to commute far from home in order to get a higher daily rate, sometimes as long as 1-2 hours EACH way. Of course, there's always an option to move closer to work, but who would want to live out in the boonies?
3) You can always argue that Dr. Jane can raise her income by negotiating a higher daily rate or open up her own practice. One, good luck with negotiating as a newbie when you're in a high supply/low demand environment, especially in the cities. Two, unless you're planning to inherit a large sum of money or rely on the generosity of family members and friends, you're going to have to take out more loan to start a practice. I'm not saying that it's impossible, but remember to calculate the net take home pay and how long you'd need to work 6-7 days per week while eating ramen noodles.
4) What about student loan interest deduction or income-based repayment program? Unfortunately our lucky Dr. Jane makes too much money to qualify for either program.
5) While I know there are ways to decrease the tax liability such as contributing to retirement and/or health saving accounts, the money saved into these accounts are not spendable because you don't have immediate access to it; therefore, it's not part of the take home pay.
6) Being an independent contractor, Dr. Jane is not entitled to unemployment benefits, sick or holiday pay, CE reimbursement, 401(k) matching, or other perks if she was an employee. So the answer is to be employed right?
Well, not so fast. Check out the next post to see if it's really better.
According to startclass.com, the lowest in state tuition for U.S. optometry school is $16,626 at Northeastern State University and the highest is $41,902 at MCPHS. Note that this does not include fees, books, equipments, or room and board; therefore, it's not uncommon for the average total amount of student loans after four years to be $150,000 to $200,000, not counting undergrad.
Not to fret, salary.com reports that “the median annual optometrist salary is $115,015, as of August 29, 2016, with a range usually between $101,837-$127,443.” Cool! But we all know it's not about how much you make that matters. It's what you get to keep that's important.
In general, many financial college experts recommend this rule of thumb for safe student loans borrowing:
“Your total college debt should not exceed your total annual income after graduation and that your monthly loan payment should be less than 10% of gross income.”
Maybe you know something that I don't, but I have yet to see any OD job offer with a salary of $150-$200K for a new or seasoned doctor. EVER! Obviously, many students choose to ignore this rule completely and it has proven to make the financial reward of being an optometrist a lot less appealing.
So, how much do optometrists REALLY take home?
Let's look at a case study*: Warning: A lot of details and number crunching ahead.
*I try using the most realistic average numbers to reflect the majority of CA optometrists' real life experiences:
Dr. Jane is a recent graduate who works 5 days a week as an independent contractor (1099) at multiple offices with a rate of $375/day (average per diem rate in CA). Because she was frugal in school, she has only $150K in student loans at 6.8% interest rate, 20 years term. This means her loan payment is $1,145.01 per month or $13,740.12 annually.
Gross Income: $375/day x 5 days/week x 50 weeks/year = $93,750
(I use 50 instead of 52 weeks because of no paid holidays and time off for continue education).
Hidden costs of maintaining your license. Luckily these are deductible expenses: (yearly)
Malpractice insurance: $425
DEA License: $243.67
OD License renewal: $218.50
Continue education courses: $625
Business Travel/Hotels for CE: $1000
Business meals: $100
Equipment depreciation: $1000
Health insurance: $3,360
Total deductible expenses: $6,972.17
Total Net Business Income: $86,777.83, I use this number to calculate the federal, state, and self employment tax due. Calculator used: https://www.dinkytown.net/java/Tax1040.html
Summary:
Gross Income: $93,750
Total deductible expenses: $6,972.17
Net earnings: $86,777.83
- Self employment Tax: $12,261
- Federal Income Tax: $13,346
- CA State Income Tax: $4,601 ( I used the AGI as the household income for the calculation)
- Yearly Student loans Payment: $13,740.12
Total take home (after taxes, business expenses and student loan payments): $42,829.71 per year or
$171.32 per day or $21.41/hour!
That's right! Your future doctorate degree will earn you $21.41 an hour! Don't forget to include the opportunity cost for the extra four years in school but I think you're depressed enough already.
Feel free to use your own numbers in the calculation. I'm sure it'll be quite an eye opener!
I should also clarify some assumptions that I've made to the case study above:
1) Dr. Jane is a hypothetical example of the lucky few who could find a steady 5 days a week job after graduation. The truth is the majority of new or recent grads are only able to piece together 3-4 days/week due to lack of jobs or childcare needs. Also, many of the job openings usually want the OD to work on the busiest days of the week: Fridays and Saturdays. Social life aside, there are only so many Fridays and Saturdays you have per week, so choose where you work wisely.
2) Because the competition is fierce in urban areas and city centers, many doctors have to commute far from home in order to get a higher daily rate, sometimes as long as 1-2 hours EACH way. Of course, there's always an option to move closer to work, but who would want to live out in the boonies?
3) You can always argue that Dr. Jane can raise her income by negotiating a higher daily rate or open up her own practice. One, good luck with negotiating as a newbie when you're in a high supply/low demand environment, especially in the cities. Two, unless you're planning to inherit a large sum of money or rely on the generosity of family members and friends, you're going to have to take out more loan to start a practice. I'm not saying that it's impossible, but remember to calculate the net take home pay and how long you'd need to work 6-7 days per week while eating ramen noodles.
4) What about student loan interest deduction or income-based repayment program? Unfortunately our lucky Dr. Jane makes too much money to qualify for either program.
5) While I know there are ways to decrease the tax liability such as contributing to retirement and/or health saving accounts, the money saved into these accounts are not spendable because you don't have immediate access to it; therefore, it's not part of the take home pay.
6) Being an independent contractor, Dr. Jane is not entitled to unemployment benefits, sick or holiday pay, CE reimbursement, 401(k) matching, or other perks if she was an employee. So the answer is to be employed right?
Well, not so fast. Check out the next post to see if it's really better.
