Veterinarians, Plan Now for Retirement | Student Loan Planner


Veterinarians have a hard time saving for retirement for four big reasons. The first: big student loans. We’re talking two hundred to five hundred thousand dollars for four years of vet school plus whatever you had from undergraduate. The interest rates stink too: six, seven, eight percent, and you continually watch the interest grow. Another reason is veterinarians get a later start making income than other professionals and other people that just didn’t go to graduate school at all. Compare yourself to a 22 year old that has maybe fifty thousand dollars of income. That person is probably going to be saving while you’re in vet school borrowing money. That means that person that comes out with that corporate job is going to have more income than you would think that they would have saved up in retirement and other assets as well, and that’s going to give them a head start in preparations for retirement savings. Also, veterinarians earn less income (that’s the third reason) than other professionals. So seventy eighty thousand ninety thousand perhaps if you’re really really hard working and you’re in a good area for the economics of veterinary medicine and you might be making one hundred twenty thousand as an associate, but it’s rarely above that. Usually to make more than that you have to own your own practice. Compare that to other professionals like maybe lawyers, physicians, dentists and others that make higher incomes and veterinarians have a smaller economic pie to save in the first place and also the economics of veterinary medicine are typically not as strong as other fields because a lot of times people just can’t or won’t accept responsibility for the patients that you have to care for, and you can help that patient, you know how to fix whatever they’re going through, but because of the customer that you’re dealing with they can’t afford it or maybe they just don’t want to afford it and then that adds another layer of stress on top of you, already trying to figure out how do you make the best of your situation? The good news is that it’s actually totally possible to save and invest for retirement as a veterinarian. The first step that you have to take is to change your mindset around how much you have to save. Veterinarians are gonna need to save somewhere between probably 20 to 30% to be able to afford a comfortable retirement How are you going to do that if you have big student loans? You actually need to pay as little as possible to go for the veterinary tax bomb. You want your loans to be as big as you can get them in 20 to 25 years after paying on pay as you earn or revised pay as you earn. At that point you’ll pay 40% in taxes on this big forgiven balance, and then that’s going to save you a lot of money. It’s very counterintuitive, but that small monthly payment that you’ll have to make of five, six, seven hundred dollars a month depending on your income, the amount that you would have had to pay toward your debt can instead go into retirement savings. When you put that money into a 401k, that actually lowers your taxable income and lowers your student loan payments. So if you maxed out a 401k, that’s eighteen thousand five hundred dollars that you could put away for retirement. That would grow to probably over a million dollars by the time that you would retire at 60 to access those funds. What if you don’t have access to a 401k? The good news is that you can still save for retirement in something called a traditional IRA. If you’re not covered by a retirement plan at work, then you can put $5,500 into a IRA that you set up with your financial institution of choice, and then you can fully deduct that from your taxes and it also will save you money on your student loan payments. Sometimes people will offer simple IRAs. That limit is different yet again, but it’s more than a traditional IRA. The goal is that you want to save as much as possible on a pre-tax basis because almost every veterinarian is going to be in a lower tax bracket in retirement than while they’re working. That means that the Roth IRA options, well, they’re very popular in the media, are probably not best for veterinarians, especially if you have big student loans Veterinarians can absolutely save and invest for retirement but one of the things you might want to consider too is practice ownership. If you’re going to take out so much debt you might as well get the best return possible. A lot of veterinarians think that they have to be associates forever because they’ll never be able to afford a business loan, but nothing could be further from the truth. There’s actually specialty lenders, one off the top of my head is Live Oak Bank, but there are others that you could go and talk to and discuss how to get into a practice ownership situation, and then when you go to the end of your career, you’ll have a massive amount of equity built up in your veterinary practice that you could sell, and you would have paid off that veterinary practice loan, and then you’ll actually have an asset that you can use to save and invest and cover some of your retirement savings when you’re older. So, the big thing that you should realize is that for veterinarians pensions are a thing of the past. Social Security, that trust fund is expected to run dry in maybe 2030 or 2040. I think we’ll have social security but it won’t look like it is today. It’ll be significantly less benefit probably at a later age than our parents are taking out. So that means it’s incumbent upon you to make sure that you’re able to save and invest for retirement. If you save 30 percent of your income and invest it in index mutual funds, I’m fairly confident that you would be able to afford retirement as early as fifty years old. One more thing, you would want to consider opening up a non-retirement account as well. That way you can save for that big tax bomb that’s gonna hit you with your student loans in twenty to twenty five years. A couple places to look at for the tax bomb would include Vanguard, Betterment, or Wealthfront. Let’s go to Vanguard.com. If you wanted to open an account, you could go to the personal investor page and you could click on My Accounts. And it’s very straightforward- see this ‘Open An Account’ button? All you have to do is click on that. For investing you can learn about Vanguard’s mutual funds, and if you typed in the total stock market index fund, this fund here has gotten a very very good return over the long term, and the most important thing is to just simply not sell it. It’s going to crash at times. Notice how ten thousand dollars invested in 2008 fell all the way to five thousand three hundred in 2009. So this absolutely will go down fifty percent at times but no how if you left it alone and you just kept calm, now you would have had twenty almost twenty five thousand dollars with an initial ten thousand dollar investment. You can see that the long-term returns, this fund was initiated in 1992, it’s a nine point six five percent annualized return. That’s vastly better than any investment that you could make in, say, the savings account or CDs or bonds. So it’s very important to consider investing in index mutual funds. Another option that you could do is betterment.com. They are a robo-advisor and they’ll charge more than Vanguard but all you have to do is just make the deposit and they’ll invest it all for you. You can make that direct deposit into Vanguard and put a few hundred dollars a month into that on your own, but then you have to make more decisions. So if you want to make fewer decisions, Betterment is a good choice. Also wealthfront.com is a good choice. Veterinarians really need to be thinking “how can I save as much as possible” in these various accounts for retirement. Thanks so much, I hope you enjoyed some of those tips! The simple takeaway is save more money. That will pretty much solve everything, especially for veterinarians. If you can be frugal, limit your house purchase, limit your car purchase and make sure that you don’t have a car payment, and avoid all consumer debt of any kind, then you’ll be able to retire and have financial security for your family even with big student loans. That’s the good news. Thanks for watching. If you have big student loans and want a custom plan, reach out to me by clicking the contact button on this page.

Paul Whisler

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