By Dr. Tyler Scott, WCI Columnist
As I have been increasingly public with my decision to change careers from a dentist to a financial planner (a decision that was made in part by me and in part by my health), I receive an increasing number of questions that can be bundled up into one question: “Is dentistry worth it?”
Of course, “worth it” can mean a million different things to a million different people. Worth it emotionally? Worth it physically? Worth it culturally? Worth it financially?
How different people weigh these various elements is as unique as the individual. It often can’t be known until well into one’s career, and then it changes over the course of that career. The answer for me, as implied by the career change, is no, it’s not worth it. Someone else in my exact same position could just as easily feel that it is; it’s a highly subjective assessment.
The point of today's column is not to make a case for or against dentistry. Personally, I love dentistry. I am proud to be a dentist. I don’t regret my choice to pursue it. I recommend it get strong consideration as a career for those who are interested, and I revere it as a noble and honorable profession. Ultimately, I found a career better suited for my intellectual interests and physical limitations, but that should not be interpreted as a personal referendum on the profession.
The point of this column is to try to quantify dentistry’s monetary value as a career choice compared to other career choices. If we distill away the unmeasurable and subjective values of dentistry (mental, emotional, cultural, physical, etc.) and just look at some numbers, what can we learn?
In other words, I’m trying to answer the question, “Is dentistry worth it financially, compared to other careers?”
I think it’s worth mentioning that the math you will see below is not known to me yet. As I am writing this introduction, I only have the idea outlined, not completed. I don’t know what the results will say about dentistry; I suspect it’s not great news, but I’m interested to find out. Of course, by the time you read what's below, we'll have a pretty good idea of whether being a dentist or an ER doc or a plumber is worth it.
Methodology
To provide a simple means of comparison, I approached this question from the lens of an investment. If we view dental school as an investment (tuition and time) that we expect to generate future returns (wages), we can use two related mathematical/financial concepts to compare this investment to other similar investments (i.e. training in some other profession).
Those two financial concepts are Net Present Value (NPV) and Internal Rate of Return (IRR).
I will be comparing the NPV and IRR for a plumber, a certified financial planner, a mechanical engineer, a physician assistant, a dentist, a lawyer, a veterinarian, a pediatrician, an emergency medicine physician, and an orthopedic surgeon.
Without going too far into the weeds on what these terms mean, I’ll just offer this simple guide.
NPV answers the question, “What is the total amount of money I will make if I proceed with this investment, after taking into account the time value of money?”
In the simplest terms: NPV = (Today’s value of expected future cash flows; i.e. future income) – (The value of invested cash over time; i.e. cost of education in time and dollars)
IRR answers the question, “If I proceed with this investment, what would be the equivalent annual rate of return that I would receive?”
The math is done by entering expected cash flows over a period of time. For example, an 18-year-old pursuing dentistry will have negative cash flows for the first eight years as they pay undergrad and dental school tuition. Once they are done with dental school and start making money, they will start to have positive cash flows. After they are done paying off their student loans, their net cash flow increases.
Viewing the financial impact of any career through the lens of NPV and IRR is a deeply imperfect exercise, and reasonable people can disagree about the assumptions made and the implications or applications of the information.
Due to the simplifying assumptions that must be made, this analysis is not meant to be predictive or prescriptive.
What do I mean by not predictive? I am not telling you what is going to happen. I am not trying to be closest to the pin on the exact dollars and cents in this thought experiment. For example, I am not considering marginal tax rates, the future value of a building/equipment, lifestyle creep, various savings rates, spending behavior, business plan, or 100 other variables. Instead, I’m using a consistent formula and logic simply to compare the numbers to each other. The numbers are only relevant in the context of one another.
What do I mean by not prescriptive? I’m not telling you what to do. I don’t think what I’m submitting here is some kind of definitive guide to choosing a career. Rather, my hope is that an undergrad student considering dentistry will take this analysis as a portion of their decision-making rubric which should include a far greater number of factors.
More information here:
Here’s How Much We Make, Save, and Spend as ‘Moderate Earners’
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Assumptions
To do this math, several assumptions must be made. For purposes of continuity and simplicity, I applied several assumptions. The numbers used are the result of considerable research, and they are as current and accurate as I could find. Sources included The US News and World Reports salary averages, the Medscape Physician Compensation Report, the College Board's Annual Survey of Colleges, and other reputable and current resources.
All careers except the plumber require a bachelor’s degree. This degree was obtained over four years at a public university. This degree was paid for with federal student loans. The cost of any additional or job-specific training (i.e. medical school, dental school, certificate program, etc.) was also borrowed using federal loans. These loans were paid back over a 10-year period following the completion of training with no external reductions (i.e. PSLF, NHSC, IHS, military, etc.).
- Total cost of the four-year undergraduate degree at a public school = $98,000
- Total cost for a master’s degree in mechanical engineering (two-year program) = $31,000
- Total cost of dental school = $300,000
- Total cost of medical school = $244,000
- Total cost of law school = $220,000
- Total cost of veterinary school = $300,000
- Total cost of PA school = $95,000
- Total cost to become a CFP = $8,000
- Total cost to become a plumber = $17,000
- Interest rate on the federal student loans = 7%
The annual incomes for each job are as follows. Note that the math for NPV and IRR holds the salaries in today’s dollars every year (so they are inflation-adjusted salaries but we assume no raise above inflation). For the physicians, I assumed an annual income of $55,000 during residency.:
- Plumber = $60,000
- Mechanical Engineer = $96,000
- CFP = $121,000
- PA = $124,000
- Dentist = $160,000
- Lawyer = $128,000
- Veterinarian = $100,000
- Pediatrician = $240,000
- Emergency Doc = $373,000
- Orthopedic surgeon = $557,000
Results
Using those assumptions, the Net Present Values for a hypothetical individual starting at age 18 and working until age 65 are shown below. Remember that NPV helps answer the question, “What is the total amount of money I will make if I proceed with this investment, after taking into account the time value of money?”
- Plumber = $992,000
- Mechanical Engineer = $1,212,000
- CFP = $1,554,000
- PA = $1,296,000
- Dentist = $1,231,000
- Lawyer = $1,008,000
- Veterinarian = $534,000
- Pediatrician = $1,982,000
- Emergency Doc = $3,242,000
- Orthopedic surgeon = $5,040,000
Using those assumptions, the Internal Rate of Returns for a hypothetical individual starting at age 18 and working until age 65 are shown below. Remember that IRR helps answer the question, “If I proceed with this investment, what would be the equivalent annual rate of return that I would receive?”
- Plumber = 339%
- Mechanical Engineer = 44%
- CFP = 51%
- PA = 28%
- Dentist = 18%
- Lawyer = 18%
- Veterinarian = 11%
- Pediatrician = 22%
- Emergency Doc = 26%
- Orthopedic surgeon = 31%
Again, having undergrad paid for by scholarships and/or 529s, having some third party paying for post-bac education, out-earning the averages for a profession, getting above-inflation raises, specific tax situations, or 100 other variables would impact these numbers in myriad ways. These numbers are just averages and are only valuable in that context and in the context of each other.
More information here:
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Discussion
Now that the math is done, what stands out to you?
My first thoughts were these:
- Generally speaking, the more money one makes, the higher the NPV. Having large positive cash flows in the future makes the present value of the investment more attractive. No surprise there.
- Generally speaking, the less money and time one spends obtaining education, the higher the IRR. Training costs in dollars and opportunity costs in years have a meaningful impact. No surprise there.
What is more interesting is the comparative analysis between the professions:
- The plumber has the highest IRR by a huge margin. I’m not surprised it was the highest, given the low cost of entry and the ability to start working right away (no opportunity cost). But the size of the gap between the plumber and anyone else is notable. However, the plumber has the second-lowest NPV due to the comparatively low salary. In other words, the rate of return for being a plumber is exceptional, but that rate just can’t do as much wealth-building because it is working with smaller annual values. This contrasts with the ortho doc who has an IRR of only 31%. But that 31% is working with a much larger annual income so the NPV ends up much higher than the plumber.
- The mechanical engineer, PA, and dentist all end up with very similar NPVs. However, the IRR for the engineer is almost 2.5x that of the dentist (44% vs 18%). This speaks to the profound impact of paying/borrowing $300,000 for additional education and taking four years of opportunity cost to obtain it.
- I was surprised at how rough the comparative numbers are for the lawyer and the veterinarian. The NPV for the lawyer is barely better than the plumber, and the NPV for the vet is far worse. Both have an IRR that is orders of magnitude worse than the plumber. The time and money spent obtaining these degrees to generate moderately more earnings has a tremendous impact on the “investment value” of these professions.
- Ultimately, my eyes are most drawn to my first professional love, dentistry. As I suspected and feared, dentistry is not a particularly great deal from a numerical perspective. It’s not a terrible deal by any means, and it can certainly lead to a “successful” financial life. It’s just notable to see that the PA, CFP, and mechanical engineer all end up with a similar or better NPV and all with a much better IRR.
So, what’s the point?
As I mentioned earlier, this post is meant to be neither predictive nor prescriptive. My great fear is that, by analyzing a few of these professions through the myopic lens of money, someone somewhere will take offense or feel slighted by the numbers. Please know that is absolutely not my intention. I am confident our collegial online community does not conflate a person's financial potential with their dignity, worth, or capacity for personal satisfaction, and . . . it’s still worth saying out loud.
The world needs vets, plumbers, ER docs, dentists, CFPs, and a million other jobs for our society to function. I respect, admire, and honor every profession and the dedication required to perform those duties with the integrity, consistency, and competence that benefit my life in so many ways.
The person I see in my mind’s eye as I am writing this is a high school senior thinking about their future, a college sophom*ore feeling excited but unsure what to do with their unbridled intellectual capacity, or a current dentist with a child who's considering following in their parent’s footsteps.
My hope with this column is that someone choosing to pursue dentistry today does so with their eyes wide open to the comparative financial value of the profession. The prevailing wisdom I absorbed at age 18 that “dentists work four days a week, retire early, and are some of the richest people in our upper-middle class neighborhood” is no longer supported by the financial realities of modern dentistry. The astronomical cost of training, the lowering of incomes brought on by changing economic conditions (a topic for a future post), and meaningful opportunity costs result in a financial picture for our dental future that looks very different than our dental past.
I guess I’m really writing as a voice from the dust to my 19-year-old self. If I had read this post as a bright-eyed coed, I may have made a different choice. Or if I made the same choice, I would have done so with more information, more intention, and with a greater awareness of why I was choosing this path.
My hope is that those who elect to enter the noble profession of dentistry do so because they are motivated by values that transcend finance. That they feel called to work in spite of, not because of, the feeling that it represents the shortest and most optimal path to a predetermined sense of “being a rich doctor.”
What do you think of this research and the results? Would you choose the same path if you had seen the NPV and IRR numbers beforehand? Despite the money you make (or maybe because of it), are you satisfied with your career choice? Comment below!
