A cautionary tale, or mathematical parable?
I recently experienced an inexcusable judgmental moment, one that could be a learning opportunity for all of us, unless you’re not as ignorant as I was. As you’ve probably guessed, it all started with a toilet problem. The details do not beg elaboration. I hired a plumber to install a new 1.8 gpf porcelain throne. Sometimes I take on jobs like this as a combination of learning and cost cutting, but Home Depot offers toilet installation for $100. No instructions or troubleshooting or dealing with backed up refuse on my end. Bingo.
I stayed home for a day and waited for the plumber to arrive. I guess I ascribe to the traditional image of a plumber as being a little bit overweight, combed-over, and perpetually middle-aged. I’m surprised if they’re wearing anything but a white shirt and jeans. So far most of my experience has confirmed this, though we once had a plumber/rapper who handed us a mix CD on his way out the door. His rhymes were solid. Not once did he mention plumbing, which I see as a missed opportunity.
Anyways I was waiting in the kitchen of our middle class suburban abode with my ancient Corolla parked in the driveway, and a team of two plumbers pulled up in a new-ish Infinity SUV. They approached the door, and I opened it to what looked like a younger version of half of Mumford and Sons. They were hip. Of the three of us, I was unquestionably the scrub (wearing scrubs, as a matter of fact.)
They were polite and laughed while removing a toilet as old as our house, and I had my unenviable moment. I looked down at the free scrubs I was wearing and my battered compact car next to a glistening SUV, and I assumed for a millisecond that they couldn’t possibly afford the car they drove or the clothes they worked in. In retrospect they could have gotten their bowling team button ups at a thrift store, which would have been all the more hipster, but in either case, I presumed that because I am a doctor, I must be better off than them. I’m ashamed enough to call it an error in moral judgment but enough of a realist to assume that I can’t be alone in that assumption. It took less than a second for my moral compass to redirect me, but a little bit longer for the logical part of my brain to catch up and inform me that I was completely wrong. The plumbers I hired to replace my toilet are, without a doubt, wealthier than I am. I have a negative net worth left over from years of expensive education. These guys probably got their training as paid apprentices at 18 and worked as plumbers ever since. Unless they were actually musicians. Now I’ll never know.
There is a difference between what doctors consider wealthy–how much someone makes in their career–and the kind of wealth that actually matters, which is net worth. We think this way out of some self-defensive mechanism, because we need to sacrifice net worth for most of our lives to attain the training we need. Many of us will go on to high salaried practice years with commensurate expenses, and may not be truly wealthy until our retirement age, if ever. But my unenviable moment came with a lesson. I realized that even as a young attending, who could afford to drive a new Infinity SUV and buy a larger home, I still wouldn’t be wealthier than my plumbers for quite some time. I decided to investigate. (Don’t worry, I’m not trying to convince you to drop out and become a plumber. Despite the threat of decreasing reimbursement and the increasing cost of healthcare educations, going into professional school remains a strong decision if you take the long view. But I still need to prove it.)
What follows is the most realistic breakdown I can muster for the trade school vs. medical school debate. It’s the kids who might not even need GEDs vs. your high school student council. Plumbers v. plastic surgeons. Let’s get ready to rumble.
So you want to be a plumber. If you think dentists get sick of hearing jokes about how much we talk while our patients can’t, imagine the flak you get about peaking butt cracks when you announce your intention to pipefit for a living. Anyways, you’re eighteen, decently smart, and willing to work hard.
You have a few options: you can get a plumber’s certificate in under a year for between $800 and $3,000. Alternatively, you can get a two year associate’s degree, which will put you up there with the most educated plumbers, for $8,000-$23,000. Finally, many plumbers train as apprentices. An apprenticeship program can last up to 4-5 years, but it is paid training. Estimates for the cost of books and supplies vary between $700-$1200. One training program in New England estimates room and board at $7,000 and other expenses at $5,900. In their opinion, someone training to become a plumber should be living off of $13,000 a year.
You do not need an additional undergraduate degree in plumbing. Your total education costs range from $2,200 to $23,700. You may have loans if you do the associate’s degree. You will start working anywhere from the age of 18 to 21.
Salary ranges widely for plumbers, with averages ranging from $30s-$78,000 per year. Many master plumbers make more than $100,000 per year. The average hourly rate is $24-$36.50 per hour, for plumbers who don’t own their own business. Let’s assume you start towards the bottom and make $39,000 at the age of 19, increasing to the upper end of the pay scale by the time you blow out the candles on 34 (15 years of experience), when you’ll be earning $73,000. This represents a pay increase of 4.23% per year.
Investing: This is highly variable. The general rule of thumb is to invest 10-15% of income towards retirement. Let’s assume you’re a smart plumber, disciplined enough to be pay off your loan debt (which you might not have in the first place) and lend 10% towards retirement for the first 7 years, and 15% after that until you’re 34. If you live according to your means then this isn’t a stretch.
We will assume investments are index funds and that the market follows historical trends and averages a 7.7% appreciation rate. After the first seven years you will have accumulated $41,541, and all of it will be in a Roth IRA. In the last eight years you will need to open an additional account that doesn’t have the same tax benefits as the Roth. The total in your Roth IRA at 34 will be roughly $147,480, and with the additional value of your other account you are now adding to, your net worth will be positive $174,154. You will probably have more if your house isn’t underwater or if you’ve scrapped together any other savings. If you continue to save $10,000 a year –13.6% of income–from 34 to retirement age at 65, you will have accumulated $2.75 million, regardless of whether your salary ever tops $73,000.
If you were able to get a higher paying job from the beginning, or save more when you were younger, the compounding will act in your favor. If you save $10,000 a year from 18, by 34 you would have $316,000. At 65, that would be $4.4 million, of which you would only have actually had to make and deposit $460,000. The more you save early the better. The tradesman’s advantage is not digging a money pit in your twenties.