How ODs can earn "free" money by investing early

February 09, 2020
This week, I'm thrilled to share some wisdom from guest contributor Dr. Jerry Hayes. I know you will enjoy it! While Dr. Hayes was writing this article, I have been prepping to speak at IDOC's member meeting this Thursday in Orlando. If you're attending and want to meet, just reply back to this email and we can find a time to say hello.

How ODs can earn "free" money by investing early
By Jerry Hayes, OD

Albert Einstein supposedly said, “Compound interest is the most powerful force in the universe. He who understands it, earns it; he who doesn't, pays it.” 

I think it's probable that some other smart person actually said that, and then attached Einstein’s name to it to add some gravitas.  

Either way, there’s a profound truth to the idea that compound interest is a powerful economic force. Which leads to my very best investment advice for ODs… START A SAVINGS AND INVESTING PROGRAM AS EARLY IN YOUR CAREER AS YOU POSSIBLY CAN WITH THE GOAL OF BUILDING WEALTH OUTSIDE YOUR PRACTICE. 

Let’s look at two examples to see how time works FOR people who start investing early, and AGAINST those who start later in life. 

Dr Young starts investing early
Dr Young is a 30 year old OD with a new practice and part time job in a chain office that helps her pay the bills and importantly, put away some money in a long term investment account. 

Wisely, the first bill she pays every month is $1,000 to her own savings account which is then invested. Her goal is to create enough wealth OUTSIDE her job and practice to retire comfortably at age 65. 

$1,000 invested monthly ($12,000 per year) at an average annual return of 8% will be worth an impressive $2,233,226 at Dr Young’s age 65. 

(For the sake of illustration, we are going to assume tax free growth in both scenarios. You can model your own assumptions HERE.)

Perhaps even more impressive, she was able to build this nest egg by investing only $420,000 of her own money (12 months x $1,000 x 35 years). A return of over 500%! The power of compound interest does not require chasing hot stocks or trying to time the market. Two things that are incredibly hard for professional investors to do successfully, much less amateurs. 

Better late than never
Dr Olda, on the other hand, is a 50 year old optometrist making $250,000 pre-tax in his own successful practice. 

That level of income has allowed him and his family to live a wonderful lifestyle. However, he has recently come to the realization that he does not want to work forever and while he is a little behind, he knows the very best time to start harnessing the power of compound interest for his own benefit is NOW. 

Our question is, how much will Dr Olda have to start saving and investing today to match Dr Young’s $2 Million+ nest egg? 

Using the SAME CALCULATOR and return assumptions, we find that Dr Olda will have to put away $6,350 per month ($76,200 per year) over 15 years to create a retirement nest egg of $2,234,510. 

And, because he is working on a much shorter time frame than Dr. Young, he has to invest $1,134,000 of his own money ($6,300 x 12 months x 15 years). That’s a decent return, but less than 100%. As you can see, the earlier you start, the richer you can become using less less of your hard earned dollars.

No, we haven’t forgotten that both doctors should be able to supplement their retirement funds with the proceeds from selling their practices. While that is true, we’ll leave that consideration for another week. And also discuss whether $2 Million is enough to fully support their retirements? 

It can feel like FREE money when you invest early
 One way to look at these two examples is to say that in very real terms, Dr Olda had to ‘pay’ $1,134,000 for his $2 Million retirement portfolio because he started late. 

Dr Young, on the other hand, started early and was able to ‘buy’ her $2.2 Million retirement portfolio for only $420,000. Maybe it’s not really FREE money, but that’s an astounding savings of $723,000 over the cost of what Dr. Olda had to save to reach the same amount. 

If there is one thing I know about ODs, it's that we love a good bargain! And the very best ROI you can get on your money is to find a professional financial advisor you are comfortable working with and start your investing program as early as possible. Then stick with it for the long term. Do that, and you will wake up one day to find yourself a very wealthy person. 

A former practicing OD, Dr Jerry Hayes was the founder of Hayes Marketing, HMI Buying Group, Red Tray and Prima Eye Group. Although Jerry is Natalie’s father, he is not a Principal in Hayes Wealth Advisors nor does he provide consulting or investment services to ODs.

The views expressed here are as of the date of publication and are subject to change. This information should not be construed as investment advice. It is presented for information purposes only and is not intended to be either a specific offer (or recommendation) Hayes Wealth Advisors to sell or provide, or a specific invitation for any investor. Information herein may have been obtained from sources believed to be reliable, Hayes Wealth Advisors is unable to warrant its accuracy.
All data, projections and opinions are as of the date of this report and subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Hayes Wealth Advisors does not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be suitable for all investors.
Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.