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mod (Andy) note: "Blast from the past - Best of Eddie" - This one is originally from May 2010. If there's an old post from Eddie you'd like to see up again shoot me a message.

We spend a lot of time on this site discussing how much money it would take to retire now, how much you plan to have when you walk away, and so on. I always get a chuckle out of these posts, because I know how different my actual walkaway number was from the number I had in my head when I got started. I don't bring that fact up much, because I'm not interested in being the catalyst for someone to lower their expectations/aspirations in life. I know what worked for me, and I'm satisfied with it, but I realize some people will strive for more.

I think for most of us starting out (and I know for a fact this was the case for me), somewhere around $10 million is the number. When I got started in the business, I was convinced that as soon as I accumulated $10 million, I was out. That was $10 million cash, mind you. The number in your mind might be higher or lower, but it's probably somewhere in that neighborhood.

This is going to come as a shock to many of you, but Business Week just published a fairly extensive study that might shine the harsh light of reality on your walkaway number. They found that Harvard MBA grads made more money over the span of their career than graduates from any other MBA program. The estimated career earnings for an MBA from the #1 business school in the nation? $3.87 million.

Now $4 million is nothing to sneeze at. And I can already hear some of you making the argument that the study includes MBAs from all career fields and that Wall Street naturally skews higher. That could very well be the case. But realistically, by how much more? Here is the complete table of the various B-schools and their respective earnings.

My point in this is that your actual walkaway number is probably going to be a lot lower than you think. And that's a good thing. Because it might alleviate some of the undue pressure you put on yourself. I always made good money on the Street, but it wasn't until I gave myself an expiration date that things really went my way monumentally. And the biggest component of my decision to punch out was my coming to terms with the fact that I wasn't going to have $10 million in cash when I did it.

The importance of being realistic about earning potential can't be overstated, especially in the current regulatory environment. Does that mean you should settle for less, or aim lower? Absolutely not. There is no shortage of young people making millions of dollars per year in the U.S. Just recognize the potential that exists in your current career path and if that doesn't meet your expectations/aspirations, change your path.

Here's a little something to get you started. It'll save you $100,000 and two years of your life. Something to think about.

Guys, please don't take this post in a negative light, because that's not how it's meant. Laboring under false assumptions leads to massive disappointment, and being realistic about your career path is truly liberating. Never forget that there are outliers in every field, and the outlier might be you. Never lose sight of the fact that, even if you only make a couple million bucks over the course of your career, it's still a shitload of money. Manage it (and your career) accordingly.

P.S. If you're the outlier (or think you might be), I'd love to hear about it in the comments.

2

Comments (40)

  • antmavel's picture

    "Here's a little something to get you started. It'll save you $100,000 and two years of your life. Something to think about".

    I disagree with your point, I don't think an MBA is about 10 big lessons you can learn or about watching a few concepts only. On top of the general knowledge you are going to get there are additional aspects you need to integrate:
    1) It's one of the only way to change/shift career and many companies have a specific entry levels for MBA grads
    2) in some industries you don't have much choice, either you get it and you progress or you get out.
    3) it helps you to build key relationship for your future career and that is worth a lot, the ability to call a former classmate to know more about their recruiting process a few years after you graduated is very valuable, the opportunity to meet with someone inside the school during your mba program and start together a company is also something happening

    I do believe though that there is a lot of distinction to make between the programs, the tier and the impact an MBA can have...sometimes it's true that it's not worth $100k, especially right now where jobs are tough to get and often for a lower salary.
    Finally if you plan to make $10m I don't think $100K is bad investment (1% only !) as the yield can be extremely good based on my remarks above.

  • dagro's picture

    i'm just wondering about all the careers where you actually advance to management, partner if you will, after around a decade or two if you're good enough, and begin making seven figures. obviously not for everyone, but that kinda puts the whole argument to shit, don't it?
    according to the study, after 20 years, the average pay for harvard grads was 230k. that's ridiculous for some career paths. if you manage to stay in consulting for example for that many years, you'll be a senior partner by then, which means you'll be making seven figures easy. in IB, PE, HF - and in C-suites after exiting from any of those you'll probably be making more.

    =========================================
    "... then, lobbest thou thy Holy Hand Grenade of Antioch towards thy foe, who, being naughty in My sight, shall snuff it."

  • Edmundo Braverman's picture

    Keep in mind those are MEDIAN pay figures, not AVERAGE pay figures. Meaning, in your example dagro, that half the MBAs were making more than 230k and half were making less. I would bet the average number would be considerably higher (and less reliable for statistical purposes) because of the handful of C-level executives making 8 and 9 figure comp.

  • surferdude867's picture

    Edmundo Braverman wrote:

    Now $4 million is nothing to sneeze at. And I can already hear some of you making the argument that the study includes MBAs from all career fields and that Wall Street naturally skews higher. That could very well be the case. But realistically, by how much more?

    Nah, a disproportionate number of HBS grads end up on Wall Street anyways, so the data is probably pretty accurate.

  • JohnnyCage's picture

    Question Edmund- What did it take in your life for you to step away? I'm risk adverse by nature as are most people on this forum, so for me it would have to be 1) Health 2) Another job in waiting 3) Moving to a whole new area 4) An ominous fortelling from a 3 nipples fortune teller. Essentially it seems like the more you have invested in the salary (kids, house, doggies) the less realistic quitting becomes.

    Did you ever consider remaining at your level e.g. VP and NOT kill yourself to move up the ranks? (I know you were a trader, so I guess this might not apply, but still a scenario I see)

  • Jimbo's picture

    "The estimated career earnings for an MBA from the #1 business school in the nation? $3.87 million."

    And this number is pretax.

  • Edmundo Braverman's picture

    First of all, kudos on the obscure Kevin Smith movie reference, Mallrats is one of my all-time favorites.

    I bailed because I hated the work. That's it in a nutshell. The hours I was putting in were horrendous, the guys at the top of my firm were total jerkoffs (one of them just got 9 years for a brain-dead fraud he cooked up a few years after we worked together), and I managed to reach my income goal six months ahead of schedule. So I bailed.

  • Edmundo Braverman's picture

    Also, there was an unsustainable component to my success. I developed a trading system over the course of about two years, and it worked even better than I expected. When it failed, however, I knew it would take at least another two years to make another and I already had a bunch of money. Wasn't worth the effort to me. Sometimes you have to know when to walk away.

    And just to clarify, I'm not some superstar with ESP. I happened to be trading at a time in the market when most commodities were at all-time lows and it was very easy to make money. It doesn't take a rocket scientist to figure out you should buy crude oil when it's $11 a barrel. I knew the market conditions would never be that easy again in my lifetime (who knew the Fed was going to print $2 trillion and pump it into stocks a few years later?) so I took the money and ran.

  • Marcus_Halberstram's picture

    Very interesting. But I would, as you pointed out, argue that if you look at strictly finance professionals from HBS, the lifetime earnings number is probably several times $3.87 million. If you stick it out in the field, after your 3rd or 4th year as an MD you'll be pulling in $1+ million/year at a BB bank. If you happen to be on the buyside that number will be blown out of the water.

  • Edmundo Braverman's picture

    No doubt. But how many people make it to that level as a percentage of MBA holders? As a percentage of people who work in investment banking? As a percentage of the working public?

    It's true that a number approaching 100% of MD and C-level bankers have an MBA. But what percentage of MBAs make it to that level? My guess is less than 5% overall. This study seems to bear that out.

  • In reply to Edmundo Braverman
    CNB90's picture

    Edmundo Braverman wrote:
    No doubt. But how many people make it to that level as a percentage of MBA holders? As a percentage of people who work in investment banking? As a percentage of the working public?

    It's true that a number approaching 100% of MD and C-level bankers have an MBA. But what percentage of MBAs make it to that level? My guess is less than 5% overall. This study seems to bear that out.

    What happens there exactly? do people just lose their drive or what? - In my opinion, if I'm not aiming for MD and higher levels and devoting a good deal of my 20's and early 30's to career progression, I shouldn't pursue an MBA.

    I wonder if this survery takes into count those who started their own firms/funds..

  • PecuniaryTutelage's picture

    I am not in the industry currently, more of an outsider looking to get in, so my perspective is skewed based on that and is something that must be kept in mind. Beyond that I would say my figure lies between $7-8 million in current dollars, with an additional 3.5% per year for general inflation. Assuming a 5% after-tax earning percentage, and only utilizing 1.5% for living this would give me about $120k or so a year to live on, which is sufficient if I were retiring at said level.

    A consideration I have beyond that though is the fact that right now, I never stop wanting more. A thought which could very well change if/when I attain my goal. And not so much in the sense that I only want more for the sake of it, but because like any goal, you achieve the goal, then set an even higher one to reach for. Constantly striving to be better in all areas of life, including monetarily, means reaching beyond your last achieved goal. To me anyways.

    Now, placing all of that into context considering the earning potential of an individual given their MBA school, I would say that the industry will not be where I earn all of that money. The reason is mostly because unless I achieve MD status, or am thoroughly successful on a trading/prop desk, there just won't be enough money coming in to achieve that over a lifetime. This means I have to look outside of the career 'box' to other options, which to my mind are: 1) Business Startup, 2) Personal Investing/Trading, 3) Winning the Lottery. So, in the end, my goal would really be to earn sufficient capital while building a business model/product, or trading system whereby I could convert that into my long-term goal, all while hoping to win the lottery. So yeah... My 2 cents. ( I want 'em back at the end BTW, for my piggy bank. :P )

    -N.

    "It's about the game." - Gordon Gekko
    "No matter how much money you make, you'll never be rich." - Jacob "Jake" Moore
    "'Oh Africa Brave Africa'. It was... a laugh riot." - Patrick Bateman

  • In reply to CNB90
    Victor252's picture

    CNB90 wrote:
    Edmundo Braverman wrote:
    No doubt. But how many people make it to that level as a percentage of MBA holders? As a percentage of people who work in investment banking? As a percentage of the working public?

    It's true that a number approaching 100% of MD and C-level bankers have an MBA. But what percentage of MBAs make it to that level? My guess is less than 5% overall. This study seems to bear that out.

    What happens there exactly? do people just lose their drive or what? - In my opinion, if I'm not aiming for MD and higher levels and devoting a good deal of my 20's and early 30's to career progression, I shouldn't pursue an MBA.

    I wonder if this survery takes into count those who started their own firms/funds..

    You say that now but try grinding away for fifteen years. I bet after five you'll be looking for an easy out. Once you have enough banked for retirement, and paid off any college/home debt, you'll probably want an easier job that let's you travel or have a personal life.

    You don't need $10M to sit on a beach and drink beer. That's what retirement means to a lot of people.

  • In reply to Victor252
    CNB90's picture

    Victor252 wrote:
    CNB90 wrote:
    Edmundo Braverman wrote:
    No doubt. But how many people make it to that level as a percentage of MBA holders? As a percentage of people who work in investment banking? As a percentage of the working public?

    It's true that a number approaching 100% of MD and C-level bankers have an MBA. But what percentage of MBAs make it to that level? My guess is less than 5% overall. This study seems to bear that out.

    What happens there exactly? do people just lose their drive or what? - In my opinion, if I'm not aiming for MD and higher levels and devoting a good deal of my 20's and early 30's to career progression, I shouldn't pursue an MBA.

    I wonder if this survery takes into count those who started their own firms/funds..

    You say that now but try grinding away for fifteen years. I bet after five you'll be looking for an easy out. Once you have enough banked for retirement, and paid off any college/home debt, you'll probably want an easier job that let's you travel or have a personal life.

    You don't need $10M to sit on a beach and drink beer. That's what retirement means to a lot of people.

    I'm not wired to sit on a beach and drink beer, I'd like to do it maybe once a week or something but I can't see my self being that free. I like being busy and constantly achieving, I don't think that will change for a while.

  • breakinginnew's picture

    @edmundo--I agree with alot of your sentiments...however I think the businessweek table is a very bad reference.

    From viewing the little methodology blurb at the bottom...not only do they use medians (which is fine for looking at income, but looking at median numbers and then producing an estimated career pay number from that won't even produce the right number if you compare it to the median of actual career pay.) Also more importantly this excludes stock + option compensation...which i imagine is most substantial at the higher ends of the dataset.

    I think accurate data on the subject is going to be very hard to come by...though I would say that alot of people on here do think they are going to be multimillionaires and that isnt neccesarily a given just because you became a banker or went to HBS

  • marcellus_wallace's picture

    GenghisKahn used to say best on here. Bschool Associates become better VPs and MDs than analyst promotes. It's true no one knows the reasons, but read any books about the leaders in this industry. The Blankfein's, Paulson's, Dimon's, Cayne's, Fuld's etc...

    A high high percentage of those guys all got in later in their careers or caught a break at some point.

    I don't think its mathers of being wired a certain way, or even a takeaway number. But at some point you can't keep acheiving at the same pace you are, at some point the seats at the top are too few. The longer your in the industry the easier people label you, and at some point no one is gonna let you get higher. I would actually be interested to know what % if any "star analysts" become superstar PE dudes or MDs.

    Or maybe its just sole burnout that you really don't see pile on. I met a trader who was working 12-14 hours days from age 18 to 40. The guy had difficulty staying awake past 8pm at night after age 36 or so. He was basically totally brunt out, even though he showed up everyday at 6 to the floor, you could see he was not the same guy as when he was 26 and his PnL demonstrated that.

  • Slacker23's picture

    When it comes down to it, a lot of us are just as bad as the teenage girls who want to be famous actresses when they grow up. The only difference is that people here want to be like Lloyd Bankfein. Is it possible? Of course. Is it probable? Not really. The truth is that there are only so many open positions available for a whole sea of people applying. You can spend your life grinding and still never get to the top. If you retire with $4 million instead of $10, is that failure? It's important to remember that nothing in life comes without sacrifice. There comes a point in your career where you'll need to make sacrifices in your personal life in order to take the next step career-wise. If you spend 100% of your time working, then your career owns you (rather than the other way around).

    It's kind of like the whole Fight Club materialism philosophy, where we become defined by the things we own.

  • In reply to Edmundo Braverman
    marcellus_wallace's picture

    Edmundo Braverman wrote:
    Marcus_Halberstram wrote:
    Schwarzman said the same thing in the Chasing Money special about HBS. He said its unclear why, but those who don't go to get their MBAs just stall out by their late-20's.

    Guilty.

    You mind expanding on that? You are still quite knowledgable and am sure was very successful to agree to such a thing. Do you think it was solely due to not taking a break and instead being in the same frame of mind day in-day out? Or was it more that without the MBA was difficult for you to make the move from foot solider to general? Why not go back and do an MBA now you certainly you could afford it no? Was there other people in your situation that stuck it in, or developed into that general type, you think they did things differently?

    I think understanding where your coming from sure would help the 19 year olds on here who are planning ahead to their 35+ MD days after working 80 hour weeks for 10 years in a row.

  • MCGILLIAN's picture

    I have a family member that was part of a successful MBO that allowed him to make about $4-5 million, he lives a very comfortable life, ie travel wherever and whenever he wants, new car every couple years, membership at top 50 golf course. I would think my number is around $10mm as well but when I think of the life that this person has. The difference btw 5 and 10 might not be that huge.

  • ilikewimminz's picture

    Nice, thanks for posting.

    I think those who haven't yet entered the work world need to step back and reflect on the big picture a bit. It's great to have lofty goals and ambitions, however, don't forget that everyone who came before you was likely exactly the same as you were. It is a bit naive and arrogant to think you are THAT different than those guys who burned out and left the field, or the 95% who never made it to the MD level.

  • ideating's picture

    1) Not all HBS MBAs are created equal. I have met, worked with, interviewed, informational interviewed quite a few who were quite mediocre. Yes, there are a certain percentage who are pretty ridiculous but there are also a significant number who are going to top out at 200k as director of marketing for a trucking company in Ohio.

    2) You don't simply stop earning when you "retire" at 40.

    3) Your expense base will be significantly lower in whatever location you choose to retire (unless you plan on staying in NYC).

    4) Anyone see the irony in a bunch of prospective monkeys standing firm on 10MM when they're longshots to even get a first round analyst interview?

    5) A lot of HBS MBAs with the path to make multi-millions simply choose not to for personal reasons i.e. being a woman and having kids.

    6) Anyone who tries to do an MBA evaluation based on a DCF of future earnings is an idiot. Citing arguments like "100k discounted into the future could buy you a house in Costa Rica" either a) is grasping at straws or b) is naive enough to think the analysis is meaningful in any way.

  • Cmoss's picture

    retirement for me is coaching highschool football.

    Of course it will take years of hard work to set up my life and assets to allow me to live off the 30k a year they make.

    That being said my walk a way number is prob $1 Mil

  • Edmundo Braverman's picture

    ideating, that was the major flaw I found with this study. It assumes a roughly 20-year career span, which is unrealistic at best. Maybe 20 years in banking (though, in truth, I can't even fathom that), but it's ludicrous to think that a person stops earning after 20-25 years.

  • WestHudson's picture

    After dealing with people in finance I've lost all perspective on what is a good amount of money. In the midwest 1 million is kick ass, in finance i don't know anymore...

  • In reply to Jimbo
    JulesWinnfield's picture

    There are a few problems I have with this study:

    Only cash compensation is considered (read the fine print). A massive amount of wealth and large chunk of compensation can be earned through stock and stock options. Many C-suite and higher-ups have a relatively low base salary, and a majority of their compensation comes through incentive-based stock options and grants.

    They assume a 20-year career. I would expect many MBAs to work longer than that, at least in some capacity.

    Only 23,000 MBAs were sampled, which means only about 100 to 300 actual salaries per school were used in the study, which is stated in the fine print below the study. Although this sample could result in an accurate estimate, I would think people in the higher paying (which I assume to mean busier) jobs probably would not take/have the time to complete the MBA survey.

    Also keep in mind that while those cash compensation figures are pre-tax, they are also pre-investment. It is not hard to find a near-riskless asset to hold or savings account or CD with a decent interest rate in which to deposit savings. Savings today can be significantly more 20 years down the road.

    While this study is interesting to take a look at, I question how much water it holds. I will not be using this study as a factor in my decision whether to attend graduate B-school.

  • Bondarb's picture

    "Walkaway number" is a flawed concept in an age where a person in good health can live until 90. Playing golf at a top 50 course and having a new car are not enuff to sustain somebody for 50 years if you retire at age 40. Provided I am healthy I plan on working until the day I die...whether it is in finance or some other field that at some point in the future i decide to pursue. Thinking in this way allows you to spend more freely and enjoy the journey much more. Running a sprint to hit some "magic number" is not a good idea because you are going to need to occupy yourself for a long time (knock on wood).

    My grandfather changed my perspective on this topic. He retired at 60 after a fairly succesful career. 30 years later he still wakes up every day but he hasnt had a thing to do aside from playing golf and cards for a couple of decades. He says it's torture and i believe him...that will never be me.

  • milkman84's picture

    The main problem here is that career earnings =/= walkaway number. If anything, this study shows that one's walkaway number is way higher -- after all, if these are MBAs working until they're 50, they weren't exactly "walking away," right? Retiring at 50 sounds about right for someone in the upper end of the upper tax bracket, but I wouldn't call it walking away. Leaving at 30, 35, 40? Sure.

  • Startop's picture

    Can someone clear something up for me? Median pay 5 years out of of a Harvard or Wharton MBA is 150k? Why is this number so low, and so different from other figures/intuition?

  • dagro's picture

    ... not everybody goes to work for mbb and bb. and even less work for pe and hf. the majority go do marketing for gm and walmart, and stuff.. some do gov't, others charity. the median graduate apparently has a dead-end job.

    =========================================
    "... then, lobbest thou thy Holy Hand Grenade of Antioch towards thy foe, who, being naughty in My sight, shall snuff it."

  • AKnightsTale's picture

    Interesting topic! I was also aiming at 10M but the probability of attaining such a sum is very dim given the current market conditions and the age at which I plan to finish by MBA (27-28; remember I don't want to work until 60...). But I believe it is perfectly realistic to aim for less and yet enjoy a bright life after retirement.

    Anyway I believe it is best to make the most out of your early twenties and go for the money kill as you approach thirty so that's why I'm travelling, doing sports, and reading about all kind of stuff now.

    I am currently working on the technology side but planning to do an MBA in 2-3 years. I wasn't sure what to do after my studies but eventually decided to do IT for a big bulge bracket bank as I had some debts & student loan to repay (those nights out during my studies in expensive clubs in London surely didn't help me financially lol! ).

    So the big question would now be: is 5 million a reasonable pension? Note that expectations were lowered by 1/2 :(

    I just play to win...

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