Do actuaries make good money? (Actuary salary analysis)

 

Yesterday someone asked me if actuaries make good money. I completely understand that this is something anyone considering the career would want to know. But I found it hard to answer directly.

Fully qualified actuaries can make $150,000+ annually, so most people would say actuaries make good money. But it really depends on your definition of good money.

There are a few different ways we could look at this.

• Consider the actuarial salary compared to the amount of time/effort it takes to become an actuary.
• Or, we could compare actuarial salaries to the average American salary.
• Alternatively, we could consider similar jobs and see how the salaries compare.

Then, depending on what your definition of good money is, you’ll know if the actuarial career path provides the salary expectations that you’re looking for in a career.

 

Actuarial Salary

Before we can compare the actuarial salary to anything, we need to have some numbers to compare to.

Let’s consider a typical life insurance actuary. These are one of the most common types of actuaries and their averages salaries tend to be middle-of-the-pack. Property and casualty actuaries tend to have slightly higher salaries, and pension actuaries are typically lower.

So, using this actuarial salary survey and assuming that the actuary begins working with 2 exams passed (which is realistic) and passes 1-2 exams each year, a reasonable salary might be:

So this is what will be used to do the comparisons. Everyone’s salary path is going to be different, but this is certainly feasible.

 

Actuarial Salary vs Time Spent Working and Studying

One way to consider whether or not an actuary makes good money is to consider the amount of input you put in (hours of time) vs the output that you get (a salary).

Becoming an actuary requires tons of effort and time. On top of your regular 9-5 work hours, you have to put in hundreds of hours of study time. The majority of that will be your own time, so it’s unpaid.

 

Study Hours Calculation

In the above salary projection, I’ve assumed that the actuary obtained fellowship in year 7, so for the first 7 years he’s spending his own time to study for actuarial exams.

Actuaries need to pass 10 exams in total in order to become fully qualified. Since our sample actuary started working with 2 exams passed, that means he passed 8 exams while he was employed.

We can make a rough estimate that he needs to spend 300 hours studying for each exam. Let’s say he fails 2 exams along the way, which is reasonable (and maybe even a bit low).

So, with 8 exams to pass and 2 failures, that’s 10 exams that he wrote during 7 years. Are you still with me?

That means he spent 10 x 300 = 3000 hours studying over the first 7 years. This equates to about 430 hours of studying annually each year.

 

Actuarial Hourly Salary Breakdown

In year 1, the actuary makes $58K. That works out to about $30 per hour. That assumes a 261 working days, 7.5 hour days, and no overtime.

If we now include the 430 study hours into his salary (because those are technically hours spent keeping your job), then that breaks down to $24 per hour.

So, is $24 an hour in your first year good money to you? There’s no right or wrong. It’s all personal opinion.

Remember this doesn’t include commuting time or lunch break which is mandatory in some workplaces, so after all this is taken into consideration you may be spending about 1-2 hours each weekday on work-related requirements that you don’t actually get paid for.

Let’s look at the same analysis for year 6.

The actuary makes $135K, which works out to about $70 per hour.

If we include the 430 study hours for the year, that’s $57 per hour. So, is that good money to you? Again, no right or wrong answer here it’s just a possible interpretation of “good money”.

When you’re thinking about this, also remember that you put in 3-5 years of your time into getting your bachelor’s degree. That time isn’t even considered in this break down.

 

Average American Salary vs Actuarial Salary

Since salary increases with experience, tenor, and number of actuarial exams passed so we could also consider whether or not actuaries make good money relative to their average American counterpart of the same age.

Here is a chart of average American salary (values interpreted from this post) compared to the salary of our sample actuary. We will assume that our actuary started his career at age 23.

As you can see, our sample entry-level actuary that starts working right after obtaining a bachelor’s degree starts out making about double the average 2017 American salary.

By the time he reaches age 30, he’s making almost 4x (quadruple) the average American salary.

Once he reaches age 42 and beyond, he’s making about 4.3x more than the average American salary.

So, is this good money to you? Remember that actuaries likely put a lot more time than the average American into educating themselves in order to be able to do their job

 

Similar Career Salaries vs Actuarial Salaries

The third way that we can consider whether or not actuaries make good money is by comparing their salaries to other similar jobs.

A few jobs that people notoriously equate with actuaries are accountants, data analysts and underwriters. Let’s see how their salaries compare to our sample actuary.

 

Accountant vs Actuary Salary

First let’s compare the accountant salary to the actuary salary. I interpreted the accountant salary from this website.

As you can see, our sample actuary’s salary is higher than the average accountant salary throughout his entire career.  Keep in mind, this isn’t necessarily a CPA.  CPAs tend to earn more than any average accountant.

In his first year, he’s making approximately 134% of the accountant’s salary. Just like actuaries, accountants have to write exams too but most would say that accounting exams are easier than actuarial exams.

Note: If you’re interested, I go into all the 4 major differences between actuaries and accountants here.

As our sample actuary reaches age 30, he’s making about 3.27x more than the accountant.

And by the time he reaches age 42, he’s making about 3.91x more than the accountant.

 

Data Analyst vs Actuary Salary

Now let’s compare our actuary to a typical data analyst salary. I interpreted the data analyst salaries from the same website, here.

Again, a data analyst’s average salary (according to the source above) is lower than our actuary’s salary throughout his entire career.

From this comparison, we can see that our sample actuary is making anywhere between 123% to about 325% more than the average actuarial analyst.

Honestly, I was surprise to see that data analyst salaries were higher than accountant salaries because data analysts don’t (typically) need to write any exams or get any sort of certification.

 

Underwriter vs Actuary Salary

Lastly, we will compare the salary of underwriters to that of actuaries. I interpreted the underwriter salaries from this website.

Our sample actuary’s salary is still well above the underwriter’s average salary in all years. Like actuaries, underwriters too have to pass a series of examinations. They’re likely not as difficult as actuarial exams though.

Just starting out, our sample actuary makes about 128% of what the underwriter does. And by the 20th year in each of their respective careers, the actuary is earning an annual salary that is about 300% of the underwriter’s.

 

Overall Comparison to Other Careers

It’s safe to say that the actuarial profession salary skyrockets over that of these other similar careers. But, like I mentioned in some of the explanations above, actuaries likely put in a lot more time (through study hours) in order to reach these salaries.

So, based on these comparisons, do actuaries make good money? That’s up to you to decide! But I hope this post has been informative and helpful in making that decision for yourself.

If you decide that the actuarial career is right for you, then make sure to join the Actuary Accelerator Community (AAC)! You’ll get access to a personal mentor, a supportive group of aspiring actuaries, and resources to help you at every step of your actuarial journey,