A Master's degree typically takes two years if you attend full time whereas a PhD can take five to seven years full time. Some PhD programs allow you to earn a Master's degree along the way, but only a few. PhDs are more research-based than Master's degrees. PhD candidates must complete a dissertation, which is a lengthy paper outlining research that has been done. Most Master's degree programs do not require a dissertation.
The top three psychology programs in the nation, according to the Social Psychology website, are Stanford, University of Michigan and Yale. All three do not require a Master's degree to be accepted into the PhD program (see References 3-4); however, these programs are highly competitive, which means that anything you can do to make yourself stand out more will increase your chances of being accepted. Having a Master's degree is one thing but also showing that you have applied your Master's degree in psychology in some way, i.e. practicing as a licensed counselor or conducting research. Both of these things can make you a very desirable candidate and increase your chances of being accepted.
If all you wish to do is practice as a licensed counselor, a Master's degree will suffice. Following your state regulations, find a Master's program that will satisfy the educational requirements so that you may apply for licensure once you graduate. PhD programs are advisable when you would like to teach in a university setting or you love your field and wish to have the most knowledge.
According to the Bureau of Labor Statistics (BLS), people holding a Bachelor's degree had a median salary of $40,387 in 1998. With a Master's degree that went up to $48,772 and with a PhD $60,729. For psychology specifically, the earning differential between a Master's and a PhD was about $30,000.