Presentation on theme: "Best Retirement Plan: College vs. Part-Time Work vs. Work Than go to School Team 3 Ronald Lee– Summarizer Rafael Gutierrez– Techie Walter Areas – Techie."— Presentation transcript:
Best Retirement Plan: College vs. Part-Time Work vs. Work Than go to School Team 3 Ronald Lee– Summarizer Rafael Gutierrez– Techie Walter Areas – Techie Andrew Quezada- Organizer EGR403: Asset Allocation and Technical Decision Making
PROPOSAL Determine which Life Path will Provide the Best Savings at Retirement. 1. College Full-Time after H.S. 2. Work Full-Time for 2 Years after H.S. 3. Work and College Part-Time after H.S.
Scenario 1: College Full-Time Go to college after high school. Graduate in 4 years. Take out loans to pay for tuition. Repay loans after graduation. Live at home.
Scenario 2: Work Full-Time Work full-time after high school for 2 years. Save money for college tuition. Save 10% of income for investments. Return to college and graduate in 4 years. Live at home.
Scenario 3: Part-Time C/W Part-time college and work after high school. Pay for tuition along the way. Graduate in 6 years. Live at home. Save 10% of income for investments.
Comparison College Full-TimeWork Full-TimeWork and School Part-Time Housing Expense Paid Living ExpensePaid TuitionStafford LoanPaid Income (H.S.)$0$39,111$18,750 Savings (H.S.)0%10% Income (C.)$59,215 Savings (C.)Year 0-4: 0% Year 5 : 9.4% Year 6+ : 10% 10%
College Full-Time Pros Focus on school Finish school faster Cons Need to repay loans No money being saved No work experience
Work then College Pros Tuition is paid Work experience Savings during first 2 years accumulate interest Cons Time Low Salary
Work/College Part-Time Pros Tuition is paid Work experience Cons Time Low Salary after High School
Spreadsheet Rates The following are data that are assumed for spreadsheet calculations: Salary Upon Graduation $59, Annual Salary Increase4.0% 401k Annual ROR8.0% Retirement Age65 Annual Savings10%
Analysis Assumptions Students going to school full time will graduate in 4 years, those working and going to school graduate in 6 years 4% yearly raise 10% savings Loans apr 6.8%, interest differed until 6 months after graduation
Analysis Results Working Full-Time for 2 years after High School makes the most money at retirement College Full-Time makes 4% less money College and School Part-Time makes about 2% less money
Sensitivity Analysis Rate of Return Tuition Loan Savings Gradient Percentage of Income to Repay Loan
At minimum, ROR needs to be at least 7% to have the most Savings Work Full-Time for 2 Years At minimum, ROR needs to be at least 9% to have the most Savings College Full-Time At minimum, ROR needs to be at least 8.5% to have the most Savings Work and College Part-Time S.A. Rate of Return
S.A. Tuition Loan Tuition Loan needs to be less than about $12,000 for the Best Savings College Full-Time
S.A. Savings Gradient Regardless of Savings Gradient, Work-Full-Time for 2 Years is Always Better Savings Gradient needs to be at least 9.5% to have the most Savings Work Full-Time for 2 Years Savings Gradient needs to be at least 11% to have the most Savings College Full-Time Savings Gradient needs to be at least 10.5% to have the most Savings Work and College Part-Time
S.A. Repaying Loans Need at Least 30% of Income to Repay Loans to Have the Best Savings College Full-Time This is NOT Realistic
Conclusion: Work Full-Time With the Initial Assumptions Provide the Most Savings $3,497,882! Need one to have the MOST SAVINGS: 7% ROR 9.5% Savings Gradient
Conclusion: College Full-Time For those Going to College Full-Time Need one to have the MOST SAVINGS: 9% ROR 11% Savings Gradient Less Than $12,000 in Tuition Loan
Conclusion: Work and College For those Going to Work and College Part- Time Need one to have the MOST SAVINGS: 8.5% ROR 10.5% Savings Gradient
Resources SalaryWizard.com 1. Customer Service Rep – High School Diploma $39, Waiter/Waitress $12.50/hr. 3. Entry Level Engineer $59,215. StaffordLoan.com