Personal Investment Options

1. Best Retirement Plan: College vs. Part-Time Work vs. Work Than go to School Personal Investment Options Team 3 Ronald Lee– Summarizer Rafael Gutierrez– Techie Walter Areas – Techie Andrew Quezada- Organizer EGR403: Asset Allocation and Technical Decision Making

2. 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.

3. 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.

4. 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.

5. 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.

6. Comparison

7. College Full-Time Pros • Focus on school • Finish school faster Cons • Need to repay loans • No money being saved • No work experience

8. Work then College Pros • Tuition is paid • Work experience • Savings during first 2 years accumulate interest Cons • Time • Low Salary

9. Work/College Part-Time Pros • Tuition is paid • Work experience Cons • Time • Low Salary after High School

10. Spreadsheet Rates The following are data that are assumed for spreadsheet calculations:

11. 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

12. 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

13. Sensitivity Analysis • Rate of Return • Tuition Loan • Savings Gradient • Percentage of Income to Repay Loan

14. S.A. Rate of Return Work Full-Time for 2 Years Work and College Part-Time College Full-Time At minimum, ROR needs to be at least 7% to have the most Savings At minimum, ROR needs to be at least 9% to have the most Savings At minimum, ROR needs to be at least 8.5% to have the most Savings

15. S.A. Tuition Loan College Full-Time Tuition Loan needs to be less than about $12,000 for the Best Savings

16. S.A. Savings Gradient Work and College Part-Time Work Full-Time for 2 Years College Full-Time 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 Savings Gradient needs to be at least 10.5% to have the most Savings Savings Gradient needs to be at least 11% to have the most Savings

17. S.A. Repaying Loans College Full-Time Need at Least 30% of Income to Repay Loans to Have the Best Savings This is NOT Realistic

18. 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

19. 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

20. 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

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