A good age to start pension plans

[Beppington]

Yes but I have too few posts to post it.

Telegraph dot co dot uk slash finance/personalfinance/7146562/Britons-desire-to-stay-young-sees-them-refusing-to-save-for-the-future.html

I'm not sure starting as early as possible is such a good idea. In their early 20s most people have student debts to pay off and are living in rented accommodation. I prefer feh's idea of starting once you have purchased a house.

It doesn't have to be this way: On Dave Ramsey's radio show last nite a female caller asked him how she should go about financing her college educ. & master's. She said she didn't like the idea of going into debt, & wanted his advice. Dave agreed, & said that while he knows it's not popular, he recommends you take on no debt going to college. Either get a scholarship(s), save up before starting, or work as needed while going, but don't go into debt. He said he worked 40-60 hours a week when he was getting his educ., so he doesn't have much sympathy for people not wanting to work & go to school.

[Joan.of.the.Arch]

It doesn't have to be this way: On Dave Ramsey's radio show last nite a female caller asked him how she should go about financing her college educ. & master's. She said she didn't like the idea of going into debt, & wanted his advice. Dave agreed, & said that while he knows it's not popular, he recommends you take on no debt going to college. Either get a scholarship(s), save up before starting, or work as needed while going, but don't go into debt. He said he worked 40-60 hours a week when he was getting his educ., so he doesn't have much sympathy for people not wanting to work & go to school.

Well, goody-goody for Dave Ramsey. He got his degree in 1982. The average cost of tuition has risen by about 9 times since then, and that is in general inflation adjusted dollars. Does Ramsey think he could work nine of those 40-60 hours/week jobs to put himself through school? The cost of tuition has far outstripped the cost of living since 1982. The cost of tuition has even far outstripped the cost of medical care since 1982.

[puck36]

Well, goody-goody for Dave Ramsey. He got his degree in 1982. The average cost of tuition has risen by about 9 times since then, and that is in general inflation adjusted dollars. Does Ramsey think he could work nine of those 40-60 hours/week jobs to put himself through school? The cost of tuition has far outstripped the cost of living since 1982. The cost of tuition has even far outstripped the cost of medical care since 1982.

I believe Dave could. I worked full time in the summers and part time during the school year to pay for my college.

[Beppington]

Well, goody-goody for Dave Ramsey. He got his degree in 1982. The average cost of tuition has risen by about 9 times since then, and that is in general inflation adjusted dollars. Does Ramsey think he could work nine of those 40-60 hours/week jobs to put himself through school? The cost of tuition has far outstripped the cost of living since 1982. The cost of tuition has even far outstripped the cost of medical care since 1982.

Maybe the student could consider part-time school & full-time work (40-60 hrs)?

Regardless of how a student chooses to pay for college: I believe debt is bad. You become a slave. It can be overwhelming. Better to hear it now & realize it's true, rather than later once the damage has been done.

Look how looong & detailed this article is about how bad student loans are.

Do you really want to enter into a relationship, i.e. your loan agreement (with loan sharks), that results in this much discussion explaining how bad it is??

[woodie96]

Man...now I feel bad.....guess I'm the latest starter so far at age 41......had visions of starting years ago...but divorce ended those visions....so step back...regroup and go at it again....

[Caoineag]

Maybe the student could consider part-time school & full-time work (40-60 hrs)?

Regardless of how a student chooses to pay for college: I believe debt is bad. You become a slave. It can be overwhelming. Better to hear it now & realize it's true, rather than later once the damage has been done.

Look how looong & detailed this article is about how bad student loans are.

Do you really want to enter into a relationship, i.e. your loan agreement (with loan sharks), that results in this much discussion explaining how bad it is??

As someone who worked a hair under 32 hours per week while going to school full time, I am always amused when people think everyone can get a job that pays well on a high school education. I was a min wage worker and got scholarships and still left school with some schooling debt. And I went to the 5th cheapest school in my state. That said, I only walked away with 20k in student loans despite 5 full years of college since I was trying my best to accumulate as little debt as possible.

Private loans are definitely nasty but the government ones are rather forgiving (so long as you don't stop paying on them completely of course). Oh and when I went to college, part time students lost access to a lot of scholarships because they weren't full time.

[Beppington]

As someone who worked a hair under 32 hours per week while going to school full time, ...

Why did you work only 32 hours per week?

... I am always amused when people think everyone can get a job that pays well on a high school education.

Did I write that you could get a job that pays well with just a high school education? And, if you can't get a high enough paying job, it seems to me that the alternative is to work more hours.

I was a min wage worker and got scholarships and still left school with some schooling debt.

Couldn't you have worked more & taken less credit hours? Did you need to finish school as quickly as you did?

That said, I only walked away with 20k in student loans despite 5 full years of college since I was trying my best to accumulate as little debt as possible.

Only?! $20K is a lot!!

My guess is you knew pretty well what everyone else was doing, i.e. being "normal" by going deeply into to debt for an education, & decided that must be the thing to do ... instead of really analyzing your particular situation & coming up with a plan to get educated without going into debt.

I don't mean to bust your balls here, after all what's done is done; I just think a student should be able to get an education without going into debt. Not to say it would be easy, as it will take careful planning & probably a lot of working.

[am_vanquish]

Another (less popular) option for reducing the cost of education is trying to finish early. I understand this isn't really an option for everyone, but it worked well for me. I was able to graduate in only 3 years by taking heavy class-loads each semester.

I also worked 20+ hours/week each Fall/Spring semester and I worked full-time during the summers (no classes). I consider myself fortunate to have actually increased my net worth while attending college instead of taking on incredible amounts of debt. It was a lot of hard work, but it's paying off now - no student loans means I can max out things like 401k match, Roth limits, and ESPP.

[jIM_Ohio]

It doesn't have to be this way: On Dave Ramsey's radio show last nite a female caller asked him how she should go about financing her college educ. & master's. She said she didn't like the idea of going into debt, & wanted his advice. Dave agreed, & said that while he knows it's not popular, he recommends you take on no debt going to college. Either get a scholarship(s), save up before starting, or work as needed while going, but don't go into debt. He said he worked 40-60 hours a week when he was getting his educ., so he doesn't have much sympathy for people not wanting to work & go to school.

Take on no debt for college is a good ideal to have, but is not reality. Dave is not wrong to advise it (avoiding debt), but its not good general advice.

Time value of money...

If a person takes 8 years to work thru college (earning lets say 20k per year during college and it costing person numerous things like:
1) no retirement savings
2) suggested college costs of 10k per year (meaning you have to live on the other 10k per year you earn if 20k is assumed income).
3) starting salary of 40k once 8 years/80k of tuition is spent with a degree in tow.


Take another person which borrows the 80k
they finish 80k of tuition in 4 years, have that 40k salary 4 years earlier. Meaning higher retirement contributions 4 years sooner and also debt payments of about $900/month.

Which is better?

This assumes tuition of 80k gets you a job making 40k- most engineers and technical people could make that path happen, no idea about other occupations. The higher wage the occupation pays, the more the borrowing (leverage) comes out ahead.

If you are going to do something like teach (lower paying job) then the more Dave's no debt approach is decent general advice.

[disneysteve]

Well, goody-goody for Dave Ramsey. He got his degree in 1982. The average cost of tuition has risen by about 9 times since then, and that is in general inflation adjusted dollars. Does Ramsey think he could work nine of those 40-60 hours/week jobs to put himself through school? The cost of tuition has far outstripped the cost of living since 1982.

This is so true, and many people even in their 30's don't realize this. Certainly many of my peers in our 40s don't know it until our own kids start looking at college. The school I graduated from in 1986 was about $10,000/year for tuition, room and board at that time. Today, the same school is over $40,000/year. In 24 years, the cost has increased four-fold. In the same 24 years, minimum wage has only increased from $3.35 to $7.25, a little more than double. So a student who wanted to get a job at the mall or somewhere else near campus, mostly low-income stuff, would have a far more difficult time today earning enough to cover college expenses.

Maybe the student could consider part-time school & full-time work (40-60 hrs)?

This isn't practical for many career paths, especially if you are entering a field that requires an advanced degree. I spent 11 years in school as it was going full-time. How long would it have taken had I only gone part-time?

Regardless of how a student chooses to pay for college: I believe debt is bad.

I disagree with this generalization. It is not a bad thing to borrow money to make a lot more money. If someone can borrow 50K in order to get an education that will then land him a job earning 100K, that sounds like a shrewd investment to me. Of course, borrowing 100K to get a degree in advanced basket-weaving that pays 25K is a whole different story.

[jIM_Ohio]

[quote=disneysteve;250982]This is so true, and many people even in their 30's don't realize this. Certainly many of my peers in our 40s don't know it until our own kids start looking at college. The school I graduated from in 1986 was about $10,000/year for tuition, room and board at that time. Today, the same school is over $40,000/year. In 24 years, the cost has increased four-fold. In the same 24 years, minimum wage has only increased from $3.35 to $7.25, a little more than double. So a student who wanted to get a job at the mall or somewhere else near campus, mostly low-income stuff, would have a far more difficult time today earning enough to cover college expenses.

Maybe the student could consider part-time school & full-time work (40-60 hrs)?
This isn't practical for many career paths, especially if you are entering a field that requires an advanced degree. I spent 11 years in school as it was going full-time. How long would it have taken had I only gone part-time?


I disagree with this generalization. It is not a bad thing to borrow money to make a lot more money. If someone can borrow 50K in order to get an education that will then land him a job earning 100K, that sounds like a shrewd investment to me. Of course, borrowing 100K to get a degree in advanced basket-weaving that pays 25K is a whole different story.

Steve-

In 1991 I graduated from HS- list price for a full year's tuition when I looked at colleges was about 9k per YEAR for a degree in enginneering. I went to a top 5 engineering school.

By time I finished in 1997, tuition was listed at 15k per YEAR. Nearly double what it was 7 years earlier.

The logic the school gave was the following:
The students it was competing for were looking at Harvard, Yale and Stanford (for example), so by increasing tuition the sticker price would be more comparable.

I read something a few months ago that whenever the fed government passed a tax break for tuition, that the upper level schools just added that to tuition costs. If government creates a student loan interest deduction, colleges just estimate what that is worth, and increase tuition accordingly.

One example of the law of unintended consequences. Pass a tax break for middle class, and the colleges elitist behavior just raise tuition more.

One theory I have of Harvard (and Ivy league schools in general) is they are their own economies which bypass taxes. Harvard has an endowment bigger than most pension plans, and more stable too (because alumni donate every year) and the school is under "no obligation" to spend the endowment. It uses the endowment for scholarships and financial aid, but by no means does it even pay out all its gains each year as aid. Meaning if the endowment is $100 billion, 4% of the that is $4 billion, no way the school is handing out $4 billion in aid each year, so some of those gains get reinvested, and that $100 billion grows to 102 billion without any new donations... and the self fulfilling prophecy continues...

Mandate that schools spend their endowments might help keep tuition under control.

[GREENBACK]

It doesn't have to be this way: On Dave Ramsey's radio show last nite a female caller asked him how she should go about financing her college educ. & master's. She said she didn't like the idea of going into debt, & wanted his advice. Dave agreed, & said that while he knows it's not popular, he recommends you take on no debt going to college. Either get a scholarship(s), save up before starting, or work as needed while going, but don't go into debt. He said he worked 40-60 hours a week when he was getting his educ., so he doesn't have much sympathy for people not wanting to work & go to school.

This is the route I took to get thru college back in the early 80's. It took me 10 years to get my degree. I quit a couple of times to work three jobs. I got little sleep but earned nearly the money I make now. As mentioned, tuition and everything else is far more expensive but motivation goes a long way towards reducing the debt load. I graduated with only a couple thousand owed and got that taken care of in a year or so.

Maybe you can't completely pay for an education that way nowadays but you can reduce the debt you'll owe later. I'm not a big DR fan but do like this advice in it's proper perspective.

[LivingAlmostLarge]

How do you go on? Most intensive graduate programs require full time work, so if they had to pay cash for medical, dental, law, etc who could afford to go?

[Beppington]

How do you go on? Most intensive graduate programs require full time work, so if they had to pay cash for medical, dental, law, etc who could afford to go?

Nobody. And then the price would come down.

[Caoineag]

Why did you work only 32 hours per week?



Did I write that you could get a job that pays well with just a high school education? And, if you can't get a high enough paying job, it seems to me that the alternative is to work more hours.



Couldn't you have worked more & taken less credit hours? Did you need to finish school as quickly as you did?



Only?! $20K is a lot!!

My guess is you knew pretty well what everyone else was doing, i.e. being "normal" by going deeply into to debt for an education, & decided that must be the thing to do ... instead of really analyzing your particular situation & coming up with a plan to get educated without going into debt.

I don't mean to bust your balls here, after all what's done is done; I just think a student should be able to get an education without going into debt. Not to say it would be easy, as it will take careful planning & probably a lot of working.

I only worked 32 hours per week because my work didn't want to pay me benefits and everything over 32 was full time. If I had gone part time, I would have lost all of my scholarships (they did not permit part time students to receive them, their rules, not mine). I lived in Michigan at the time, number 1 for unemployment stats for how many years(and no, I couldn't have gone out of state cheaper, that tacks on another 10k to tuition)? I was considered lucky to have a job. I was completely self supporting, no parental involvement at all and the 20k was a calculated risk not based off other people's amounts but based on what I could do with an actual degree.

The day I graduated, I moved to another state and had a job the day after I moved there. My student loans have never been a burden and in another 2-3 years will be paid in full. I have made plenty of mistakes in life, but my college degree was not one of them.

My cost benefit analysis said that it would allow me to earn more by taking on that student loan than not (yes I did the math on my own). I was right. It would have cost much more and been infinitely harder to get through school on a minimum wage job than to take the loan and start earning much more money shortly thereafter.

As to what other people were spending at the time, I have no clue. I do know that I chose to go to this school instead of Cornell because Cornell would have cost me 100k and I didn't want any debt. Did I end up with debt? Certainly, but nothing like it would have been if I had gone to a more expensive school.