Berkeley (sticker) vs. UT (full ride) vs. NU (full ride) Forum

[cornellbeez]

545 for 25 years for three years of personal preference though. I think you'd regret it when you retired with a lot less money in the bank.

Based on my projections, earnings from our retirement funds will outpace the actual earnings somewhere between 55-60, so we can retire comfortably (at pre-retirement standards) before 60, for both of us. This include $225k debt from law school.

ETA, without the debt, it would be a year or so earlier. But no big deal. So 1 extra year of working vs. 3 years of preference.

Do you project making a million dollars a year by then or something? If not you need to check your math because this is ridiculous.

Best question in the thread

[théo]

You have a difficult decision ahead of you. I just wanted to say HUGE congrats on your impressive stats and an even bigger congrats on withdrawing from Harvard. That diploma mill doesn't deserve impressive people like you.

+1

[r6_philly]

545 for 25 years for three years of personal preference though. I think you'd regret it when you retired with a lot less money in the bank.

Based on my projections, earnings from our retirement funds will outpace the actual earnings somewhere between 55-60, so we can retire comfortably (at pre-retirement standards) before 60, for both of us. This include $225k debt from law school.

ETA, without the debt, it would be a year or so earlier. But no big deal. So 1 extra year of working vs. 3 years of preference.

Do you project making a million dollars a year by then or something? If not you need to check your math because this is ridiculous.

Best question in the thread

You guys are funny, accusing a programmer of bad math.

Anyway, it's too complicated to post recursive formula, so go here: http://www.bankrate.com/calculators/sav ... lator.aspx

put in:
initial: 100,000
month contribution: 8,000 (save $around 100k per year on 2 salaries)
interest rate: 6.5% (really conservative)
year: 20

result: 4.4 mil.

On 6.5% a year, you can have annual interest payment of $286,000 per year, about the same as pre-retirement income.

BTW, the real formula is much more complex because of salary increases, debt services, and living adjustments. But the point is if save around 100k a year you can have enough interest after year 20 to account for most if not all of your pre-retirement earnings.

And if you are financially sound you can get better than 6.5% which will alter the result by quite a bit.

[alexonfyre]

You guys are funny, accusing a programmer of bad math.

Anyway, it's too complicated to post recursive formula, so go here: http://www.bankrate.com/calculators/sav ... lator.aspx

put in:
initial: 100,000
month contribution: 8,000 (save $around 100k per year on 2 salaries)
interest rate: 6.5% (really conservative)
year: 20

result: 4.4 mil.

On 6.5% a year, you can have annual interest payment of $286,000 per year, about the same as pre-retirement income.

BTW, the real formula is much more complex because of salary increases, debt services, and living adjustments. But the point is if save around 100k a year you can have enough interest after year 20 to account for most if not all of your pre-retirement earnings.

And if you are financially sound you can get better than 6.5% which will alter the result by quite a bit.

If you honestly believe that you can get 6.5 points on anything short of venture capital investment, you have more to learn than you think.

[powerlawyer06]

You guys are funny, accusing a programmer of bad math.

Anyway, it's too complicated to post recursive formula, so go here: http://www.bankrate.com/calculators/sav ... lator.aspx

put in:
initial: 100,000
month contribution: 8,000 (save $around 100k per year on 2 salaries)
interest rate: 6.5% (really conservative)
year: 20

result: 4.4 mil.

On 6.5% a year, you can have annual interest payment of $286,000 per year, about the same as pre-retirement income.

BTW, the real formula is much more complex because of salary increases, debt services, and living adjustments. But the point is if save around 100k a year you can have enough interest after year 20 to account for most if not all of your pre-retirement earnings.

And if you are financially sound you can get better than 6.5% which will alter the result by quite a bit.

If you honestly believe that you can get 6.5 points on anything short of venture capital investment, you have more to learn than you think.

This has nothing to do with OP's choice anymore.....

Honestly 6.5 is low compared to most diversified portfolios. I have investments spread between small cap, mid cap, large cap and international equities. I was down 27% in 2008 and up 21% in 2009. Excluding those years my returns have averaged 11%.

6.5 is what I would expect to earn on Muni Bonds (including their tax exemption)

[alexonfyre]

You guys are funny, accusing a programmer of bad math.

Anyway, it's too complicated to post recursive formula, so go here: http://www.bankrate.com/calculators/sav ... lator.aspx

put in:
initial: 100,000
month contribution: 8,000 (save $around 100k per year on 2 salaries)
interest rate: 6.5% (really conservative)
year: 20

result: 4.4 mil.

On 6.5% a year, you can have annual interest payment of $286,000 per year, about the same as pre-retirement income.

BTW, the real formula is much more complex because of salary increases, debt services, and living adjustments. But the point is if save around 100k a year you can have enough interest after year 20 to account for most if not all of your pre-retirement earnings.

And if you are financially sound you can get better than 6.5% which will alter the result by quite a bit.

If you honestly believe that you can get 6.5 points on anything short of venture capital investment, you have more to learn than you think.

This has nothing to do with OP's choice anymore.....

Honestly 6.5 is low compared to most diversified portfolios. I have investments spread between small cap, mid cap, large cap and international equities. I was down 27% in 2008 and up 21% in 2009. Excluding those years my returns have averaged 11%.

6.5 is what I would expect to earn on Muni Bonds (including their tax exemption)

Then your risk is super high, and if you are willing to take the chance on losing your retirement at any time (regardless of how diversified and complex your investments are) then good.

The highest Muni bonds I have seen recently have been 5.5 and uninsured in very limited quantities. If you buy them in the volume that you were describing you would be looking at closer to 4.25, since you have to average in the lower rates. If you then factor in the loss ratio for risk on some of the lower rated bonds you would have to buy, you are probably closer to 4ish.

[powerlawyer06]

Then your risk is super high, and if you are willing to take the chance on losing your retirement at any time (regardless of how diversified and complex your investments are) then good.

The highest Muni bonds I have seen recently have been 5.5 and uninsured in very limited quantities. If you buy them in the volume that you were describing you would be looking at closer to 4.25, since you have to average in the lower rates. If you then factor in the loss ratio for risk on some of the lower rated bonds you would have to buy, you are probably closer to 4ish.

If you want to leave your savings/retirement in FDIC insured accounts earning < 1.5% that is your perogative. For me, I see market exposure as a necessary part of saving and investing. I am diversified so that even in the worse case scenarios (i.e. 2008) I do not lose all my capital and obviously the funds I am invested in had great returns as the market rebounded. Responses like yours are common. I have worked in finance for six years now and I can definitely attest to the fact that the market fluctuates. However it is the people that leave their money in the longest that get the highest returns.

My muni bond rate accounted for the tax benefit you get from owning muni bonds.

[powerlawyer06]

Also, come to Berkeley OP! I have some AZ ties as well. I hope to meet you in the fall.

[bigben]

You guys are funny, accusing a programmer of bad math.

Anyway, it's too complicated to post recursive formula, so go here: http://www.bankrate.com/calculators/sav ... lator.aspx

put in:
initial: 100,000
month contribution: 8,000 (save $around 100k per year on 2 salaries)
interest rate: 6.5% (really conservative)
year: 20

result: 4.4 mil.

On 6.5% a year, you can have annual interest payment of $286,000 per year, about the same as pre-retirement income.

BTW, the real formula is much more complex because of salary increases, debt services, and living adjustments. But the point is if save around 100k a year you can have enough interest after year 20 to account for most if not all of your pre-retirement earnings.

And if you are financially sound you can get better than 6.5% which will alter the result by quite a bit.

Now try this: take the payments on 225k for 10 years at fed rates - about 2600. Move those forward 20 years at your chosen rate and you get about 850k. So like I said, for the difference between 225k and $0 to be equal to only one more year of work at retirement, you'd have to be making nearly a million dollars a year. More if you use a higher interest rate or a period of more than 20 years. So yes, a programmer did some bad math.

without the debt, it would be a year or so earlier. But no big deal. So 1 extra year of working vs. 3 years of preference.

[glewz]

Now try this: take the payments on 225k for 10 years at fed rates - about 2600. Move those forward 20 years at your chosen rate and you get about 850k. So like I said, for the difference between 225k and $0 to be equal to only one more year of work at retirement, you'd have to be making nearly a million dollars a year. More if you use a higher interest rate or a period of more than 20 years. So yes, a programmer did some bad math.

I write in support of r6's math and proper judgment to recommend OP to attend Berkeley.

Go bears. /thread

[r6_philly]

Now try this: take the payments on 225k for 10 years at fed rates - about 2600. Move those forward 20 years at your chosen rate and you get about 850k. So like I said, for the difference between 225k and $0 to be equal to only one more year of work at retirement, you'd have to be making nearly a million dollars a year. More if you use a higher interest rate or a period of more than 20 years. So yes, a programmer did some bad math.

No, you forgot that my portfolio is making money too. You can do extended, graduated payment on 30 years, so the debt service is still on going in 20 years (and not full value as you assumed).

So if my portfolio is making 300-400k a year, plus the extra year of income (300-400k assuming standard increases) it will more than offset the lost investment from previous debt service (even at standarized payment schedule).

So I guess you are right that I will be making like a million a year. But not my earned income, but my total income (earned + portfolio). If I could realize more than 8% a year, it would even be earlier/sooner.

[rayiner]

Now try this: take the payments on 225k for 10 years at fed rates - about 2600. Move those forward 20 years at your chosen rate and you get about 850k. So like I said, for the difference between 225k and $0 to be equal to only one more year of work at retirement, you'd have to be making nearly a million dollars a year. More if you use a higher interest rate or a period of more than 20 years. So yes, a programmer did some bad math.

I write in support of r6's math and proper judgment to recommend OP to attend Berkeley.

Go bears. /thread

R6's calculations are completely ridiculous.

[r6_philly]

If you honestly believe that you can get 6.5 points on anything short of venture capital investment, you have more to learn than you think.

Making accusations about people not knowing stuff is easy on the Internet, but so is googling.

Google "30 year return on S&P" returns this:

--LinkRemoved--

So if you buy a low tax burden S&P EFT and hold it for 30 years, the historical return for 30 year avg is 10.36%.

Dow and Nasdaq have similar returns. Like others echoed, if you hold a diversified portfolio with a good mix of bonds, EFT and high risk investments, you can yield more than 6.5% on average easily. I mean, if you can get 5% coupon on muni bonds (with virtually no risk) you can reason to earn a lot more in stocks.

I mean, if it is hard to earn more than 5-6%, why is there an arbitrage law for munis

[r6_philly]

R6's calculations are completely ridiculous.

Don't question the assumptions because they are personal, nothing is wrong with the math.

[rayiner]

R6's calculations are completely ridiculous.

Don't question the assumptions because they are personal, nothing is wrong with the math.

The assumptions are so questionable that the math, even if correct, is completely irrelevant to this thread.

[09042014]

You guys are funny, accusing a programmer of bad math.

Anyway, it's too complicated to post recursive formula, so go here: http://www.bankrate.com/calculators/sav ... lator.aspx

put in:
initial: 100,000
month contribution: 8,000 (save $around 100k per year on 2 salaries)
interest rate: 6.5% (really conservative)
year: 20

result: 4.4 mil.

On 6.5% a year, you can have annual interest payment of $286,000 per year, about the same as pre-retirement income.

BTW, the real formula is much more complex because of salary increases, debt services, and living adjustments. But the point is if save around 100k a year you can have enough interest after year 20 to account for most if not all of your pre-retirement earnings.

And if you are financially sound you can get better than 6.5% which will alter the result by quite a bit.

Now lets factor in what that 150K in debt would be over that 20 years. $570,406.06

[r6_philly]

R6's calculations are completely ridiculous.

Don't question the assumptions because they are personal, nothing is wrong with the math.

The assumptions are so questionable that the math, even if correct, is completely irrelevant to this thread.

Ok commence questioning. What's questionable? Saving $8000 a month? Because if that's accepted, everything else is ok.

[r6_philly]

Now lets factor in what that 150K in debt would be over that 20 years. $570,406.06

Read a few post above. Earnings from portfolio + earned income will overcome 570k. Especially if you delay the principle payment by using extended graduated plan and earn a higher return with the debt service savings than the interest on the debt (which is fixed).

[FiveSermon]

R6 you should become my accountant. To hell with law school.

[r6_philly]

R6 you should become my accountant. To hell with law school.

Playing with numbers are boring. I used to work on financial calculation software, boring stuff. I am only interested in ibanking for my own money. Although I wouldn't mind working on muni bonds.

[r6_philly]

Of course just in case my math is fuzzy, I did another spreadsheet.

Standard 120 month payment plan on 200k v. extended graduated.

If loan interest is 6.8% and you invest every dollar of the payment differences at 8.5% interest, compounded monthly, at the end of 10 years, you will have $201,000 saved up from the difference. In the mean time, you did already paid down some of the principle (not sure how much because I can't find an amortization table on the student aid website). But the point is you will have some money left over after paying off the balance at the end of 10 years. But if you went with standard payment plan you will have no money and no principle.

So if the assumption that you will earn 8.5% is correct, then it pays to push off debt service into the future (obviously because you earn more than you are being charged).

So again if 8.5% is assumed, earnings from the savings will outpace the debt service by year 11. So you will only be paying the debt service out of pocket on the extended/graduated plan for 10 years. Total? $149,615. Also since you will have some left over after paying off the principle, you can add that to your retirement fund and let it grow for another 10 years helping to achieve earlier retirement.

Period (M) | Monthly Payment | Std Payment|Diff|Rate|Earning|Balance

1 $1,133.33 $2,301.00 $1,167.67 8.50% $0.00 $1,167.67
2 $1,133.33 $2,301.00 $1,167.67 8.50% $8.27 $2,343.61

year 10:
13 $1,365.66 $2,301.00 $935.34 8.50% $1,236.07 $176,675.64
14 $1,365.66 $2,301.00 $935.34 8.50% $1,251.45 $178,862.44

Year 10 month 11-12
23 $1,365.66 $2,301.00 $935.34 8.50% $1,394.88 $199,253.94
24 $1,365.66 $2,301.00 $935.34 8.50% $1,411.38 $201,600.66


formula:
earning = prev. balance * rate/12
Balance = difference + earning + prev. balance

[lisjjen]

R6 you should become my accountant. To hell with law school.

Playing with numbers are boring. I used to work on financial calculation software, boring stuff. I am only interested in ibanking for my own money. Although I wouldn't mind working on muni bonds.

Why are you going to LS, if you don't mind.

[FiveSermon]

R6 you should become my accountant. To hell with law school.

Playing with numbers are boring. I used to work on financial calculation software, boring stuff. I am only interested in ibanking for my own money. Although I wouldn't mind working on muni bonds.

Why are you going to LS, if you don't mind.

Models and bottles?

[r6_philly]

Why are you going to LS, if you don't mind.

There are personal aspirations that got me started down this path. Professionally, we pay more for legal services than my own work. I have hit sort of a glass ceiling for my profession, and I wanted to expand beyond that. Coupled with my personal reasons, this seems like a good move. Could go to business school but I don't want to work in the corporate chain anymore. I want to be a partner in a small firm, or a consulting company. JD seems useful.

[splitmuch]

Have you applied for a matching scholarship at Berkeley? I believe NU is one of the schools that they match?

Berkeley does NOT match Northwestern (or Texas).
http://www.law.berkeley.edu/6957.htm

Can someone explain to me why for Berkeley GULC > NU?

Probably because NW doesn't take parents income into account for aid decisions.