Trading Degrees for Dollars?

Though it hardly feels like another year has passed and summer is coming to a close, it’s already time for back to school specials and gearing up for fall. Before we know it leaves will be falling and Thanksgiving turkeys will be pardoned.

Before this season gets away from us, though, it seems a good time to sit back, kick our feet up, and lend a little consideration to the purpose of education. All too often we find ourselves bogged down in homework, projects, papers, tests, football games, marching bands, school budgets and levies. In all the hustle of short term issues, it’s easy to lose sight of the farther reaching implications of a public education system.

After all, the real purpose of education is not to consume time with menial tasks, nor is it all about “the three r’s,” and even less so about the popularity contest that is senior prom. The real goal of education is to help mold young Americans into productive, civically-minded citizens.

Admittedly the question of whether our current educational system is successful with either of those goals has become and will almost certainly forever remain a source of major debate, but that’s a question for another issue. For now, it’s worth focusing on productivity of young Americans, how it is defined and how it can be fostered.

Over the past half-century there has developed an assumption among American academics [and parents] that every child should go to college. There is a tightly held belief that higher education is necessary for Americans to lead full, prosperous lives. Unfortunately, while college is certainly a great step for some, it almost certainly isn’t for many – in fact, in the long run it can prove extremely detrimental to their long-term security.

Consider, for example, two young Americans: one average young American who attends a four-year university and graduates with a bachelor’s degree before seeking employment, the second graduates from high school and shifts immediately into the job force by working in a skilled trade – a tool and die maker.

According to a recent study from CNN, the average American graduating from a four-year university has accumulated $35,200 in student debt by the time they graduate. Obviously anyone who opts to skip post-secondary academia and begin working immediately does so without that debt, so they’re already $35,000 wealthier than their college-trained counterpart.

Now, the average starting salary of a college graduate in the United States is roughly $45,000, according to the National Association of Colleges and Employers (or NACA). Assuming they are hired right away (which isn’t guaranteed in this job market) and dedicate 10% of their steadily-rising salary to pay off their college debt, our newly minted college grad can be debt free in about 10 years (per simple calculations at

In those ten years, our tool and die maker (starting as a level one, progressing to level two) has made, according to, roughly $43,000 per year. If they’re able to save just 10% of their salary each year for investing – the same portion our college grad is using to pay off their debt – and earn an average 8% annual return on those investments (which certainly isn’t out of the question), around the same time our college-graduated friend is becoming debt free, our tool and die maker has grown their investment account to just over $100,000.

Around this time our college grad (now 32 years old), after annual 5% pay raises (which is aggressive), is probably making about $73,000. It only seems natural that our hard working level one tool and die maker will have been promoted to a level two maker, increasing his pay to $51,000 annually. Now that our collegiate is debt free, we can hope that he continues deferring 10% of his annual income, this time for investing. To keep things fair we’ll assume he earns the same 8% return as our skilled tradesman.

With steadily increasing pay and compounding savings, our white collar college grad has accumulated a hundred-thousand-dollar investment account within eight years, just shy of their 39th birthday. By then, our tool and die maker, who is probably ready to step up from level two to three (and the corresponding $58,000 pay grade), has built a retirement fund worth just less than $300,000.

For another 10 years they toil – now each is 52 years old and the high school prom is a distant memory. Having continued to see incremental annual raises our college grad has watched his kiddy grow to a tidy quarter-million dollar account – certainly nothing to shake a stick at. Our tool and die maker, though, has over the same time watched their savings grow to a staggering $750,000 – and is likely ready to step into management as a level one tool and die supervisor making $65,000 per year.

For those keeping track, with annual 5% raises our college grad is now making nearly $200,000 per year, despite their retirement savings totaling just a third of their high school classmate.

Ten long years later (now 62), our college graduate has finally started watching dollars roll in, with their investment account finally topping the half-million mark. Of course, this pales in comparison to our tool and die supervisor, now ready to step up to a level two supervisor for the last several years of their career, which pays all of $73,000 annually. Of course, by this time their investment account totals more than $1.6 million.

Take these projections out another 4 years to 65 – a typical retirement age. At this point our anonymous college grad is earning a startling $366,000 per year, with more than $600,000 in savings. Certainly this is enough to live on through retirement – although it will likely require substantial lifestyle changes. Our skilled tradesman, though? He’ll be living the good life in St. Bart’s. Having ended his 48 year career making a maximum $73,000, he’s now living off a staggering $2.3 million retirement account.

Who was it that wrote that book All I Really Need to Know I Learned in Kindergarten? Maybe they were on to something there…

Ben Treece is a partner with Treece Investment Advisory Corp ( and licensed with FINRA ( through Treece Financial Services Corp. The above information is the opinion of Ben Treece and should not be construed as investment advice or used without outside verification.
« Back to the blog.