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43 with four kids under 10
Old 02-07-2018, 08:32 PM   #1
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43 with four kids under 10

Hi everyone,

I'm 43, married, four kids from 2 to 10 and I have been lurking on various early retirement sites for a few years but this is my first post. RE is a goal as soon as possible (BS bucket overflowing!) but, with young kids, brings with it a high amount of anxiety. I'd love to hear from anyone that has an opinion, a similar experience, or just a random thought that can make a difference. I've received a lot of varied and valuable feedback from reading lots of your posts but I'm taking the plunge now for specific feedback!

I'm hesitant to set a "what's your number" goal because I find myself moving the goal posts. But, the "number" is probably something I'm seeking as well as either constructive criticism or affirmation that we're on the right track.

Our numbers and info: fairly LBYM in general with a decent track record of savings. ~2.1MM net worth: 1.2 of which is tax deferred, 300K home equity, 350K in taxable (index funds), 200K in 529s (moderately aggressive), 50K emergency fund (cash).

Life is great right now except for 'work'! (well, I can't truly say that when it funds everything but the love is gone). Home life is great, kids are growing fast, activities are going to increase and this brings with it an expectation of increased costs. That said, we truly value experiences over things so we're happy to enjoy the kids experiencing things/events/activities and willing to invest in those. Right now, annual expenses are about $90K, which includes very little corner cutting and many 'nice to haves'.

The challenge is mainly when to decide to back off work and be comfortable that we can keep the high value family activities, reduce the stress of work, and not worry about the financial impact. Scale back? Change jobs? New Career? Quit? Suck it up for X more years?

I'm pretty comfortable with investment vehicles, choices, costs, diversity, etc. What are your opinions on the numbers above? If solid, what to do going forward!?

Thanks in advance for any and all opinions!

IHaveHope
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Old 02-08-2018, 12:01 AM   #2
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Been there, done that, got the t-shirts!

Sounds like you are doing very well. We chose to scale back as time went on but I especially was going pretty hard until 50 and then pulled back for 3 years before pulling the plug. DW and I still dabble a bit doing things that we like and that occasionally we get paid for but that isn't why we do it. Children are now 18, 20, 22 and 24. All in college or beyond. We have the benefit of being in Canada so healthcare costs are not a major concern.

Figuring out your number is a very personal things and so many variables but does sound like you are on track. Good luck. Enjoy!! They are only young once. We are waiting for grandkids but could be quite awhile.
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Old 02-08-2018, 04:25 AM   #3
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I would say that "your number" is where your spending, including taxes, medical, and buffer for the unexpected is in the range of 3-3.5% of your investments.
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Old 02-08-2018, 05:55 AM   #4
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You are in a very high risk situation in order to retire. 40+ years of longevity. 4 kids that may need marriage funding, life funding and college funding. Barely enough to do a 3.5% withdrawal rate and make ends meet. Your SS will be smaller and likely no pensions.

Maybe you have a spouse that works and will continue to do so? If that is the case, it lessens the risk and is not really retiring. It is not being retired, it is being a stay-at-home mom/dad, and living off someone else.

Start by cutting expenses now. Increase any savings rate to the max. Put the max in your 401K, HSA, After tax IRA, Roth IRA, etc. If you are not already doing maximizing those accounts, it show you cannot cut spending any more than you already have, as those extra savings are a no-brainer. It means that even though you say you can cut, you have not. It shows your lack of will-power. If you have maximized those savings, it shows determination.

Start small on reductions. Reduce the kids allowances this week by 25% and see what happens. If you cannot do that, it shows you will not be able to hold the line when they come for money for college or life later when you really do not have the extra money. Or perhaps your own spending may be tougher to cut than you think.
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Old 02-08-2018, 08:40 AM   #5
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Hi and Welcome, you are doing quite well from a net worth perspective. I am in a similar situation, four kids between 2 and 10, 43 and still working. You are ahead of me financially, but have a higher burn rate than I do.

I too would like to FIRE ASAP, but I need at least seven more years to get there. My current spend is $60k, but I expect it to increase as the kids get older, so I am aiming for $100k in annual spend and will need about $3.3M to be comfortable. I would like to RE before the oldest goes off to school, but we'll see how that goes.

Although you have $2.1M to your name, you "only" have $1.6M that is accessible for your expenses. At your current spend level, that is 5.6% of your assets. Does that included taxes and charitable donations as well?

I would not be comfortable pulling the plug until you get to $3M in assets 3.3% WR, you could do this either by working longer in a low stress job (let investments grow without withdrawal or contributions) or keep working in your current job until you get to your number (by saving and investing more).

I have been adding income properties to augment my investments and regular income and if I get enough income from rental properties, I'll need less invested to pull the plug.
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Old 02-08-2018, 08:53 AM   #6
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If I were in your financial situation I wouldn't even consider ER. You are trying to predict events 40 or 50 years into the future. If you want to take a serious look, I suggest ES Planner, a software tool that lets you enter guesses at your whole future financial life -- "lifetime budgeting." Using it is a lot of work, though, involving excruciating detail. The proprietor is a guy named Larry Kotlikoff, who is a somewhat known talking head on TV. It's not BS, though. I have talked to Larry on the phone and he is the real deal. His heart is really in this thing. ESPlanner Inc.

If I were you, though, I would however take advantage of my financial security to go looking for a new job where I could get more satisfaction. Even if you take a pay cut, 43YO is too young to be chained to a job you hate.
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Old 02-08-2018, 10:09 AM   #7
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Agree with the above. I'm also 43 DW 45. We've saved enough to live on 3.5% of investable assets, but it feels like there is significant risk of pulling the trigger right into the beginning of a down market. Theoretically, 3.5% should still be safe, but as stated above you're not quite there when not counting your equity. I may have missed it, but do you earn enough that you can aggressively save over the next 2-3 years and significantly lower your withdrawal rate? Do you have health insurance lined up? We spend $1850/month currently with a 7k deductible. Hoping to benefit from ACA subsidies upon ER, but assuming the bill will fall squarely on us given the uncertainties.
Good luck and welcome!
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Old 02-08-2018, 10:22 AM   #8
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Welcome, IHaveHope! If you've been lurking here and on other similar sites, you know already that one size does not fit all when it comes to FIRE. A few things to consider:

- Are you and your spouse on the same page financially, both day-to-day and long-term goals? If not, this is the time to get there. If you are a one-income couple now, what's the timeline to go to two incomes (even if one is part-time)? If you are a two-income couple now, your expenses will drop significantly when you aren't paying daycare so that helps with funding college and retirement.

- If your BS bucket is full where you are, have you figured out why and what alternatives there might be? Even a 20% income reduction might be worth it if it lets you comfortably get to FIRE in your early 50s without the BS. You might consider seeing a career coach of some kind for ideas.

- The good news is that financially you are way ahead of most families your age, so congratulations on that and keep up the good work!
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Old 02-08-2018, 11:27 AM   #9
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Welcome!

I would not (personally) count Home Equity or 529 money in your NW, because you need somewhere to live, and that college money has a specific goal. So, that aside, your budget/WD rate should be on the rest. But yes, as others mention, given your kids' ages you have to anticipate a budget with a lot more wiggle room that most.

I'm sure others have done it earlier, but with the age spreads of your kids I'd be thinking what I could do to be ready in no less than 10 years (and that's still risky): You'd have 2 of them starting/near college then so a better idea on those costs, and the youngest would be 12 so you'd be able to better reduce the variables on their expenses and have a smaller window until they are all up and out. But your 200k in a 529 will maybe pay for one kid to graduate if you're lucky, starting 8 years from now.

Healthcare alone for 6 even this year would probably add 20k to expenses, and we're all likely in for a bumpy ride before that becomes more reliable (or worse).

That doesn't mean stay in the same job for 10 years, but it means something that at least lets you maintain, if not save at quite the same rate. Continue adding to the 529's and mortgage if you have one, while also still getting 401ks maxed, that kind of thing.

So, you don't have FI money, but you do have FU money.... if it's really that bad it's time to start a search for your next role, and figure out how much of a hair cut to salary you are comfortable absorbing.
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Not there yet, but not so far away either
Old 02-08-2018, 11:57 AM   #10
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Not there yet, but not so far away either

You're 43 with NW ~2.1M. That puts you roughly, let's see... um... about 2.1M ahead of where I was at your age. You're doing swell!

But I'll echo the other commenters that you're not quite ready to pull the trigger. Your life expectancy is on the order of 40 years, not the 30 that is the most commonly cited retirement duration. Those extra 10 years add a LOT of uncertainty, which will translate into needing a more conservative WR. You need to be thinking in the range of 3% or less, i.e. nest egg at least 3M (3M x 0.03 = 90k). And don't bother including your home equity unless you plan to sell it and live in a tent.

Also, remember that while you are busy growing that egg a bit more, the silent thief (inflation) will be quietly nibbling away at the purchasing power of your anticipated 90k in expenses. Even if you could squirrel away the extra mil in just four years, 3% inflation will turn your 90k spend into a bit over 100k. The necessary 3 million turned into 3.4 million.

Now, don't panic. The saving and spending and longevity curves will converge, but you're probably looking at something like 4 years before hitting the RE button. If that's too long to endure your current situation, perhaps you should consider looking around.

But back to my original observation: take comfort in your excellent progress so far. The first million is the hardest, the subsequent ones get easier and easier. Good luck, and keep posting!
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Old 02-09-2018, 05:14 PM   #11
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Thanks for all the great responses! Much appreciated. Here is some additional information based on questions and comments:
  • DW is stay at home with the kids so no income but no daycare!
  • I'm maxing 401K and I also max HSA (actually, I forgot to mention a $40K balance there). I'm taking full advantage of the triple tax benefit!
  • I'm also "maxing" (state tax benefit) 529 contributions at 14K per year (I did $28K last year, two separate accounts)
  • Income is now around $180K (obviously, hasn't always been there), which I should have mentioned because it helps to understand how important this is for our family and how difficult it is to walk away from!

To respond to some other comments, I recognize that I'm not ready to RE yet - definitely more work to do! Thanks to those that commented that I need to understand the root cause of work unhappiness because that's something I'm figuring out. And, I think I agree with the $3MM mark as a potential target.

What have your experiences been with a decent run up in savings and then making a decision to ease off? When have you allowed the money to work for you and reduced savings rates? How far from early retirement? [note: I saw a comment in a different thread about the spouse going back to work - I think it was tongue-in-cheek but my wife and I do talk about that, although I don't ever see it happening (at least not for financial reasons) so I'll take that off the table].

Lastly, what have your experiences been (potentially in similar situations) when approaching college? I don't think financial aid will be in our picture but with potentially more than one sibling in college at the same time and potentially not having a work income (if I retire), there might be something to explore there?
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Old 02-10-2018, 10:56 PM   #12
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Quote:
Originally Posted by IHaveHope View Post
Thanks for all the great responses! Much appreciated. Here is some additional information based on questions and comments:
  • DW is stay at home with the kids so no income but no daycare!
  • I'm maxing 401K and I also max HSA (actually, I forgot to mention a $40K balance there). I'm taking full advantage of the triple tax benefit!
  • I'm also "maxing" (state tax benefit) 529 contributions at 14K per year (I did $28K last year, two separate accounts)
  • Income is now around $180K (obviously, hasn't always been there), which I should have mentioned because it helps to understand how important this is for our family and how difficult it is to walk away from!

To respond to some other comments, I recognize that I'm not ready to RE yet - definitely more work to do! Thanks to those that commented that I need to understand the root cause of work unhappiness because that's something I'm figuring out. And, I think I agree with the $3MM mark as a potential target.

What have your experiences been with a decent run up in savings and then making a decision to ease off? When have you allowed the money to work for you and reduced savings rates? How far from early retirement? [note: I saw a comment in a different thread about the spouse going back to work - I think it was tongue-in-cheek but my wife and I do talk about that, although I don't ever see it happening (at least not for financial reasons) so I'll take that off the table].

Lastly, what have your experiences been (potentially in similar situations) when approaching college? I don't think financial aid will be in our picture but with potentially more than one sibling in college at the same time and potentially not having a work income (if I retire), there might be something to explore there?
At your tender age, I wouldn't back off the savings for a long time. You will need access to sufficient funds (probably in a taxable account) to support yourself for many years. Suggest that's where you put your money after you have maxed out the tax-deferred opportunities.

As for college savings, we invested early for my kids in 529s-about $50K each before they were 4 years old. With the other things we did, now appears I'm overfunded for undergrad, but there will be money for grad school should that make sense. Late DW and I ensured we set aside adequate funds for them to get an undergrad degree early on.

We're looking at state schools, and I won't go along with $200,000+ for an undergrad degree. Finally got the HS junior on board with that, and don't expect resistance from the 7th grader. Don't expect to qualify for any financial aid, and my kids know they are barred from getting student loans.
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Old 02-11-2018, 08:18 AM   #13
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... What have your experiences been with a decent run up in savings and then making a decision to ease off? ...
When you have thoughts of easing off, consider the following multiple choice question:
You are 75 years old, reviewing your investments. Which situation would you rather have?

(a) You realize that you are running out of money.
(b) You conclude that you may have saved a little bit more than you're going to need.
There is no penalty for having a little too much. The penalty for not having enough, though, is horrible.

Certainly there is a number after which you can ease off. But IMO it is a very big number. The only thing certain about the future is that it is uncertain. It is not at all inconceivable that there will be a worldwide depression with consequent bank and corporate failures. It is also not inconceivable that there will be a limited nuclear war. All those nifty retirement simulations and discussions of withdrawal rates give a sense of predictability that is simply false. There really are black swans out there. Somewhere.
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Old 02-11-2018, 10:24 AM   #14
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To echo what others have said - you are in great shape for this stage of your life, but it doesn't appear that you are quite at the ER stage. I have 10 years on you, but an extra kid (5 total) and just retired at the end of last year. Our spend rate is similar to yours also.

Continue to save and give a hard look 5 years from now and see if you can pull the trigger.
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Old 02-11-2018, 11:00 AM   #15
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You're in great shape. Much better than with 10 kids under 4.
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