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43 with wife and 2 kids
Old 03-27-2012, 01:37 PM   #1
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43 with wife and 2 kids

I've enjoyed reading the forums so I thought I'd jump in now with my first post

Background
1) 43 year old guy, working in high COL area (California) with a high paying but unstable job that I dislike
2) Have 2 kids (9 and 4) both in daycare and after school programs
3) Wife is also 43 and working and travelling somewhat and has a high paying job (which she enjoys)

Saving and investing approach
1) Have been saving and investing for 15+ years and conscientiously putting money towards a 401k for the same amount of time. Currently 300k for me and 300k for her
2) Both contribute to ESPP
3) Both kids have a 529 and UTMA and we've been putting money towards both since they were born. Currently 200k in there in total
4) Wife has a conservative approach and has a seven figure sum tied up in Mutual funds. But she is totally hands off when it comes to finances. Doesn't even look at her statements.
5) I'm more aggressive and have a seven figure sum tied up in tech stocks
6) We LBYM and use Mint to track income and expenses. Used Firecalc and it gives a 100% success rate even on half our combined net income. I feel as though we're FI but slightly hesitant about ER because of daycare costs and our relative age between now and social security

Debt and spending
1) House (850k) was paid off this year so there is no mortgage
2) Drive old cars and they've been long paid off
3) No credit card debt. Always pay off at the end of the month
4) No real extravagent expenditure i.e no overseas trips or eating out much, no cable, cheap pre-paid phone
5) I cook for the family and we bag our lunches
6) No budget created but I see the spending in MINT and we're careful if not frugal
7) Average around 4k in spending per month. Used to be a lot higher i.e 7k.

Daycare - 1500
Food and household - 700
2 cars - 700
Bills - 400
Miscellaneous - 700

Miscellaneous is a catchall for kids expenses, one off annual home and car insurance and other stuff I don't really track. We have to have 2 cars at the moment since it's a commute for both of us and we drop the kids off

Concerns I have
1) After school and daycare expenses for each kid are $500 and $1000 respectively . I can take one or both out of daycare, but the younger one especially benefits from the social interaction and enjoys it immensely. These are our single biggest expenses right now

2) I'm really not happy at all in my current job (difficult manager and somewhat of an aggressive non appreciative work environment leads to a lot of stress). I'd like to leave but the work is somewhat specialized and it would be difficult to find something comparable elsewhere locally (wife travels, so it forces me to look for local opportunities)

I would like to semi retire or retire altogether or even move out of the area, but daycare costs won't go away. I think it'll be the same everywhere. Wife also doesn't want to move and kids are somewhat settled in a good school district, so it would be somewhat selfish on my part

3) Asset allocation needs review. Wife has 80% in mutual funds and 20% in stocks. MF are largely index funds, but it's all over the place. Mine are in 80% stocks and 20% MF. Nothing in bonds, CDs or low interest but safe yields. I like the idea of more income coming in, but tech stocks are doing so well with the principal growing so well, it makes me hesitant to sell for something safe but perhaps low yielding. I'm torn. I believe I would benefit from professional help but I'm somewhat distrustful of financial advisers. Are there specific funds I should consider and research further on ?

4) Not dependent on social security. We're 43. But nice to think we have another income stream coming in, but it's a long wait for a small sum
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Old 03-27-2012, 03:41 PM   #2
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Mighty Wingman, what are you waiting for?

If you have 'seven figures' in mutual funds, your wife has 'seven figures' in mutual funds, this means your non-IRA/401k savings are north of $2MM.

SWR of 4% on $2MM is $80k/year- your expenses are $48k/year.

Your 401k assets should more than double in 12 years, leaving you with another $1.2MM available when either of you are 55.

It's time for you to become 'Mr. Mom', especially if DW has a high-paying gig that provides HC coverage.

...am I missing something?
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Old 03-27-2012, 04:18 PM   #3
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Sounds like you got more than enough, but unless I missed something, I didn't see that your wife was looking to ER, just you.

That can certainly work OK, but may cause resentment in one way or the other (you resent her because she is still tied to a job and you want to travel or she resents you because she goes off to work all day and you sit in your underwear and watch TV and she still comes home to a dirty house).

Best make sure you re both OK with the plan, because with your stash, its not really a financial decision.

Can't see why you would need to pay for daycare if you are retired however? Spending more time with my kids, while they were small was my man motivation to ER. There goes your biggest monthly expense.
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Old 03-27-2012, 10:44 PM   #4
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LBYM really works. LBYM with big incomes works even better. The FI you have achieved provides you with all sorts of options. You and your wife need to figure out what both of you want to do. The obvious choice would be for you to retire now and stay home and be a super dad. Think beyond that choice looking for others. What if your wife were to retire now so she could stay home and be a super mom and then you could go looking for the job you really want? You could even consider the option of both of you retiring now though having one of you working may be the source of your health insurance and with both retired it might be expensive to get other HI.
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Old 03-27-2012, 10:49 PM   #5
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Did not see cost for Health Ins but if only one retires and the other is willing to still work and cover that it would be a non issue as long as you stay married and she stays willing to work. Otherwise you might need to consider not can you afford it now but can you even get it and if so can you afford it in 10 or 20 years at 15% increases.
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Old 03-27-2012, 11:36 PM   #6
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One other wrinkle to think about-- saving $$$ for the kids:
Turns out the method to determine whether your kid will qualify for financial aid depends more on the $ in he kids name (UTMA) than the money you have (including any 529s which are considered yours NOT the kid's)

Now with tax laws as there are any $$ you are saving in their name in UTMA might as well be in your name- so long as you think of it as theirs...so you might preserve their chance to get aid when they go to college-- assuming that is your plan-- not trying to be a "snob"
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Old 03-28-2012, 11:21 AM   #7
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farmerEd
Yes it would be just me who is thinking of ER. She's ok with working for the next 5 years and for me to ER or do something else. She's not putting pressure on me to stay home with the kids. I feel somewhat obligated to do that however since she'll be the one working. I do spend enough time with them since I don't travel and I currently do the majority of the household chores anyway (gardening/cleaning/cooking/bills/shopping/pickup/dropoff/homework help) But you raise some good points and I haven't probably given enough thought to this time between now and when she wants to retire. I've also been charging hard for so long and striking a work life balance that it's not come up before. But really tired of the workplace and not getting any satisfaction with that aspect of my life

ejw93
From an absolute net income point of view, I think we're ok and sure theoretically 4% SWR results in around 80K
But from a real world asset allocation and income generation point of view, it's currently not optimal
I need a better strategy on how to easily generate 48K-80K upwards based on the principal we have, preserving principal and not being hit by so much in taxes come April
I can see the principal growing but I'm afraid there's not enough free flowing income coming in if one person retires i.e big tax bills etc

jclarksnakes. fisherman
I am concerned about health care and the family is currently on my plan. We'll go over to hers if I decided to leave and this is a risk we've talked about if goes for ER as well. We're both healthy but with young kids for me this is also holding me back. If it was just me and I had no other responsibilities, I would have left a long time ago

urn2bfree
I'm not relying on financial aid. I don't expect to pay for their complete education. It's a good sum in there right now. The UTMA was setup so that this would be their inheritance. Both of us have probably blindly put money aside for the longest time without thinking too much of the end goal and LBYM

It feels like a selfish decision to leave when you have responsibilities
I'm torn right now
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Old 03-28-2012, 11:32 AM   #8
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Quote:
Originally Posted by winging View Post
farmerEd
Yes it would be just me who is thinking of ER. She's ok with working for the next 5 years and for me to ER or do something else. She's not putting pressure on me to stay home with the kids. I feel somewhat obligated to do that however since she'll be the one working. I do spend enough time with them since I don't travel and I currently do the majority of the household chores anyway (gardening/cleaning/cooking/bills/shopping/pickup/dropoff/homework help) But you raise some good points and I haven't probably given enough thought to this time between now and when she wants to retire. I've also been charging hard for so long and striking a work life balance that it's not come up before. But really tired of the workplace and not getting any satisfaction with that aspect of my life

ejw93
From an absolute net income point of view, I think we're ok and sure theoretically 4% SWR results in around 80K
But from a real world asset allocation and income generation point of view, it's currently not optimal
I need a better strategy on how to easily generate 48K-80K upwards based on the principal we have, preserving principal and not being hit by so much in taxes come April
I can see the principal growing but I don't believe there's enough free flowing income coming in if one person retires

jclarksnakes. fisherman
I am concerned about health care and the family is currently on my plan. We'll go over to hers if I decided to leave and this is a risk we've talked about if goes for ER as well. We're both healthy but with young kids for me this is also stopping me

urn2bfree
I'm not relying on financial aid. I don't expect to pay for their complete education. It's a good sum in there right now. The UTMA was setup so that this would be their inheritance. Both of us have probably blinded put money away for the longest time and LBYM

It feels like a selfish decision to leave when you have responsibilities
I'm torn right now
What are those responsibilities you speak of? You seem to have provided your family with ample resources so far.

Generating say $60K in income from a multi-million dollar portfolio should not be that difficult. Unless your money is tied up in stock options. But, of course, as long as your wife continues to enjoy her high paying job and brings home a good income and healthcare bennies, your portfolio doesn't even need to generate any income at all to cover your expenses.
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Old 03-28-2012, 11:32 AM   #9
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My comments were not so much suggesting that you were relying on financial aid...but given that you are NOT going to be funding their education completely, you don't want to have them have "too much" in their UTMA so that THEY don't qualify for financial aid that might make it easier for them (and for you)....more of a keeping options open as best as you can strategy.
You could have the exact same money saved up for them but depending on how it is allocated could have very different impacts on the ability to qualify for aid.
Better to qualify for financial aid and not need it (ie have more of the money in your name as liquid funds or in 529) than need it and not qualify because too much of it is in their UTMA accounts.
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