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Can we afford it?
Old 12-25-2012, 08:51 AM   #1
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Can we afford it?

I'm new to this website so please be kind.
I'm 32 and my husband is 51. We have two young children. I'm a CPA but now a stay at home mom. I will go back to work when our twins turn 2(they are 4 months now). My husband currently bring home $4500 a month after taxes and 401k. Our expenses are $4000 a month. We have 40k in retirement accounts and 200k in the banks. We have no debts except our mortgage 220k at 3.5% 15 years fixed and 8 years left. My husband wants to retire at 62. He will probably get $1500 a month from social security. I will carry the family health insurance when I get back to work in about 1.5 year. I would like to retire at 50. Can we afford to have him retire at 62 and I'm at 50? What can we do to start this journey? Thank you.
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Old 12-25-2012, 09:13 AM   #2
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Welcome to the forum, anon. The answer to your question is "it depends".

Your NW is positive (barely) so I wonder why DH has not managed to get further ahead at 51. How frugal or speedy are you both? As a family, you are currently saving $500 a month, which is less than 10% of net income. That's not going to get you very far. A huge variable is your earning potential when you go back to work. That is considerable, but how much of it will you be able to save when child care for the twins is factored in?

As a CPA you are well qualified to do some financial modeling and I suggest you begin with FIRECALC. The link is below. Also, check the FAQ forum for some useful reading lists. I'm sure other forum members will be along shortly once they have opened their gifts.......
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Old 12-25-2012, 09:17 AM   #3
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Can't tell from the information you have given.

How much will you make when working as a CPA?

How much are you contributing to the 401k?

And how much do you plan on spending when retired?

Any other debt besides the house?

Probably some more questions others will have. I am sure they will chime in.

Good that you are thinking about it. Most people never give retirement a thought till its upon them.
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Old 12-25-2012, 09:25 AM   #4
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You probably want to do a little spreadsheet modeling, and play with FIRECalc to get a feel for the numbers, but it may be doable. I'm concerned that a 51 yo interested in ER has so little saved already, but if you both work 9 years before he retires and continue to live on his salary, you may be able to catch up quite a bit. Childcare expenses (and any future children) are a big wildcard. You probably need to invest most all your pay when you go back to work, so finding a very lucrative job is key. Also if you support the family for some years after he retires, that can give your savings a bit more time.

Good job on keeping expenses down for a family of four. You likely need to stay very good at this to make your plan work.
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Old 12-25-2012, 09:56 AM   #5
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Believe me your life will go in many directions and it's too early for an answer. Your husband will be 68 when your kids graduate high school.....how about college funds for two? Your expenses could be far higher than you are estimating and you'll have everything on you.....as the breadwinner, mother and the wife of an individual that will spend far more time in Doctor's offices than you can imagine now.

Why do I think this way? I'm a Dad in about the same position you are in but now far older than you and your husband. My son is smart, and is looking forward to a PHD .......not at all cheap. And, next month I see the eye Doctor, Dentist for a possible implant, take 7 pills a day, am a pre diabetic with it under control. And, compared to my same aged friends I'm really healthy.

I have a great wife, great kids, money in the bank but instead of taking retired folk vacations I'll be visiting colleges over the next couple of years. And, my wife who is a gem is thinking about returning to work.....we don't really need the money but it would come in handy and frankly she needs to keep busy......the age difference is a lifestyle difference as well.

Don't let me sound negative....I'm a very lucky guy and my wife and son feel the same way. All I'm saying is you can't know what to expect at this time in your life.

What would I do if I were you? I'd save a heck of a lot more money than you have....I'd have your husband hold off on SS intil later unless you intend to work later....I'd have both of you "think young" so you're fair to your twins. Think being parents for the next 17 years.....not retirement.

I've enjoyed every day with my wife and kids but many thought and still think I was nuts. I've given up retirement lifestyle and some days miss it. It's not all about money but the lack of it later in life will really be painful.

Good luck to you....I hope you're as fortunate as I have been as you live your life.
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Old 12-25-2012, 10:07 AM   #6
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If you are 32 and plans to retire at 51, and your twins are 4 months old, you will be facing bills for college for 2 right at the time of your retirement, provided that you do not have more children. You have to account for that and save for those expenses as well.
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Old 12-25-2012, 10:15 AM   #7
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Quote:
Originally Posted by anonforthis View Post
I'm new to this website so please be kind.
I'm 32 and my husband is 51. We have two young children. I'm a CPA but now a stay at home mom. I will go back to work when our twins turn 2(they are 4 months now). My husband currently bring home $4500 a month after taxes and 401k. Our expenses are $4000 a month. We have 40k in retirement accounts and 200k in the banks. We have no debts except our mortgage 220k at 3.5% 15 years fixed and 8 years left. My husband wants to retire at 62. He will probably get $1500 a month from social security. I will carry the family health insurance when I get back to work in about 1.5 year. I would like to retire at 50. Can we afford to have him retire at 62 and I'm at 50? What can we do to start this journey? Thank you.
Although your expenses will drop when the mortgage is paid off, I'll assume that they will stay @ $4k/month now and in retirement (they might rise or fall, which is for you to figure out). You don't mention what your net savings are (if he's maxing out 401k or what). I'll assume he is.

DH's contribution - $17k savings/year in 401k for 9 years, added to the 40k, growing @ 2% real return would be roughly $200k in 2012 dollars when he's 62. Also assume $200k in savings grows @ 2% real return.
DH's cash flow
$1,200/month SS (that's $1,500/month in 2021, reduced for 2%/year for inflation to get back to 2012 dollars)
$583/month from 401k, assuming 3.5% withdrawal rate
$700/month from taxable investment account (your $200k growing after 9 years)
$2,483/month total cash flow in 2012 dollars when DH retires @ 62.

Your contribution - Assume $17k savings/year for 15 years (ages 35-50), with 2% real return would be roughly $300k in 2012 dollars when you're 50. That $300k would provide $9k in 2012 dollars at a 3% withdrawal rate, or $750/month.

So when you retire at 50, your DH cash flow + yours would total roughly $3,200/month (in 2012 dollars), if he receives SS @ age 62.


Because you are so much younger than your husband - and if he has decent longevity genes in his family - it would make sense to strongly look at delaying his SS until he's 70. It would maximize your survivor's benefit, and increase his benefit. The only exception would be if your total earnings record (including the years you had $0) would be more than your spousal benefit.

The big unknowns are what your salary/net savings would be while both of you are working, and what your expenses are projected to be during retirement. If you're able to save significantly more when you're working, and/or your expenses are less than $4,000/month after the house is paid off, it would tip the scales much more in your favor.

As of right now, your plans look possibly doable, but in my personal opinion, somewhat on the 'marginal' side of the continuum for my comfort. Some members of the forum - given your retirement age at 50 - would opt for a conservative 3% (or slightly less) withdrawal rate, while others would sleep soundly at night with a 4% withdrawal rate.

As a reference, I'm 36, and am planning to hopefully retire @ 47-49 with about a 2.8% withdrawal rate (living off of dividends/interest, and letting the stash grow with inflation).

Quote:
Originally Posted by anonforthis View Post
We have no debts except our mortgage 220k at 3.5% 15 years fixed and 8 years left.
I'd strongly look at refinancing that mortgage. For example, PenFed Credit Union is offering a 10 year fixed @ 2.50% with zero points, about $3,700 closing costs. All you have to do to qualify is pay a one-time $20 fee to a non-profit national military family association. Plus, you can get 5% cash rewards back on all gas purchases with their credit card!
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Old 12-25-2012, 10:35 AM   #8
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My husband business failed. It left him with a lot debts and not much in retirement, but it's all okay now. I will make at least 50k a year once I return to work. We don't really plan to save for our kids college education because we went without it. Instead of saving for their college education, I will invest 3 hours everyday after school to teach them math, chemistry, and physics. My husband will teach them English since it is not my first language. This way, they will have high SAT scores and eligible for scholarships. I will also want them to work part time while go to school. My family came here late and we turned out okay without college savings from our parents. I forgot to mention, we also have a rental which brings us $200 net a month after expenses. The rental income is 1600 and expenses are $1400. We owe 120k on it and 15 years left.
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Old 12-25-2012, 01:06 PM   #9
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Quote:
Originally Posted by anonforthis View Post
My husband business failed. It left him with a lot debts and not much in retirement, but it's all okay now. I will make at least 50k a year once I return to work. We don't really plan to save for our kids college education because we went without it. Instead of saving for their college education, I will invest 3 hours everyday after school to teach them math, chemistry, and physics. My husband will teach them English since it is not my first language. This way, they will have high SAT scores and eligible for scholarships. I will also want them to work part time while go to school. My family came here late and we turned out okay without college savings from our parents. I forgot to mention, we also have a rental which brings us $200 net a month after expenses. The rental income is 1600 and expenses are $1400. We owe 120k on it and 15 years left.
I believe it is far too early for anyone to tell you when you can retire. But I agree with the way you are looking at your children's education.

America is a very child centered society, and it isn't turning out particularly well for us. College is absurdly expensive, but with intelligent, motivated kids it can be beaten.
Best of fortune in your lives!
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Old 12-25-2012, 09:28 PM   #10
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I suggest that you put your plan down in Quicken Lifetime Planner (included with Quicken Deluxe or higher). QLP is a pretty intuitive tool that will project your retirement assets and whether they will last for your lifetime.

Off-the-cuff I suspect that you will find that you don't/will not have sufficient assets for your husband to retire at 62 but that is just a guess based on what you provided but you really need to crunch the numbers.
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Old 12-26-2012, 02:09 AM   #11
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Instead of saving for their college education, I will invest 3 hours everyday after school to teach them math, chemistry, and physics. My husband will teach them English since it is not my first language. This way, they will have high SAT scores and eligible for scholarships.
Yes, well, good luck with that. When my children were young I had similar ideas. However, they had other ideas. I did do some work with children after school, however, many children are just not willing to do a lot of schoolwork after school that isn't required by the school. Some are. But, they aren't all willing to do it and not every child can be trained to do that. Children have their own personalities and abilities and desires and not all of them are academically inclined.

Also with children that are 4 months old it is a little soon to be counting the scholarships. Things I didn't foresee for my son when he was 4 years old: Dyslexia, ADHD, Dysgraphia. I'm not saying that he isn't smart. He is extremely smart (graduated high school at 15 for example) but he had some real challenges as well. He just didn't develop to be the kind of kid to get high SAT scores and scholarships even though he had the intellect to do it. I know that you probably think that won't happen with your children, but the point is that no one thinks it will.

I am not saying you have to pay for your children's college. What I am saying is that a plan that depends on high SATs and scholarships may or may not come to fruition regardless of the intellect of your children.
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Old 12-28-2012, 11:33 PM   #12
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I think that if you both REALLY want this, it will happen with a lot of hard work and sacrifices. I married a 49 yr old and I am 38, we are not having any children but he has a 19 yr old and a 16 yr old and college is expensive even with aid and grants! We have four years till child support and college is over till we can max out all retirement vehicles giving us some time to catch up. I am worried that you both don't have time to save for retirement and raise two children who will need/want things.
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Old 01-11-2013, 08:51 PM   #13
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Sure. Retire at 62 and go back to work - for you! Think about working towards having your own business. Then he can work till 65 and get a bigger SS check.
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