Married 50 year old with 2 young kids, looking to retire at 55

[akidagain2018]

Medical, medical, medical..... I stayed employed (single no kids) until I had a guaranteed economical solution to healthcare. Even if kids' college is covered through some other means, medical for a family could be a huge nut. Do the math under current rates and put a huge escalator on it. Costs will increase for Affordable Care Act policies (more than group plans), as the underpinning for that market was pulled once the mandate was pulled under current administration.

 

[MoneyIsMyHobby]

Which is the crazy part? We retired early, oldest has finished college and has a good STEM job and had multiple job offers as did the college roommates and followed similar paths. College for our oldest child had a 6 month pay back period on our out of pocket costs. That was even with paying for room and board for two years in a high cost of living area and subsidizing one of the roommates R+B. I guess it depends where you live but in California there are many good public school options and state grant money for tuition along the lines of the ACA limits. I believe the tax savings accounts for college count against financial aid?

The crazy part is the prices you indicated... they seem crazy amazing to me compared to what I'm facing. That said, I'm looking at college costs 10 years from now, and you are looking at them some years ago.

Furthermore, I'm relatively confident financial aid is not in the cards for my kiddos, but I'm certainly not going to spend in an effort to qualify (which I don't think is what you're suggesting anyway).

From:https://www.savingforcollege.com/financial_aid_basics/financial_aid_and_your_savings.php

In order to determine the investment mix that offers the most favorable impact on your child's federal financial aid eligibility, let's first look at how the formula for computing EFC works. The formula counts the following financial resources as being available to pay college expenses:

20% of a student's assets (money, investments, business interests, and real estate)
50% of a student's income (after certain allowances)
2.6%- 5.6% of a parent's assets (money, investments, certain business interests, and real estate, based on a sliding income scale and after certain allowances)
22%-47% of a parent's income (based on a sliding income scale and after certain allowances)

From: https://www.savingforcollege.com/financial_aid_basics/financial_aid_considerations.php

By now you're probably thinking that the financial-aid system is as complicated as the federal income tax, and that might be right. The summary presented here only scratches the surface. Navigating these murky waters may seem difficult, but remember these four basic points:

No matter what the rules say, college financial aid officers have great latitude in determining the aid package your child ultimately receives. Officers sometimes use "professional judgment" to adjust the figures - increasing the amount of aid or creating a more attractive ratio between gift aid and self-help aid. They might be more apt to do so if they see other reasons to want your child, such as special abilities or unique characteristics.
The rules are constantly changing. The way the financial aid system works today may not be the way it works when your child is ready for college.
Your investment decisions now do not necessarily lock you in for purposes of future financial aid eligibility. You will likely have many additional opportunities to enhance your child's prospects for aid.
Saving for college reduces your reliance on an uncertain financial aid system. Some families make the mistake of spending because they believe that saving puts them in a worse position to receive financial aid. Planning and saving for college helps you control your family's destiny no matter what the future brings.

MIMH

 

[daylatedollarshort]

The crazy part is the prices you indicated... they seem crazy amazing to me compared to what I'm facing. That said, I'm looking at college costs 10 years from now, and you are looking at them some years ago.

Our kids didn't go to San Jose State. I just used that as an example. I looked up the tuition prices for this year so those are current tuition prices. Even without financial aid, two years at community college and two years at a public, in state school where I live just doesn't cost that much, especially combined with tax credits and offset with student income from summer jobs, paid internships, tutor jobs, etc. Your state may differ. College just wasn't a huge financial issue for us even without the financial aid. If we had still been working we would have just paid our portion out of our job income.

 

[Hermit]

This is crazy to me. My kids are 7 and 8 and the estimation tools say I should estimate $24k-$27k/year for in-state school (In KANSAS)... that includes room & board & books, but not entertainment money. $100k for 4 years of college is still a good investment, but something most of us need to plan for (generally not something parents could cover without a savings account, especially if they have multiples in school at the same time).

The other thing is the tax-advantages of those savings accounts. In our state, you avoid tax when you contribute AND when you withdraw, plus the federal withdraw savings similar to a RothIRA...

My goal isn't to have 100% saved before college starts (there is always a possibility your kid doesn't go to college for 4 full years for whatever reason) but to have most of it in the bank. If I were going to try to RE before they start/finish school (which I'm considering) I would definitely want to have it all saved up with adequate planning.

MIMH

DD graduated from a Virginia state university in 2012. She spent her 4 years in the dorms. She got $1k/year scholarship. I paid the rest. FASFA was not an option. Total cost was around $65k. I did not find college tuition to be all that difficult to handle out of pocket. I am doing the same for DS, only he is way over the 4 year mark.

 

[Potstickers]

Kids do not live at home for free.

Many of the expenditures you make on their behalf while they're in high school do not need to figure into your budget for the 33 or so weeks they are in college living in the dorms. Think about how much you spend on groceries/hh consumables per week or month -- if $300/week covers 4 people, when one of those people is at college, you should be able to reduce grocery expenses by $2,500 over the course of the two semesters. You can also save a bunch on meals out, Starbucks, and all the small expenses associated with being a high school student. The money you spend on HS school sports/activities ($400 - 10,000 depending on the sport/activity -- and I've seen club hockey go even higher) shouldn't be an issue in college. The associated college costs are baked into the college's Cost of Attendance (tuition, fees, room & board, books & supplies, transportation, personal expenses) already. You don't want to double count them. Some costs (think summer camp) are simply avoided. Lessons (instrumental, voice) usually don't continue unless the student is a music/theatre major. Church youth group activity costs usually are eliminated.

When I sit down with families earning $100K-150K/year, it is rare that we don't come up with savings from the family budget of at least $8K/year. In many cases, the numbers are over $12K. The exceptions have been a couple exceptionally frugal families that grew a lot of their own food, rarely ate out, and had kids in very inexpensive hobbies.

Of course, you need to make sure that lifestyle creep doesn't eat up the savings.

Most students can work summers, and if they're living at home, put away at least $2500 towards the cost of college. A 10 hour/week school year job will likely earn another $2000 or so, and many college jobs come with the fringe benefit of no social security/medicare taxes.

Between the savings in costs and the student earnings, families tend to have more resources than they think they have. The American Opportunity Tax Credit can also help families - $2500/year with a MAGI under $160K.

You don't need to have everything funded through a 529 or from savings. (And, if you are income-eligible for the tax credit, you do want to make sure that at least $4K/calendar year of college qualified expenses is NOT paid from a 529 so that you get the credit.)

The biggest issue is that most parents have no idea how much they are spending. I've seen some pretty awkward discussions when parents finally realize how much a certain sport or activity costs -- especially traveling sports teams, where there can be significant travel expenses for both the student and accompanying family members as well as entry fees and team fees. Ditto on the incredulous look one dad received when he suggested that $75/week sounded about right for groceries for their family of 5 with two teen boys.

 

[daylatedollarshort]

Kids do not live at home for free.

Right, the cost of attendance figures for many colleges usually include categories like food and transportation - expenses that may not increase much for kids whether they are away at college or at home and in high school. One of our kids went to school in an urban with limited parking but discounted public transportation passes for college students so transportation costs were actually lower than they were living at home and having to drive more to get around.

Community colleges in our state also have transfer degrees for state colleges and separate program for the university system to get into the 4 year schools and have all credits transfer, with student contracts laid out to graduate with 60 more credits. The students don't have to worry about credits not transferring as the transfer degrees / admission programs are state law. This makes is easier to not have to take more than 4 years to graduate, as additional years would add to the cost.

 

[Cincyguy63]

Moving and or downsizing now is not in the cards, not at least until the kids are grown and out of the house. As a kid I liked growing up in one house, living in one neighborhood, keeping consistent friends, keeping close to family. I want all the same for my kids....so for now I guess I keep my head down and continue at mega corp. The pink slip will come eventually and when that day comes I plan to be prepared. This forum and the responses you all have provided help me in my preparation, so thank you all!

Decoy - I too work in Software sales @MegaTech and I'm in my mid 50's. Have you considered moving up into management or what we refer to here as the "farm" ie channel management. I find that the older I get, the more experience I get the more value I am in a leadership gig. Could extend the expiration date a 1/2 decade or more.

 

[Hermit]

Right, the cost of attendance figures for many colleges usually include categories like food and transportation - expenses that may not increase much for kids whether they are away at college or at home and in high school. One of our kids went to school in an urban with limited parking but discounted public transportation passes for college students so transportation costs were actually lower than they were living at home and having to drive more to get around.

Community colleges in our state also have transfer degrees for state colleges and separate program for the university system to get into the 4 year schools and have all credits transfer, with student contracts laid out to graduate with 60 more credits. The students don't have to worry about credits not transferring as the transfer degrees / admission programs are state law. This makes is easier to not have to take more than 4 years to graduate, as additional years would add to the cost.

Don't necessarily believe the credit transfer story. It might be true in general, but then again it might not be true for a specific curricula. That was the case for DS and he took 2 years worth of math and other courses twice. Universities play by their own rules in spite of what the state wants. The Ivory Tower is alive and well.

 

[daylatedollarshort]

Don't necessarily believe the credit transfer story. It might be true in general, but then again it might not be true for a specific curricula. That was the case for DS and he took 2 years worth of math and other courses twice. Universities play by their own rules in spite of what the state wants. The Ivory Tower is alive and well.

The transfer degrees from the CCs to the CSUs are state law and available in a wide variety of major /CSU combos:

New Law Increases Transfer Degrees Between Community College, CSU
https://edsource.org/2013/new-law-increases-transfer-degrees-between-community-college-and-csu/40349

Here is a list of all the transfer degrees for the CSUs. It seems pretty extensive-
https://adegreewithaguarantee.com/en-us/degrees.aspx

The UC system has a new transfer law for 2019 -
UC extends guaranteed admission to transfer students | The Sacramento Bee

"Starting next fall, students who complete one of those model curricula, which are meant to ensure they can graduate within two years after transferring, and meet the minimum grade point average requirement will also be guaranteed admission into the UC system. If students are not admitted to the campus of their choice, UC said it will place them at another campus that has space in their major."

 

[MoneyIsMyHobby]

Ditto on the incredulous look one dad received when he suggested that $75/week sounded about right for groceries for their family of 5 with two teen boys.

You mean because $75 is for a whole moth... right?



MIMH

 

[MoneyIsMyHobby]

I appreciate all of the thoughts here... I really do as they have been educational. That said, my parents paid for my college entirely (including a reasonable amount of 'fun money') and I would like to do the same for my kids - paying it forward. They let me keep any scholarships I earned and discouraged us from working - saying school was our job at that point. If we did work (I was a resident assistant in the dorm) we got to keep the money from working, rather than being expected to pay for college with it.

There are all different points of view on how to do college and how to pay for it, and we can all agree it isn't one-size-fits-all... but I'm going to pay for my kids to go to a state college (skipping Community College) and not require them to work while they're there. That part is settled. Now, how to ensure they appreciate their education and get the most out of their classes when they're not footing the bill... that's the next problem to solve.

Side note, I got a masters degree around 7 years after completing my BS. I was amazed how much more I cared about 'learning' at 29-30 vs 18-22. I seriously think that is less about the fact I was paying for it myself at that point, and more about the fact that I was 7 years more mature. I think we grow up a lot those first few years out of college.

MIMH

 

[daylatedollarshort]

That is certainly your choice on the part-time work, but paid internships can pay quite well as well as help with job offers post college. Many colleges have co-op programs that integrate with majors, which is what one of our kids participated in. From a recent Forbes articles, Internships: The Ultimate Return on Investment for Today's College Students:

"Phil Gardner, Director of the Collegiate Employment Research Institute at Michigan State University, reports that employers shifted from accepting candidates with limited experience in the early 1990s. Today, employers expect candidates to have the experience before applying. This shift has drastically changed the process of entering the workforce.

Researchers at the Georgetown University Center on Education and the Workforce found that 63% of college graduates who completed a paid internship received a job offer, compared to 35% who never interned. In addition, graduates with paid internships received a starting salary that was 28% higher than their peers without internship experience."


When our oldest graduated, he had jobs offers, relevant work experience and good references from both places he interned.

 

[MoneyIsMyHobby]

This just popped into my email box today from Vanguard (and I'm guessing many of your inboxes as well):

https://vanguardblog.com/2018/05/15/answers-to-your-top-college-savings-questions/

Here’s how it works on the Free Application for Federal Student Aid (FAFSA): Assets (including 529 plans) held by a parent can reduce need-based aid by 5.64% of the asset’s value. That means if you have $10,000 in a 529 plan, that savings could reduce aid by $564.

This really isn't any new info than I previously posted, I don't think, but was more focused on the question posed above regarding 529 plans reducing financial aid.

 

[njhowie]

Home equity: $1M
...
Expenses: $15K/month
...
What advice could you offer to better help me prepare over the next 5 years? My biggest worry about leaving the work force is health insurance and unforeseen big expenses.

I'm somewhat surprised that there aren't more comments regarding the $15K/month in expenses. That is pretty huge. I have to believe that there is quite a bit of fat in your monthly budget to be racking up $15K/month in expenses.

At this time, as most know, the real estate market is hot. Could you potentially sell your home now, take the equity, move to a less expensive neighborhood/area, or possibly rent a home to live in for a few years, and bank the profit? That would be my suggestion. Instead of waiting to sell/downsize at the point when you're looking to retire in 5 years and not knowing what the market will be like, it might be more prudent to consider selling now, knowing you are going to get a really good sales price near the top of the current market.

 

[dcoy]

There is some fat in that $15K for sure, I am working on trimming some of the easy stuff like eating out....and some will be eliminated naturally when the kids move out. But for now, while I am working and while the kids are young, I want to enjoy life with them and create memories. In 9 or 10 years poof, my two darling boys will move out and it will be over. This forum has provided good insight. I will work for another 5 years at mega corp where I'll save an additional $500K. Total assets by then using a conservative 5% growth rate will be around $6.34M (total debt $600K). DW or I will then work part time to help bridge the gap until the kids move out. State tuition college expenses will be full funded. After the kids move out I see our expenses dropping to $12K/month.

 

[Hermit]

The transfer degrees from the CCs to the CSUs are state law and available in a wide variety of major /CSU combos:

New Law Increases Transfer Degrees Between Community College, CSU
https://edsource.org/2013/new-law-increases-transfer-degrees-between-community-college-and-csu/40349

Here is a list of all the transfer degrees for the CSUs. It seems pretty extensive-
https://adegreewithaguarantee.com/en-us/degrees.aspx

The UC system has a new transfer law for 2019 -
UC extends guaranteed admission to transfer students | The Sacramento Bee

"Starting next fall, students who complete one of those model curricula, which are meant to ensure they can graduate within two years after transferring, and meet the minimum grade point average requirement will also be guaranteed admission into the UC system. If students are not admitted to the campus of their choice, UC said it will place them at another campus that has space in their major."

That was supposed to be true in Virginia. It not happening that way cost me several thousands of dollars and my son two years toward a degree in computer engineering at Virginia Tech. All I am saying is make sure the courses transfer to the department you want at the receiving school before you sign up for the courses.

 

[daylatedollarshort]

That was supposed to be true in Virginia. It not happening that way cost me several thousands of dollars and my son two years toward a degree in computer engineering at Virginia Tech. All I am saying is make sure the courses transfer to the department you want at the receiving school before you sign up for the courses.

One of our kids finished a transfer degree and then a B.S. and it worked in California exactly as advertised - two degrees with no repeating of similar courses and no more than two years of full-time college after the completing the transfer degree, with a written contract with the courses all laid out well in advance.

The schools can't ignore the programs as they are state law - put in place exactly to help speed up transfer and graduation rates. The schools that don't comply with the law risk having their funding cut off.

 

[chris2008]

In 5 years your kids, then 12 and 14, will not so much appreciate dad involvement any more unless you have built a strong relationship before. Do you?

Cut expenses and hours now.
The years will not come back.

 

[dcoy]

I do have a strong relationship with my kids. While my work is intense, I work in sales (always have), the hrs are not particularly long and those hrs i do work my time is incredibly flexible. If I retired today, the time gained would not be used for additional family time, I am running at max there. Rather I'd double down on hobbies.

 

[daylatedollarshort]

One thing that helped on the expense front for us was cutting expenses that had no negative lifestyle impact - switching to LEDs bulbs, putting solar lights outside, renegotiating the cable bill (we have HBO now for half the price of what our cable bill used to be), joining a non-profit theater group that gets unsold tickets for discounts or free from time to time, weather stripping, buying a low water / low energy washing machine, finding a new mechanic with lower prices and better ratings, and probably hundreds of other changes that all added up.

There's cutting expenses through deprivation as many of the post-college ER bloggers seem to follow but there's also cutting expenses through optimizing spending while maintaining or improving one's normal middle class or above lifestyle. I would rather do the latter.

 

[PoorOldCountryBoy]

The only red flag I see for you is spousal support of early retirement. A big spender is very difficult to slow down.
Also, make sure the kids college etc funds are fully funded. You won't want to go back once you retire.

 

[njhowie]

After the kids move out I see our expenses dropping to $12K/month.

$12K/month still seems extremely high. Where is the bulk of this going? Mortgage+taxes?

 

[dcoy]

Current monthly expenses:
Mortgage: $3K
Property tax: $1K
Utilities: 2 mobile phone plans, water, garbage, electricity, gas, internet: $550
Car payment (ending 2019): $550
1/2 share of boat: $500
Club: $500
Insurance: Term for DW and me, car, home: $300
kids school: $200
kids after school activities (soccer, swim, tennis, marshal arts, coding, cooking etc): $300
529's: $800
credit card (everything else): $8000
total: $15,700

The $700K mortgage is a 10 year ARM at 2.9%. I could pay it off today, but I get a much better return on investment by leaving it in the market. When the kids go off to college I will sell the house, quit the club, likely sell the boat, i wont have a car thus no payment or insurance. My term life insurance will end at 60, I won't have to put any more $$ into the 529's...generally my monthly nut will drastically be reduced.

 

[njhowie]

Thanks for all the details...everything seems fine...except the $8000/month for everything else. If that's all discretionary - you can surely work to cut that down. That's $2k/week. Can you work to cut even $2k/month out of that? That's $24k/year = $120k over next 5 years.

Anyhow, obviously I don't know everything, just seems it's quite expensive for a family of 4 to have $8k/month in discretionary spending.

Best regards.

 

[dcoy]

njhowie,

Yeah that credit card bill is alot and we are working to work it down where we can. That amount does include travel, which skews the monthly average. My DW is from Argentina and getting a family of 4 from the Pac NW to Argentina for 2 weeks costs a small fortune...