New & looking for some input

[deafcat]

Just started looking at the forum and looks like there is a lot of good info here. I would also like to retire early, around 50, sooner if possible. Here's a little background on me:
Married for a little over a year, 33/32, live in the midwest, make approx $90k combined. I've had my house a while, owe approx. $48k on a house worth about $140k. Wife and I purchased land for new home, owe about $39k. Wife's student loans about $18k, no credit card (pay balance each month) or car loans (newer vehicles, won't have to be replaced for a while). I have about $120k in 401k and contribute approx $12k/year to this. Also have about $20k in savings (I know, wasting money on .5% ~ 1% interest...). Started an emigrant account that I will eventually transfer this money to as I get comfortable with them (signed up over two weeks ago, $500 in the account but still haven't received the letter to let me access the account...) to get a better savings rate. and maybe $6k in other IRA/Roth funds Wife is a teacher so I here they have a good retirement package but still haven't quite figured out how it works, and she doesn't ask...I have her saving/spending habits changed now so they are pretty good (that's why she has student loans and I don't)...
We would like to build a house on the land we purchased, possibly next year, looking to do a lot of work ourselves, but still figure on borrowing around $130-150k. Ideally this will be the home we retire in (the land is in the country, we both enjoy the outdoors, etc.) I would really like to have current home and land paid for before building but don't want to miss out on current low interest rates that I don't feel I'll ever see again in my lifetime. I figured I should start saving money in something besides 401k, so been doing a Vanguard Star fund, approx $500/month for the last 4 months. Will I be strapped for spending money when retiring because I believe I wouldn't be able to tap the 401k until 59.5, or do I not understand correctly. At this point the wife says she doesn't have interest in retiring early, but they may always change. Any suggestions out there for what I/we should concentrate on? Also, if we currently save approx. $2-2.5k a month (after all expenses, extra on mortgage & land loans, grocereries, etc), what would be a guestimate of how much we would save each month after having a kid (i.e. how much would spending go up) Just looking for some ideas.
Thanks!

 

[just_hatched]

I don't have any good advice on your question because I don't have any kids yet either.

However, I just want to say "welcome" and you're doing an AMAZING job on living below
your means and saving a large part of your income.

The teacher retirement package should also help in your retirement plans!

 

[ats5g]

Hi deafcat,

I'm 30 [DW is 28]. We've got two kids [ages 3.5 + 0.16667].

Wife is a teacher so I here they have a good retirement package but still haven't quite figured out how it works, and she doesn't ask.

Your wife should've been given all the retirement information when she was hired. If she works for the state, there is usually a website with all the state employees/teachers retirement system info, including pension info and 401(k)/457 info. Something like Virginia's. If she works for a private school, you might have to hunt for the info, or simply request it from her HR dept. Each benefit plan usually has a summary plan description booklet that outlines all the ins and outs. If you find a link, we could probably review and answer your questions.

At this point the wife says she doesn't have interest in retiring early, but they may always change.

That changed for me big-time when I had kids. I'd much rather be interacting with my kids than working, commuting, and dealing with all the headaches of coordinating the three. Though, work is a nice break from the kids.

I would really like to have current home and land paid for before building but don't want to miss out on current low interest rates that I don't feel I'll ever see again in my lifetime.

I'll just add don't do anything your uncomfortable with. Remember that interest rates were very low until the 1970's, so there is a good chance that long term interest rates won't rise as much as they did in the 1970's and 1980's. Also, IIRC, the number one reason for divorce is disagreements over financial/money matters. Over-extending yourself right before you have a baby is probably not a good idea, especially if it's your first baby - our first was extremely stressful. Plus, babies take a lot of time and attention, so if you plan on doing a lot of the work yourself, it may take a long time, and your stress level may jump off the chart.

I figured I should start saving money in something besides 401k, so been doing a Vanguard Star fund, approx $500/month for the last 4 months.

Excellent thinking, saving extra money is always a good idea, especially at a low cost shop like Vanguard. However, since you've got 401(k)'s and IRA's in addition to a taxable account [which i assume is where the STAR fund is located], you might consider looking at all your retirement investments as a whole. STAR is not really that tax efficient. It contains fully taxable bond funds [LT corp, GNMA, and ST corp], and actively managed funds [mostly value funds] which would probably be better off being stuck into the 401(k)'s and IRA's. I think you'd want to try to hold tax efficient stock funds/ETFs in the taxable account [like Vanguard's tax efficient large cap index funds], and the tax in-efficient funds [bonds, actively managed funds] in the 401(k)'s and IRA's.

Now, you can certainly hold stocks and bonds in both places, but there are more tax efficient vehicles for the taxable account [like the aforementioned Vanguard tax efficient large cap index funds, I bonds, municipal bond funds, etc.].

Will I be strapped for spending money when retiring because I believe I wouldn't be able to tap the 401k until 59.5, or do I not understand correctly.

If you keep contributing to the Roth IRA, you'll be able to withdraw your contributions from the Roth IRA [but not the earnings usually] before 59.5. Also, most 401(k)'s allow for withdrawal earlier than 59.5. Mine allows it as early as 55. You can also roll the 401(k) into an IRA and do Seperately Equall Periodic Payments [SEPP] or 72t withdrawls. You can probably do a search on this site for 72t and SEPP for more info.

Also, if we currently save approx. $2-2.5k a month (after all expenses, extra on mortgage & land loans, grocereries, etc), what would be a guestimate of how much we would save each month after having a kid (i.e. how much would spending go up) Just looking for some ideas.

If you're going to put the kid(s) in daycare and both work, it could run you anywhere from $100-225 per week per kid, depending on where you live and what kind of daycare it is [in home or center]. IIRC, most of our expenditures were the kid start up costs [furniture, baby clothes, diapers, baby toys], though our families helped out a good amount. Our 3.5 year old son is pretty cheap now, except for daycare [155 per week].

Any suggestions out there for what I/we should concentrate on?

Personally, I hate debt, so I think I'd rather pay that off first, but each to his own. Plus, the paydown of debt is a more sure return on your money, while investing it in stocks is more unsure. Not too sound like Dr. Phil too much, but I think you should probably have a good talk with your wife [before the kid arrives] about what you want to do, and if you think you've got enough money to do it. Note that there will always be shady loan people, etc., that'll say "sure you've got enough to do X," you'll just have to borrow more money, and that person surely has a vested interest in you borrowing more money.

- Alec

 

[wildcat]

We've got two kids [ages 3.5 + 0.16667].

Was that a copy and paste from the Excel spreadsheet?

 

[justin]

We've recently had a kid (7 months ago). Kid costs are rather variable. We're spending a couple thousand a year (maybe) for her, after the tax benefits. We don't spend much on daycare (we have family nearby). I've seen figures on spending for kids, and it ranges from a few thousand per year for lower income familes to tens of thousands for high income families. It depends on what you want to do materially for your kid. Private schools and prestigious preschools, designer baby clothes, the latest and greatest gadgets, exclusive summer camp, huge house with kid's playroom and "rec room" and game room, etc, extracurricular activities, 7-8 years of private university, new car at age 16, etc.

 

[SteveR]

Don't forget future expenses like school, cars, weddings, etc. that will cost a lot of $$$. These need to be in your long term budget.

 

[justin]

I was making a non-exhaustive list off the top of my head. There are tons more things you may have to pay for later. I don't know if I made it explicit in my post, but most of the potential expenses I listed are "optional", not required. For the basics, you're looking at health ins/care, food, shelter, clothing, love and attention. Anything else is extra and optional in my opinion. (Yes, my daughter will hate me when she figures out how stingy I am! )

 

[deafcat]

Thanks for the input. The wife and I have talked, she insists she doesn't want to retire early as she gets "bored" during summer vacation and looks forward to school starting. She's only been teaching for 5 years, so that's why I put the part about seeing how she feels in the future about giving up early retirement. I'm sure it's easy to get burnt out teaching with kids attidtudes these days (and their parents...). She works in a public school in Wisconsin, so I'll do some digging on the retirement package. The best benefit at this time is the healthcare, her family insurance cost is less than the single cost I was paying - so thats a big saver. With daycare, she's an only child so I'm pretty sure we can work something out with her parents during the school year to greatly reduce daycare cost. I'll look more into the funds you recommended. I don't really know a lot about investing, just about saving...my parents grew up during the depression so we only spent what we could growing up and I guess that was passed on to me. Although that was the case, parents didn't do much with the stock market, so I don't have much "reference" to go from. The inlaws also don't do much with investing, although they are also savers instead of spenders. Thanks again and I look forward to reading more on this site.

 

[wildcat]

Yeah, deafcat a lot of people will think you are crazy when you tell them about your early retirement plans (especially when you are young). It is obviously not for everyone. Don't have much advice for you as to how you should influence or explain it to others (I'm single and no kids). Aside from that just save and invest in low cost mutual funds. Pretty simple.

 

[Nords]

Welcome to the board, DC. Kid's expenses are all over the map, but you can do a lot with garage sales & Goodwill. Our kid didn't know any other places to shop until second or third grade.

Don't forget future expenses like school public school, cars (save your allowance, kid), weddings (?!?), etc. that will could cost a lot of $$$.  These need to be You may want to include these in your long term budget.

I reworded your advice a little, SteveR.  No criticism implied.

Kids' weddings are a sore spot with me.  If the govt gave us a $20K budget to have a really big blowout celebrate our wedding vows then we'd be hard-pressed to do it for under $21K.  I suspect that there's not much difference for kids whose weddings are subsidized by their parents.  As for our wedding, we enjoyed receiving a substantial cash gift from parents (both sides) but we enjoyed even more the knowledge that keeping down the wedding costs would enhance the size of the gifts.  The quality of the event and sharing it with friends didn't have to be expensive.

I did attend a wedding/reception at Pebble Beach.  Ouch.

 

[g1ngersmom]

Re: New & looking for some input <<-- kids

Just had to add to the kids/money comments.

I went to public school, a few years at catholic school (we got scholarships), wore hand me downs and/or cheap clothing. I got a paper route when I was 14 and have been working ever since. I also went to Fordham U. and paid for my entire education.

When I hear folks talk about private school and new cars/iPods/weddings/etc. for their kids, I just want to scream.."don't do it!!" Having to earn my own money in my younger years was the best thing my parents ever did for me. Had they had more, they probably would have given more -- but it was a blessing in disguise.

Having to fend for myself financially was great preparation for 'real life' -- so many of my friends/colleagues (all in their 30's & 40's) are still counting on their parents in one financial way or another.

Get those kids their working papers asap -- they'll thank you later!

 

[ProfHaroldHill]

Re: New & looking for some input <<-- kids

Just had to add to the kids/money comments.

I went to public school, a few years at catholic school (we got scholarships), wore hand me downs and/or cheap clothing.  I got a paper route when I was 14 and have been working ever since.  I also went to Fordham U. and paid for my entire education.

When I hear folks talk about private school and new cars/iPods/weddings/etc. for  their kids, I just want to scream.."don't do it!!"   Having to earn my own money in my younger years was the best thing my parents ever did for me.  Had they had more, they probably would have given more -- but it was a blessing in disguise. 

Having to fend for myself financially was great preparation for 'real life' -- so many of my friends/colleagues (all in their 30's & 40's) are still counting on their parents in one financial way or another. 

Get those kids their working papers asap -- they'll thank you later! 

Nonsense! This post is nothing but self-congratulatory rubbish. Get kids studying, not working.

HH

 

[g1ngersmom]

Re: New & looking for some input <<-- the angry prof

Wow. That was pretty harsh. Your tone and manner tell me that you probably like to argue, rather than share opinions.

But for the record, the congratulations really go to my parents. They had the wisdom to teach me that education AND hard work were both valuable in preparing me for real life.

Happy ranting to ya'...

 

[HFWR]

Re: New & looking for some input <<-- kids

Nonsense!  This post is nothing but self-congratulatory rubbish.  Get kids studying, not working.

HH

Yeah, who crapped in your Cream of Wheat...

 

[greg]

Re: New & looking for some input <<-- kids

Nonsense! This post is nothing but self-congratulatory rubbish. Get kids studying, not working.

HH

HH: I disagree somewhat. I've seen and heard about too many college grads that were pampered during their student years and then faced work shock when they moved out of that protected education environment. Many of them didn't really learn about life until they faced cold, hard real life decisions and didn't have their parents to fall back on for warm and fuzzies. When you're in a new city and your apartment mate moves out (a bad decision about his/her flakiness) on your one year lease, you have to get real. When you run up a credit card bill that you can't send home to Mom, you face consequences of your own making. When you have inter-personal problems at work, you just can't find new friends that you like more, like you can in school. Big differences and ones that students are often protected from while getting educated. I think real education occurs between 22 and 30 years of age for most people--a somewhat arrested and modern development. But not that college is unimportant.

--Greg

 

[wildcat]

I think BetterHalf is right on. Nothing wrong with that and in many cases can be an excellent learning/growing experience. It is not impossible to do both. It certainly helped me.

I think real education occurs between 22 and 30 years of age for most people--a somewhat arrested and modern development. But not that college is unimportant.

Agree with A..u..soon. College is a pretty sheltered life and it doesn't help when parents are always there to wipe up after 'em. 22-30 should be a good dose of reality.

 

[ProfHaroldHill]

First of all, there are studies that show the effects of working on the academic performance and social development of college students.  Those I have read suggest that off-campus work is negatively correlated with good academic performance and negatively correlated with good social development.  For example, someone working off-campus is less likely to study, to join clubs, and participate in sports.  So, this question doesn't really need to be answered by anecdotes.

More importantly, to me the question of getting kids working papers applies to high-school-age students (college students don't need working papers).  Does anyone really think that a kid benefits from working in McDs?  Maybe staying late to close the place?

About being harsh -- I am offended, personally, and very much, by the implication that anyone who had the good fortune to have parents that picked up the bills is spoiled, and the victim of good intention gone astray.  My parents paid my tuition, at some considerable sacrifice.  In turn, I had the opportunity to pursue my education to a greater length than I would have had otherwise.  Moreover, rather than being a spoiled brat who was handed things on a silver platter, I worked my ass off at schools that are well known throughout the English speaking world (and most of the rest of the world for that matter).  In fact, I worked hard enough, academically, to receive three engineering degrees, numerous academic honors, and to graduate very near the top of my class.

Lucky? -- you bet!!!

Spoiled? -- up yours!!!

HH

 

[Martha]

First of all, there are studies that show the effects of working on the academic performance and social development of college students. Those I have read suggest that off-campus work is negatively correlated with good academic performance and negatively correlated with good social development. For example, someone working off-campus is less likely to study, to join clubs, and participate in sports. So, this question doesn't really need to be answered by anecdotes.


HH

Work study. I don't know if the program still exists but it was great for me when I went to college. Earned some money and got to work in interesting areas of the university. Much more valuable than spending all my time flipping burgers or washing dishes.

 

[Michael Moore]

First of all, there are studies that show the effects of working on the academic performance and social development of college students.  Those I have read suggest that off-campus work is negatively correlated with good academic performance and negatively correlated with good social development.  For example, someone working off-campus is less likely to study, to join clubs, and participate in sports.  So, this question doesn't really need to be answered by anecdotes.

Sure, if you are working a 30-40 hour job it can cut into your study time.  But someone working that kind of hours may also have the discipline to see that it doesn't.  As for "joining clubs and participating in sports" I can't see that having much impact on future success, unless maybe you are joining Skull and Bones, or playing polo with the rest of the trust fund kids.  If someone hasn't worked out most of their social development issues by the time they are in college joining a campus club is probably not going to turn them into a social powerhouse.

I worked my ass off at schools that are well known throughout the English speaking world (and most of the rest of the world for that matter).  In fact, I worked hard enough, academically, to receive three engineering degrees, numerous academic honors, and to graduate very near the top of my class.

"This post is nothing but self-congratulatory rubbish."  

It is curious how ill-thought words can sometimes rebound upon the person who uttered them.

cheers,
Michael

 

[justin]

Working during school was fun and/or beneficial to my professional development.

Some of my jobs during undergrad:
Housing manager for World Special Olympics
Radio disc Jockey
Production manager at radio station
college instructor
intern in my field of study
researcher (with professor)
research engineer

Of course all of these jobs took time, but I managed to make piles-o-cash (and graduate at the top of my class in both degrees I received) and finish college in 3 years. I also got piles-o-cash from scholarships. I still had time for tons of extracurricular stuff, but the social life did suffer somewhat. I did manage to get a wife out of the deal. I still managed to sneak away for a semester of study abroad and a summer of bumming around Mexico (officially, I was "studying Mexican public transportation" for 3 credit hours ).

Sure, I didn't manage to attend a kegger every Thursday, Friday and Saturday night, but I did attend my fair share of binge drinking events (even hosted my own events from time to time).

 

[Nords]

Nonsense!  This post is nothing but self-congratulatory rubbish.  Get kids studying, not working.

About being harsh -- I am offended, personally, and very much, by the implication that anyone who had the good fortune to have parents that picked up the bills is spoiled, and the victim of good intention gone astray.  

Spoiled? -- up yours!!!

Hey, HH, I think you need to take a look at your posts from another perspective.

I didn't interpret BetterHalf's post as implying anything about you-- I saw it as their personal experiences about spoiling kids with excessive material wealth at an inappropriate age.  I think there's a difference between "picking up the bills" and buying a kid a new car.  

You guys have room for common ground.  Using phrases like "self-congratulatory rubbish" isn't a very constructive criticism or much of a basis for further discussion.

I agree with both of you guys.  My parents picked up my bills to the extent that I had food, clothing, shelter, and a small allowance.  In high school I wanted more, though, so I cut neighbor's yards, washed cars, and cared for their pets.  I also had a part-time job on weekends & summers.  The "deal" was that I had to maintain my school grades before I could seek employment, and I had to manage my time effectively to make it all happen.

I worked my assets off in college and I appreciated it much more by doing it that way.  I studied hard, joined clubs, participated in sports, and was one of thousands who were doing similar activities while working off-campus.  Martha also makes a good point about work-study schools.  I believe the total of those students' experiences is more than "anectodal".

While your studies may show negative effects, it's hard to judge their merits without a few links.  We're all pretty skeptical (even cynical) about studies until we have a chance to read them for ourselves.

 

[ProfHaroldHill]

OK -- let me ask the obvious question: If work is so great, why are so many regulars here interested in early retirement? You mean that it's only good for kids? Lots of conventional people believe that, to the extent possible, kids should learn and play, and adults should work. Seems like the relationship is getting turned around now.

HH

 

[Jarhead*]

About being harsh -- I am offended, personally, and very much, by the implication that anyone who had the good fortune to have parents that picked up the bills is spoiled, and the victim of good intention gone astray.  My parents paid my tuition, at some considerable sacrifice.  In turn, I had the opportunity to pursue my education to a greater length than I would have had otherwise.  Moreover, rather than being a spoiled brat who was handed things on a silver platter, I worked my ass off at schools that are well known throughout the English speaking world (and most of the rest of the world for that matter).  In fact, I worked hard enough, academically, to receive three engineering degrees, numerous academic honors, and to graduate very near the top of my class.

Lucky? -- you bet!!!

Spoiled? -- up yours!!!

HH

Prof:  You were indeed fortunate, but by the same token, I'm sure that your parents felt like the money was well spent.
Seems like you got a little "worked up" and could use a "jump start" towards DanTiem's 400 laugh a day requirement.   I was supposed to play golf today, but it's raining like hell, so no go.
(My wife and I have already had about 30 laughs apiece so far this morning, so I can spare one.

A man walked into a car dealership and spotted the car of his dreams.  He walked over to inspect it.  As he bent over to feel the fine leather upholstery, he broke wind.  Embarassed, he looked around nervously to see if anybody was nearby.  A salesman approached and said , "Good day, sir, how may I help you today"?
The man asked "What's the price of this car?"
The salesman said, "Frankly sir, I'd rather not say."
He said "Why not"?
The salesman said "If you farted just touching it, you're going to **** when you hear the price."

 

[ProfHaroldHill]

Ex-Jarhead -- You da man!

HH

 

[ProfHaroldHill]

All I meant was "that's a good reply" . . .

HH