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Old 05-19-2009, 12:59 PM   #21
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I'm trying to understand why "Having smaller debt payments 5-10 years from now could allow us financially to have more kids."

Are you saying something like this: "In the future, I'm planning for one income of $70k. Expenses with 2 kids will be $55k plus $15k for mortgage, so we will just cash-flow. Each additional kid is another $7k. So we couldn't afford 4. But, if we pay off the mortgage now, we'll have cash for all 4." ?

Since money is fungible, does it really matter? Money that goes into "retirement" accounts today could be drawn out to pay the mortgage if you decide to have 4. So I think it comes down to tax, employer subsidy, and market return issues on the retirement accounts that you are considering.

For example, if you're in a higher tax bracket today than you expect to be when you have kids, then maybe putting money in a tax-deferred account with plans to withdraw it then could tax sense (but unlikely due to penalty taxes). If your retirement account is a 401k, then the employer match may drive the numbers. If you're concerned that the market will be down right when you need to withdraw to pay the mortgage, then you want to pay the mortgage instead of putting money in the retirement account.

So it may come down to the tax rules for the specific retirement account you are considering, and the AA in that account. Do you know what you would be using?

We had 3 kids, but knew we had an income cushion. We're pretty conservative, so we would have paid the mortgage down if we had expected the income/expense to be real close - the market risk would have scared us (but we didn't have a 401k at the time).
You bring up a lot of great points.

Before I was thinking about it strictly in terms of monthly cash flow. I was also thinking about how I wouldn't want to pay tax penalties if I had to withdraw from retirement accounts. I was predicting that if all my debt (mortgage, students loans, hopefully not car) is around $2000 month that would make it more difficult to have an kid compared to making $1000 /mo in debt payments.

Now I'm thinking more in terms of how money is fungible and using money from my retirement accounts might not be the worst option. I don't plan on doing this, but if it's necessary to afford another kid I think it would be worth it.

Since I joined these forums I've been working on aggressively adding to our retirement accounts. Right now we're contributing:
1. 6% of my salary towards a pension plan
2. 6% of my DW salary to 401k (I believe 3% company match)
3. Maxing out our Roth IRA accounts
4. About $1,000 / mo towards a 403b account

I could cut back on #4 to pay off some of our debt. However, since our highest interest debt is our mortgage at 5.25% I'll probably leave it as is for now.
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Old 05-19-2009, 01:05 PM   #22
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I have 3 kids and in my opinion, it's really only the first one that's hard. The addition of each kid gets easier until the third just slides right into the family and is taken in stride. Because my DH was a teacher, his retirement was taken right out of his check so we didn't have a choice whether to save or not. Thank God! There were times when we had very little money and we lived paycheck to paycheck for years, but we ended up with three well-adjusted adults so the dearth of funds must not have hurt them.
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Old 05-19-2009, 02:50 PM   #23
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You bring up a lot of great points.

Before I was thinking about it strictly in terms of monthly cash flow. I was also thinking about how I wouldn't want to pay tax penalties if I had to withdraw from retirement accounts. I was predicting that if all my debt (mortgage, students loans, hopefully not car) is around $2000 month that would make it more difficult to have an kid compared to making $1000 /mo in debt payments.

Now I'm thinking more in terms of how money is fungible and using money from my retirement accounts might not be the worst option. I don't plan on doing this, but if it's necessary to afford another kid I think it would be worth it.

Since I joined these forums I've been working on aggressively adding to our retirement accounts. Right now we're contributing:
1. 6% of my salary towards a pension plan
2. 6% of my DW salary to 401k (I believe 3% company match)
3. Maxing out our Roth IRA accounts
4. About $1,000 / mo towards a 403b account

I could cut back on #4 to pay off some of our debt. However, since our highest interest debt is our mortgage at 5.25% I'll probably leave it as is for now.
If your highest interest debt is the mortgage at 5.25%, I can see where you would say you can beat that in a Roth or a 403b. Especially if you are thinking that the retirement money is more of a "contingency fund" which you don't really plan to dip into. Like I said, we were more conservative, but we were looking at a 9% mortgage.

Don't forget that the biggest expense of multiple kids is becoming a one income family (or paying so much for child care and second job expenses that it feels like a one income family).
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Old 05-19-2009, 03:15 PM   #24
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Great examples. I think vacations would probably be a lot different too. Instead of flying places and paying for 6 plane tickets it would make a lot more sense to drive to the beach, mountains, or Disney.
You can drive to Disney, but you won't have enough money to pay the entrance and ride fees, so you will just turn around and drive home.

It not just the expense of all this, but it's the logistics as well. I remember piling 9 of us into a huge station wagon to go places. And "places" had to be reasonably self-contained so that siblings would not wander away.
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Old 05-19-2009, 04:01 PM   #25
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Have one or two, secretly get a vasectomy, and keep on trying as hard as you can...
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Old 05-19-2009, 07:59 PM   #26
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Have one or two, secretly get a vasectomy, and keep on trying as hard as you can...
I always say...it never hurts to practice.
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Old 05-19-2009, 11:06 PM   #27
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You won't find many people here with a large family for the obvious reason that it is quite expensive.

Most people make too much of the scale economies of large families. If one of you gives up an income that is the same for four children as one, so that is your biggest savings. Most of the big expenses of children go up proportionally. There aren't a lot of scale economies in food, activities, school expenses, college, and a lot of other items. Somewhere between three and four you start to run into some diseconomies of scale. For example, you can't legally put four small children in a sedan anymore, and after six you have to switch to a full-sized van.

As far as paying off the mortgage and other financial tips I don't see how having children really impacts it that much. One exception would be financial aid for college, which can make a huge difference and perhaps your financial situation can be engineered to get the most aid possible. Ignoring that I'd leave the low-interest and deductible mortgage debt alone. One benefit of having the money in your own hands is the flexibility to tap it if you need it.
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Old 05-20-2009, 12:06 AM   #28
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I have 3 kids and in my opinion, it's really only the first one that's hard. The addition of each kid gets easier until the third just slides right into the family.
Unless s/he is a breech...

Ha
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Old 05-20-2009, 12:35 AM   #29
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Unless s/he is a breech...

Ha
That only hurts mom, not dad....

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Old 05-20-2009, 06:20 AM   #30
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Search inside Spend 'Till the End for "procreation", see the Table 5 on p. 223.

Amazon.com: Spend 'Til the End: The Revolutionary Guide to Raising Your Living Standard--Today and When You Retire: Laurence J. Kotlikoff, Scott Burns: Books#
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Old 05-20-2009, 06:48 AM   #31
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Go get "The complete Tightwad Gazette" from the library.
The details might be a bit outdated but the ideas are still valid.
The author raised 6 kids on one income and ER'ed.
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