How much to RE today with two young kids and no pension/medical bens?

[Independent]

Good discussion on the risks of going back to work. I picked $3 million because I figure that sometime during the next 35 years the market will tank. I wouldn't be "comfortable" if I were retired and saw may investments drop below $2 million. Similarly, I'm not "comfortable" assuming that I could find a job when that happens, or waiting for the economy to recover. I'm also figuring $20,000/year for health care, and $100k each for kids college -- I wouldn't tell my kids that I'm rich enough to retire at 40, but not rich enough for an average 4-year private college.

But I can see that the $3m is pretty risk-averse. It's not surprising the fat part of the curve is a little lower.

 

[Leonidas]

- I wouldn't tell my kids that I'm rich enough to retire at 40, but not rich enough for an average 4-year private college.

Okay, that made me chuckle, imagining that conversation. I never thought of it that way before, but yeah, I'm not sure I could keep a straight face long enough to try and sell that one.

 

[Nords]

I wouldn't tell my kids that I'm rich enough to retire at 40, but not rich enough for an average 4-year private college.

I guess that gets back into the "who pays how much for which college" parents vs kids debate.

I noticed early on that our kid was discarding some college options because she thought we couldn't afford them. We explained a bit about financial aid & scholarships and then said that she should pick the college and let us deal with the money.

Now that she's older, and exceedingly generous with our money in almost all regards, we point out that today's college splurges (e.g., Macbooks & iPhones) affect her tomorrow's first cars, grad schools, and maybe even the down payment for that first home.

Financially, unlike ER, that $100K/four years has to be funded "right now" with not much time for market recovery. And although I'm glad that our years of savings can afford today's tuitions, I'd always put my ER ahead of the kid's difference between public & private.

I'd tell the kid that anything beyond our financial support of the public school is her scholarship challenge. I think that's a lot more easily accomplished than asking all of those funding sources to support my ER. I don't think our kids want us to kill ourselves working to send them to a better school.

 

[Leonidas]

Now that she's older, and exceedingly generous with our money in almost all regards...

Thank goodness, I thought it was just mine. Isn't it amazing how cheap they can be when it's their money though?

I guess that gets back into the "who pays how much for which college" parents vs kids debate... And although I'm glad that our years of savings can afford today's tuitions, I'd always put my ER ahead of the kid's difference between public & private... I'd tell the kid that anything beyond our financial support of the public school is her scholarship challenge. I think that's a lot more easily accomplished than asking all of those funding sources to support my ER. I don't think our kids want us to kill ourselves working to send them to a better school.

I agree with the principle you're expressing, and my disagreement only comes from my own personal situation as being FI'ed earlier in life. Long before I had the benefit of reading this forum I decided early in my kids' lives to set a course regarding education and their financial liberation from my pockets. "You are going to complete college and after that you will be responsible for your own financial needs. I'll pay for the college that accepts you within my means and within reason."

Years later, when retirement became a looming possibility early in life, I stuck by my earlier statements and just included college expenses as a budgetary item under the "must be able to do" category.

I understand that this is more than just a financial situation for many people. At the time I made my commitment the kids were young (and so was I), money was good and retirement was some kind of mythical beast. I recall that at the time (early 90's) college loan debt was being much discussed and the numbers were just shocking. Looking at my financial picture, and having a vague notion about retirement, I decided it wasn't right to limit the kids' choices (or saddle them with huge debts) if I had the money - to do something that I was making mandatory (you will graduate...!).

Now, that doesn't mean if my financial world goes to hell that I'm paying for Harvard out of my pocket, but if it came down to not being able to pay for in-state public school, well, I think I could suck it up and go back and do the W word thing if I had to. If I was not capable, then we would have a conversation like one of those commercials I've been seeing where the dad tells the kid, "things have changed and times are difficult." They've got all kinds of loans and grants out there for education, but I'm not aware of any for retirement.

So far it's working out for us. Check back with me around 2015 or so and I'll give you a post-action debrief.

As for my reaction to Independent's comment, the vision I had in my head was me just back from a month's trip someplace, nice tan, practicing my putting in the backyard before I take the wife out to grab a steak and lobster, looking at the kid and saying: "Well, can't you afford the junior college tuition? I'd love to help, but this retirement stuff is just getting to be really expensive. Don't you know how expensive airfare has become?"

 

[Zoocat]

A grand/month healthcare isn't gonna cut it today for a family of 4. Starting in Oct our BC/BS monthly premium is $1085 with a 3k/yr family deductible. Add to this the lousy precription coverage, co-pays, and no dental coverage; you're looking at $1500/month minimum (if you're HEALTHY!). FWIW we have no preexisting conditions (yet).

If you have never tried to get individual health insurance for your family on the open market, you are in for a quite an experience. There are exclusions that will make your head spin. Some health problems in childhood will leave your kid uninsurable on the open market (like allergies and having ever taken an anti-depressant).

Health insurance is such a big question mark for a young ER'd family of four that I voted $5million and even that isn't enough.

 

[FUEGO]

I'm also figuring $20,000/year for health care, and $100k each for kids college -- I wouldn't tell my kids that I'm rich enough to retire at 40, but not rich enough for an average 4-year private college.

Interesting way to look at the college funding decision!

We have recently come around to deciding to basically fund expected tuition costs for each kid for four years at the local public universities plus a little bit more for fees, books, some living costs etc. That works out to roughly $100,000 a kid in 2023-2028 dollars.

I wouldn't have a problem telling them that if they want the luxury of a private college, then best of luck funding the costs beyond what we have saved for them. Of course that is against the backdrop of having two excellent public uni's here in town.

I probably would have a problem telling them, via videoconference from some exotic location on the other side of the world, that we can't afford to help them at all with college costs, so go get a minimum wage job at McDonald's and good luck. I would make sacrifices on spending or get some kinda j*b to make sure they can get through college.

I don't have a problem putting some of the costs on the kids since that will provide a cost savings incentive AND not get them used to living above their means on daddy's dime (like others I saw during college and grad school). And student loans/grants/scholarships are cheap or free money. Interest subsidies and tax subsidies are out there for student loans, and parents can always assist with repayment should the graduate hit hard times.

 

[FUEGO]

If you have never tried to get individual health insurance for your family on the open market, you are in for a quite an experience. There are exclusions that will make your head spin. Some health problems in childhood will leave your kid uninsurable on the open market (like allergies and having ever taken an anti-depressant).

Health insurance is such a big question mark for a young ER'd family of four that I voted $5million and even that isn't enough.

We have a fairly liberal children's health insurance program in our state for those families earning less than a few times the poverty level. The insurance is basically free for kids with almost no copay. My guess is that income from a $1.5-2 million portfolio would be low enough to qualify you for the "low income" health insurance for the kids. It is comparable to private insurance in most regards from what I have heard from some on it. No test for assets either, so the portfolio size wouldn't defeat your eligibility - straight income test based on family size. It is somehow provided through medicaid, and I'm sure YMMV state to state.

 

[Nords]

So far it's working out for us. Check back with me around 2015 or so and I'll give you a post-action debrief.

Same here...

I think the trick is to launch them from the nest on a high-enough trajectory and with sufficient initial velocity that they don't hangfire, lose too much altitude, or bounce back from the nearest tree branch.

By the time they get their flight parameters under control and look back, we'll be gone!

 

[ziggy29]

Health insurance is such a big question mark for a young ER'd family of four that I voted $5million and even that isn't enough.

A LOT will depend on what comes out of health care reform and, to the extent there is public funding for it, what that funding mechanism is. Don't intend to debate the merits or the politics in this thread, but it is something people need to be very aware of in their planning. How they implement this will dictate things like what age I can pull the plug on w*rk and how much income I will need annually.

 

[Lusitan]

We have recently come around to deciding to basically fund expected tuition costs for each kid for four years at the local public universities plus a little bit more for fees, books, some living costs etc.

Right now, that's our tentative plan as well (although we're still in the toddler-rearing phase).

I think a free-ride at a good public university or a substantial piece of financial assistance at a more expensive private university is a good compromise between wanting to help out but also wanting to instill a sense of responsibility and ownership in their university education.

I'll have no problems telling my kids that's all they're getting even if I FIRE at 40; it's way more help than I received from my parents (and yet still reached FIRE at a young age).