Best strategy for 31yo single parent of 3 kids?

[Weeks]

Hi All! I've been lurking a bit for a week now and found myself to be in an unique situation. Can I pick your brain a little bit so I don't totally fail at retirement?

I'm 31, single parent of 3 kids (9, 3, & 1). I make 60k/year (late start in life, I won't tell you what I was busy doing earlier in life. )

My 9yo goes to private school (about 4k/year), the two youngest in daycare (another 10k/year).
I'm currently renting but am under contract to buy a house (115k) at end of Feb on a 15 year mortgage at 3.375%. Payment on the house will be about $900 all inclusive.
Besides the kids expenses and rent/mortgage, I don't have anything else major. If there's anything I've done right it is that I am debt free and have about a comfortable emergency fund saved up to live on for about 4-6 months.

I just opened a ROTH IRA and put in 11k (2015 +2016 contribution), my 401K is at employer match @ 6%. I also have an 529 account for my oldest with just 3k in it, I plan to put in 5k more this month, and 8k each year until I have put in 32k ($8k for 4 years) in for each kid.

After all that is said and done, I have 20k left over in savings (not my rainy day fund). What are some of the things you think I should change? I thought about taking my kids out of private school but I'm not confident in the public school system. If I didn't work full time I'd be more comfortable with it since I can monitor them more closely, but maybe I'm letting my fear getting the best of me.

[prose3589]

Welcome. I am a single mom who also got a late start at retirement planning. At 31 you are still very young. The folks on the boards here will give you great advice. I suggest you start my monitoring all spending. I have been doing this for more than a year. Very informative. Max the 401k and Roth. The 529 plans are a plus too. I am sure more advice will follow. Just remember slow and steady wins the race.


Sent from my iPhone using Early Retirement Forum

[Katiek]

Congrats, even with a "late start", I think you are doing well and focusing on the main things. One other thing you might want to do if you're not already doing it, is track all your expenses. It's a great way to identify areas where your spending is more than you realized and where you can cut back without having a big impact on your enjoyment. Welcome!

[Weeks]

I have been tracking my expenses for 3-4 years now using Microsoft Money, there are some left overs each month and I managed to save them so far. Now I just need some place to put them instead of non-interest generating accounts.

When you say max out 401k, do you mean to contribute until the fed max (18k)? If that's my next goal then I have quite some distance to go.

[pb4uski]

Welcome Weeks! You are on the right track and ahead of many of your peers to be thinking ahead financially at such a young age.

I would continue tax-deferred saving in your 401k to capture the match and after-tax saving in a Roth IRA as long as you are in the 15% tax bracket. If your income increases and you get into the 25% tax bracket, then I would shift to favor tax-deferred saving.

I'm not a huge fan of 529s, particularly in your tax bracket. If the college money is invested in equity mutual funds in a taxable account in your name, then dividends and long-term capital gains are tax-free if you are in the 15% tax bracket so to me taxable account savings are better than 529 because there are no restrictions on using the funds and things can change. (For example, despite our both having masters degrees and big advocates of higher education, DS has thus far decided not to continue his education so if we had 529 money it would be stuck).

On the remaining $20k, I would put it in a solid equity mutual fund in a taxable account.

I'm a big believer in public schools since we are all out of the public school systems, but that varies a lot by locale. If there are any good public schools in your area, it could have been factored into your house hunt, but since you are under contract perhaps that ship has sailed or perhaps there are not any public schools you are comfortable with nearby.

[Rickt]

Welcome Weeks! You have done an awesome job so far.
As others have said earlier, I suggest that you:
1. Track your expenses.
2. Max 401(k) to get maximum company match.
3. Continue contributing to ROTH IRA.
4. Save all monies including for kids' education in your taxable account in EQUITY mutual funds. Check out Vanguard for low cost Index funds.

STAY THE COURSE, Stay Disciplined, learn about investing and share your knowledge & experience.

Best Wishes & Good Luck!

[Weeks]

Thank you! It's reassuring to know I'm on the right track, I will check out some equity mutual funds on Vanguard, where my Roth is already.

I've also up'd my 401(k) to 10%, if my math is correct it shouldn't affect budget too much.

The house I'm under contract with is in one of the better school district around here, so I may give it a shot if tuition gets to be too much esp when my 3yo starts prek in the fall.

Thank you for all your help!

[ESRwannabe]

Quote:

Originally Posted by Weeks After all that is said and done, I have 20k left over in savings (not my rainy day fund). What are some of the things you think I should change? I thought about taking my kids out of private school but I'm not confident in the public school system. If I didn't work full time I'd be more comfortable with it since I can monitor them more closely, but maybe I'm letting my fear getting the best of me.

You have $20k left over each year out of $60k and you support three kids? That's awesome. If you keep it up you should definitely be able to retire early or switch to part-time work once your three kids are on their own.

Just keep doing what your doing.

[Weeks]

Quote:

Originally Posted by ESRwannabe You have $20k left over each year out of $60k and you support three kids? That's awesome. If you keep it up you should definitely be able to retire early or switch to part-time work once your three kids are on their own. Just keep doing what your doing.

The 20K is from the sale of a house, I won't have this every year.

If only!

[ivinsfan]

Honestly, as a single parent on 60K a year for 3 young children, I don't think you have the funds to pay both private school and future college expenses.

There are many scholarship chances and financial aid for kids from limited income families and other options might be available to your children. Go to taxable accounts for now and make the call about college when you have a plan for your future.

Is there a bio-dad in the picture, the term single Mom can mean many things. If you are the sole support of the kids now and forever I don't believe private school or college funding should be anywhere near the top of your list. Do you have term life insurance for the kids future well being if they would be orphaned ...that's money I would spend.

[Weeks]

Quote:

Originally Posted by ivinsfan Honestly, as a single parent on 60K a year for 3 young children, I don't think you have the funds to pay both private school and future college expenses. There are many scholarship chances and financial aid for kids from limited income families and other options might be available to your children. Go to taxable accounts for now and make the call about college when you have a plan for your future. Is there a bio-dad in the picture, the term single Mom can mean many things. If you are the sole support of the kids now and forever I don't believe private school or college funding should be anywhere near the top of your list. Do you have term life insurance for the kids future well being if they would be orphaned ...that's money I would spend.

It is tight but we somehow manage. Bio dad is around but he has no money to help out. They won't be orphaned if I die but I would like to know more about term life insurance? Can you point me to some good sources?