How am I doing / Wish I was spending more

[sirsavesalot]

I found this board last week and love it. Figured I'd post my info and see what you guys think about where I'm at and if I'm crazy:

Married with 2 children, ages 2 and 3, in Columbus Ohio. Wife and I are 32. Wife was a teacher but stays home with the kids. She's sick of teaching and may not go back (grrr). We'll just focus on my income and our savings for now. For most of my working life I did the 5% employer match but stepped it up last year and this year so far and started a Roth IRA last year. I just got a very nice promotion and decided to run the numbers in Excel to see how we'll fare this year.

Current 401k and Roth IRA: $80,000
Checking and Savings: $20,000
Income:$90,000 pre tax

Retirement Savings Slated for 2013:
Maxing 401k at $17,500
Maxing both Roth IRAs at $11,000
Pension from work: $8000
Total of $36,500 going into retirement savings in 2013

After all expenses (mortgage, cars, food, insurance, 401k, Roth, kids activities, you name it) we will have an additional $25,000 left this year, after taxes. House is worth $160,000 and we owe $105,000 on a 15 year 2.75% I refied last year. I was thinking of dumping a good chunk on the mortgage just to get rid of it or maybe in some taxable investment accounts...who knows. I would love to be mortgage free but the 2.75% ain't bad.

The house we have is rather small and we would both love to get a much nicer house but then that cuts into our retire early plan. We both grew up on land and now sit here in a 1400ft2 house on 0.25 acres and we really wish our kids had more room to play and get us away from neighbors, but again, that would push our retirement date back about 2 years. We can't figure if it's worth it to do that to enjoy life more the next 20 years and have to slap on 2 more or just suck it up and live it out here. We would love to be retired at 50 when the kids are out of the house and I think we can make that happen if I threw the extra $25k into savings each year. If my wife went back to teaching you can add at least another $35-$40,000 after taxes to that.

So what do you guys think? Are we kicking ass already and we should let ourselves enjoy a bigger house with a bigger yard?

I did run a FIRECalc with just my working contributions without the additional $25k and when I'm 50 we'll have 1.4 million with a 5% return. FIRECALC says with a $40k/year withdrawal for 40 years we'll have a 100% chance of success, so we'll be able to live to 90 no prob. I know, I'll have to get medical for those years in between but I'm sure I'll get some pay raises and my wife will earn some money to good money.

 

[MichaelB]

Welcome to the forum, sirsavesalot, and congratulations on the good start. How much house is a difficult question to answer. Here are a couple of threads along those lines that might interest you.

http://www.early-retirement.org/forums/f28/how-much-house-should-we-buy-64947.html
http://www.early-retirement.org/forums/f30/taking-on-more-than-i-can-handle-65378.html

 

[heeyy_joe]

Go ahead and buy more house. Enjoy your children while they are young. You have already a well established savings habit and that is unlikely to change. A house is a tool, just use it wisely.

 

[columbus]

Welcome! We are in a similiar boat in columbus. Just moved from german village to powell for larger safer house. Find a good desl and I would do it. We now rent 2 of our prior homes if you feel you can do that then it can get you closer to er.

 

[Papa bear]

Welcome to the board from another Columbus resident!

 

[W2R]

Welcome to the Early Retirement Forum!

Personally, in such situations, I would probably want to stay in the smaller house and save a little more than planned. My reasoning is that life always seems to throw up (expensive) obstacles of one kind or another as we make our way towards retirement and so you would have saved extra just in case. But only you know the right answer to your question, for you.

 

[ronocnikral]

Welcome.

A lot changes over time, so I always encourage people to live a fulfilling life. If you want a larger home, I say make it a goal and go for it (within reason). A lot can change, many of which is outside your control. So have fun today, but stash away for tomorrow as well. You can't do it all, so prioritize your goals.

You seem to be doing OK, and on your way to eventually retire.

 

[RunningBum]

$40K won't be the same in 18 years as it is today. Not sure if you are calculating inflation into your calculations.

The money for the nicer house isn't going into a hole. You'll have that as an asset down the line. A lot of people say that you shouldn't look at your house as an investment or part of your net worth, but the fact is that you would be able to downsize when the kids are grown and get some of the money back. Whether it's worth it, I don't know because I don't have a feel for how your neighborhood is now as far as safety, schools, etc. Sometimes it can be nice for kids to grow up in close proximity to other kids rather than away from neighbors, but it also depends on the other kids.

 

[daylatedollarshort]

If it were me I would have bought a smaller house to be able to retire earlier. I never realized until these past few years how much extra in taxes, insurance, upkeep and utilities a larger house was costing us.

But if a large house and land is important to you, that may mean more to you than early retirement.

 

[Sue J]

Welcome and hello from another Ohioan. I'm outside of Akron. I don't know Columbus all that well but most of Ohio is pretty low cost of living.

If 1400sf feels small now, when the kids are little, it's only going to get worse as they get bigger. In my area 160K buys A LOT of house. What would it cost for a larger house with some room to play outside? 180K? 200K?

If you are going to make the move, do it before the family gets attached to the school system.

 

[heeyy_joe]

Welcome and hello from another Ohioan. I'm outside of Akron. I don't know Columbus all that well but most of Ohio is pretty low cost of living.

If 1400sf feels small now, when the kids are little, it's only going to get worse as they get bigger. In my area 160K buys A LOT of house. What would it cost for a larger house with some room to play outside? 180K? 200K?

If you are going to make the move, do it before the family gets attached to the school system.

+1

 

[wmc1000]

I go with making a move now as you will spend many years in the house before ER. You are doing well. I don't know how you have so much to put away at that income level unless you are are missing some expenses. What about life insurance - it is extremely important with young kids in the picture. College savings?

I live outside Indianapolis so cost of living here is pretty low also.

 

[braumeister]

Welcome!
Another Ohioan here, from the south of the state. Ohio is a good place in terms of cost of living, isn't it?

I think you're doing very well indeed, and my only bit of advice would be to go ahead and get the larger house, since mortgage rates and home sales prices are about the best they have ever been right now. The caveat, of course, is that you have to resist the temptation to get your dream house. Set a firm upper limit on what you will pay for a bigger house and stick to it. You'll be provoked by a lot of temptations (including aggressive realtors), but if you're true to yourself and stick to your limit, you should come out a big winner.

 

[obgyn65]

I would do the same.

Go ahead and buy more house. Enjoy your children while they are young. You have already a well established savings habit and that is unlikely to change. A house is a tool, just use it wisely.