Family of 6 looking to retire soon but need help!

[PackingBags]

I've been reading this forum for a while now and decided to finally join in! I am hoping to jump in on the early retirement wagon some time in the next year but I am VERY nervous.

Right now we are living in a stand still existence. For the last 10 years my husband has been traveling all over the country, making the bucks, working 80+ hours a week and is only home on the weekends. We own a business that has been doing quite well for the last few years but that should be winding down by 2013.

I've been researching retirement places. I would love to move out of the country where my dollar will stretch a bit more. I'm looking for warm, sunny and in a place where I can wear open toed shoes 365 days a year. Did I mention I live in near Buffalo New York? Yeah...snow, cold, bitter, freezing...I'm done! Hence the warm climate.

We are 40 and 47 years old and have 4 little kids ages 9, 7, 5 and 4. The top places I have been looking into are the pacific coast of Panama, or Puerto Vallarta Mexico. I have a love of the latin culture. We need to keep our location near schools for our kids (Don't even attempt me to talk about homeschooling) and I have no desire to live in a big city. Uruguay has made the list as well but is 3rd runner up because of proximity to the US. Puerto Vallarta is my first choice at this point. Easy access to the US is needed for yearly trips to visit friends and family. If anyone else has suggestions of places, I'm open! I would love to hear people's experiences of retiring with kids overseas!

As far as retirement income, this is where I'm stumped. I've run multiple calculators and some tell me I'll be living like a queen and others tell me I'll be eating raman noodles until the age of 85. Perhaps someone can shed some insight?

Portfolio: I have stuff in multiple accounts so I'm not sure exactly what I have but here is basic overview: Keep in mind that this needs to support 6 people and pay for international schools for (some schools tuition are 40K or more for my 4 kids). My youngest is autistic and may need extra $$ Services.
So here are the numbers:
2 million non-retirement 66% stocks, 23% bonds and 11% short term reserves. 500K IRA same asset mix. Each of my kids has 100K UGMA/UTMA towards college same asset mix. House that I will sell IF i can sell probably around 400K. 401K around 350K same asset mix. We have no debt, own our home and our 3 cars and have a nice array of video games

Spending. I have no idea how much we spend now. I'm guessing around the $150k mark but some are business expenses etc. Some things are quite expensive like our health insurance (1600/mo). I'm estimating spending needs in whatever country I choose to be around 100-150K/year. Again, not sure what things REALLY cost overseas.

Any thoughts? Do you think this is something we could do in this fluctuating market? I'm scared of the economy crashing and being stuck in a financial nightmare. I dream of an ocean view home and someone to clean my house 2x a week!

 

[MichaelB]

Hi PackingBags, welcome to the forum. Congratulations on preparing your self financially for early retirement. Looking to move overseas with a young family - that is different. You'll get lot of feedback for sure. Good luck!

 

[Khufu]

PackingBags,

Congratulations on your business success! Having run a successful business will be good preparation for your next job in life: planning and executing the early retirement you have in mind. At this point you don't have enough information to make a plan nor do you have the skills you will need to execute. So, you will have to educate yourself knowing that there will be few models for you to follow and that the odds will be against you.

Here's what I think you need to do to launch your new enterprise:

1. start tracking all your expenses using Quicken or some similar software. "I have no idea what we spend now" is just not adequate as a basis for planning. Continue tracking your expenses forever. Would you contemplate for a moment not doing so for your successful business?

2. start to educate yourself about investing since that is going to be your new and, with luck, last profession. Read lots of books with a critical eye. Develop an investing plan in which you have confidence because you will need it sooner or later. In addition to all the usual risks of markets and inflation, you will have the additional, and much greater, risk of having your assets in USD and your liabilities in another currency. (Unless you go to Panama or Ecuador.) If the dollar resumes its decline after the current flight to safety has run its course (and that is what economists like Eichengreen expect), then you could be squeezed right out of your cozy retirement. None of the investment books will deal with this enormous risk and there are very few investment products that even attempt to address it for the retail investor.

When my own portfolio reached a critical level of size I gave myself two years to teach myself enough about investing to proceed. It took me five years.

3. Learn about financial planning, as distinct from investing. You will have a singularly challenging task. None of the rules of thumb, like 4% rate of withdrawal, will apply to you because you are so much younger and you are raising a family. There is lots of software available, some of which is sophisticated enough to be useful, but much of it is too specialized to conventional retirement to be applicable to your situation.

4. Determine the skills you and your family will need and figure into your plan how to acquire them. Like learning Spanish. And tax planning.

As far as retirement income, this is where I'm stumped. I've run multiple calculators and some tell me I'll be living like a queen and others tell me I'll be eating raman noodles until the age of 85.

You have identified the crux of the retirement problem. Planning for such a long term is extremely sensitive to small changes in the input, such as return on investment, inflation rate, life span, tax rate, and so on. When you run scenarios using financial planning software it usually ends up that you either die broke or with more than you retired with. Add in currency risk and it must become even less stable, but you don't know because none of the planning software considers currency risk.

For what it's worth, I retired abroad earlier this year, after five years of planning, and am enjoying it quite a lot. I have tracked our own household expenses for twenty years. (We will hit our budget within 1% for this transitional year, which is better than I expected.) I know my rate of return for each of the last fifteen years or so along with full details of income, gains, etc. I also have done probably a hundred financial projections that cover the rest of my life and my wife's life. I even have a plan to deal with the expected decline of the dollar. What I don't know is whether any of it will work. But I am pretty sure that planning carefully increases my chances of success.

I think retiring abroad can be an excellent choice, but it's much more complicated than staying in the home country.

best of luck to you,

Khufu

 

[MichaelB]

For what it's worth, I retired abroad earlier this year, after five years of planning, and am enjoying it quite a lot. I have tracked our own household expenses for twenty years. (We will hit our budget within 1% for this transitional year, which is better than I expected.) I know my rate of return for each of the last fifteen years or so along with full details of income, gains, etc. I also have done probably a hundred financial projections that cover the rest of my life and my wife's life. I even have a plan to deal with the expected decline of the dollar. What I don't know is whether any of it will work. But I am pretty sure that planning carefully increases my chances of success.

I think retiring abroad can be an excellent choice, but it's much more complicated than staying in the home country.

best of luck to you,

Khufu

Hi Khufu. Where did you retire to?

 

[Khufu]

Bangkok

 

[MichaelB]

Bangkok

Welcome to the forum. Tell us a little about yourself

 

[jerome len]

I wouldn't do it, yet.

You've already had some good advice and I'll try not to repeat it. You have just over 3 m with some taxes to pay if you take retirement funds early. You probably have a nice home, 400k in Buffalo NY should have bought you a nice home. And, you save....a lot compared to most people.

So, 1st question is why overseas, and try to narrow your options down. I tried the Cayman Islands for a year, loved it but got kicked out by a hurricane and the natives really didn't like Expats. Next question, you have 100k for each kids college, but their young and 4 schools will cost a bunch and public schools aren't very good in many locations. 3rd question; what will YOU do with your time......my wife has a PHD and fit into a Brit private school 3 days a week.....boy, the income was nice. 4th, language, have you thought about it, learned some of it so you integrate early on?

OK, you get the idea, you need to plan. And, include your kids in the planning.

So, I'd find a good financial advisor here, pencil out your financial plan and your expected income. You're young.....you need stocks, you'll be retired, you need income, that probably means some bonds. Right now, until we get through Europe and a US election, I don't know what my portfolio will be worth a year from now and the 1st years of retirment, you can't afford to lose a bunch of your nest egg.

Now, after some planning, take some longer vacations to your top three choices. See if you fit in, find the prospective schools, see if your kids like them. Check out health care, a bigger expense for me in the Caymans than it is in the US. If you "think" you like it, rent for a year, try it out because you, like me, might find out that some in your family didn't like it. And, like me, you'll return.

I still would like to go overseas but I truly believe, as most Americans that I've talked to, that for all its problems the good old USA is still the best place in the world to live. Now, I now many on this forum would disagree........what I believe isn't right for all, the big question is what is right for you and your family.

today, we vacation a week a year in Cayman and love it. We have friends, we have activities and we're both glad to go and glad to come home.

So, good luck, congrats on your savings and a beautiful family........have a great holiday season.

 

[cbslc]

Tracking your expenses is the first thing you need to do. The rule of thumb is not to spend more than 4% of your savings per year. So if you need $150K - you should have 3.75 Mill.
Good luck.

 

[NYEXPAT]

Sandals or Schools!

I would be thinking about the education of my children, before worrying about open toe'd sandals!

That being said, out of the three choices Panama has the best retirement program on the Planet right now and I suspect better private schools than PV.

The best international schools will be clustered where the various embassies are.

Be careful when choosing schools as many will give your children a "sense of entitlement" when they see the mega wealth of the other children.

Here in Lima we avoided the IB schools as kids as young as 16 were flying to Miami on the weekends to party!

You must also consider your children's safety as "rich gringo kids" are prime targets in certain countries for "express kidnappings"! Most gringo's are perceived to be rich and much care should be taken to avoid that label.

Other posters have addressed financial issues, so I will leave that one alone.

Only you can decide what is right for your family, but I would consider a move to South Florida as a first step (Climate/Latin Culture/Schooling) with vacations spent in various countries to find the spot that is the best fit.

 

[FUEGO]

So, 1st question is why overseas, and try to narrow your options down. I tried the Cayman Islands for a year, loved it but got kicked out by a hurricane and the natives really didn't like Expats. Next question, you have 100k for each kids college, but their young and 4 schools will cost a bunch and public schools aren't very good in many locations. 3rd question; what will YOU do with your time......my wife has a PHD and fit into a Brit private school 3 days a week.....boy, the income was nice. 4th, language, have you thought about it, learned some of it so you integrate early on?

I like the questions brought up in this response so I'll piggyback on it.

Why overseas? Have you looked at places in the US that could offer most of what you are looking for without the difficulties that come with living overseas? For example, would a place on or near the beach in Florida meet your criteria? Warm weather, exposure to Latin culture, beaches, etc.

Private schooling for 4 could get expensive and a state-side retirement could give you equivalent (or possibly better!) education for free. And are your kids willing and able to take on the culture shock of leaving familiarity behind, learning a new language and embracing a new culture?

We have 3 young kids and I have thought about retiring overseas with them. I have mostly given up on this thought due to the hassles involved, and don't want to uproot them from family, friends, and familiar places here. And as cool as having them exposed to another culture would be, they get a lot of that locally by virtue of living in an area with a lot of recent immigrants.

On a different topic, don't be too afraid to make a leap, because it isn't an irreversible choice. If things don't work out after a year or so of renting somewhere overseas, you can always put the experience in your back pocket as something awesome, exciting, and adventuresome that you and your family did, pack up, and move back to the States (to a tropical location here).

 

[Birchwood]

With what you've written, I would not do it yet.
The kids are so young and they are going to be uprooted and the education they are going to get abroad may not be ideal when they get back.
Although living abroad is cheaper, there are also some hassles.
Instead, I would move to a cheaper part of the country(USA) and retire.
Send the kids to a good public school,is possible. That will save you some money.