35 y/o, Married w/ 2 kids - Wanting to work PT

[Gumbo]

Hi all - Have always enjoyed reading about personal finance and FI and happy to come across this board. Would love some advice/thoughts on whether my goal of working part time by 45 would work.

Debt:
$132k - Mortgage (30 year fixed/3.625% - Payment with taxes/insurance is $912/month)
$7k - Car Payment (3 more years - 1.99% - Payment is $250/month)
Total Debt - $139k

I do not contribute any additional money towards the principle on either loan.

Assets:
401k - $324k
Roth IRAs - $122k (converted regular IRAs to roths a couple of years ago).
MegaCorp ESOP/Stock Plan - $73k
$102k - Money Market Account
$30k - Checking Accounts
$18k - DRIP accounts (Direct Stock Purchase Plans/Dividends Reinvest)
Total: $669k

In addition I have ~ $80k in equity in my home.
I have $15k in 529 plans for my 2 kids (ages 3 and 1). I would like to fund their education (bachelors level) in full.

I have been at my job now for 9 years and earn ~ $78k per year. I plan to stay in my job another 5-6 years and then I plan to quit and pursue a master's degree in Speech Pathology. My company has a pension and in 5 years, my yearly benefit at age 65 would be $11.5k per year.

My wife currently stays at home with the kids. We spend ~$50k per year.

As far as current saving, with my company match, I put $10k/year in my 401k.

I move $15k per year from our checking/money market to Roth ($10k) and to 529 plans ($5k).

My wife will be going back to school next year to start a 4 year program in Speech Pathology. Once she completes it and finds work, I would start the same program. Once I complete the program, we would both work as Speech Pathologists and would both like to work part time schedules (30 hours or so per week). I estimate we could make $90-100k per year combined. If we could make roughly what I make now after paying for health care (high deductible family plan), I think we'd be OK and could continue putting back $10-15k per year. Due to the recent changes in healthcare, my concern is I really don't know what kind of premium I'd pay on a policy in 10 years.

I'd like to reduce my schedule to 10-15 hours/week at 55 (I think my wife would continue 20-30 hours/week). My kids would both be in college at that point.

There is a ton of information online about dual income earners, but I could not find any information out there about dual part-time earners. Would love to hear from anyone that has gone this route. Would also love to hear any advice on what I could do in the next 10 years to improve my chances of making this work.

[Ready]

Welcome to the forum Gumbo! You will find many very smart people here to give you advice and insights. I would say you are doing quite well for a 35 year old - congratulations and well done!

As far as thoughts I have on where you may want to look, a couple of things come to mind:

1) You have a lot of money in a money market, likely earning very little interest. You may want to think about investing some of that in other areas. At least look at a 5 year CD to get a higher rate. If you go with Ally Bank, you can always terminate their 5 year CD early for only 60 days interest penalty. Or you may want to increase your stock/bond allocation a bit.

2) You and your wife are both planning on going to school to study speech pathology. You don't state what the costs of this education will be. If the costs are significant, you will need to factor in how much that will set back the date that you hope to reach financial independence. What I find confusing is why would both of you want to work that hard on a degree and then only work 15-20 hours per week once you achieve it? If the degree is for personal enrichment, then perhaps it's fine. If you are doing so for economic reasons, the education would need to be very inexpensive for it to make good financial sense.

I work part time and my partner keeps promising to cut back his hours to part time in the near future. So, it can be done. But it is best to be FI first, so that any income you earn on a part time basis is just extra, and not money you absolutely need to live on.

I'm sure others will chime in, so I'll leave it there. Again, welcome to the forum.

[Gumbo]

Thanks for the reply, Ready.

Maybe Money Market isn't the right term. The money I labeled as Money Market is invested in various funds.
$22k in NLGIX, $22k in NMTAX, $13.5k in MAIOX, and $43k in EVRAX.

My main concern with this account is that it is with Wells Fargo. Most of our money is with Vanguard. I know I'm paying higher fees with Wells.

My wife and I both want to do Speech Pathology for a variety of reasons.
1 - We both have worked careers in sales or insurance and want a job that offers more fulfillment.
2 - The career is growing and job demand is high. I'd hesitate in going into the same field if not for that (and having prior careers to fall back on if we had to).
3 - It offers contract work at a decent pay rate and offers the ability to travel and take 8-12 weeks assignments on the road. The ability to travel for work excites us. We know SLP's working 30-35 hour weeks making $60k/year, which if doubled would be plenty of income.

I believe the total cost of tuition/fees/books will be $20k total for both of our degrees (I think total will be $40k but I believe with scholarships, it will be half). I plan to continue working while doing 1 year of pre-req courses (while my wife is starting her SLP work) so hopefully having 2 full-time dual incomes for 1 year can allow us to save to cover the total education bill.

[Ready]

Gumbo,

Regarding the funds, those are all actively managed funds. Taking a quick look at the expense ratios, they are (in your order) 1.29, 1.18, 1.37 and 1.29. If you were to compare that with a fund like the Vanguard Stock Market Index Admiral Shares VTSAX, the expense ratio is .05. So your actively managed funds would need to outperform the index by slightly over 1% consistently to be a better investment than an index fund.

While many would argue that there is a place for actively managed funds in a portfolio, in spite of their higher fees, I think you will find that many of the ER forum members have concluded that it's best to invest in low cost index funds rather than trying to beat the market. This was the premise under which Vanguard was founded.

The career expense of $40K (or $20K with scholarships) sounds very reasonable, but I would say that you are best off doing this knowing that it is more for personal fulfillment than for financial reasons. There is nothing wrong with pursuing a career that you find personally rewarding, which it sounds like this is the case.

The main downside that I see here is that both you and your spouse will be doing the exact same type of work. Couples can reduce the risk of a down market by working in completely different industries and occupations, so that hopefully if one industry is slow, the other is doing well. But again, you have to balance this with personal satisfaction in your careers.

You've thought this through very carefully, and I know you will make the best decision for your careers. Trust your judgment and you will be fine!

[REWahoo]

Quote:

Originally Posted by Ready Taking a quick look at the expense ratios, the are (in your order) 1.29, 1.18, 1.37 and 1.29.

Yike$!

[MichaelB]

Quote:

Originally Posted by Ready Taking a quick look at the expense ratios, the are (in your order) 1.29, 1.18, 1.37 and 1.29.

Quote:

Originally Posted by REWahoo Yike$!

Double yikes .. they also have front end loads.

[Gumbo]

Thanks for the advice on the funds. I will move them over to Vanguard with my Roths. I was looking to do that anyways b/c I get hit with a fee for selling funds from that account and moving them to my Roth yearly. I don't make enough money for us to fund our Roths after contributing 10% of my salary to 401k, so I have to move money around from other accounts.

[movaly1]

Quote:

Originally Posted by Ready Gumbo, Regarding the funds, those are all actively managed funds. Taking a quick look at the expense ratios, they are (in your order) 1.29, 1.18, 1.37 and 1.29. If you were to compare that with a fund like the Vanguard Stock Market Index Admiral Shares VTSAX, the expense ratio is .05. So your actively managed funds would need to outperform the index by slightly over 1% consistently to be a better investment than an index fund. While many would argue that there is a place for actively managed funds in a portfolio, in spite of their higher fees, I think you will find that many of the ER forum members have concluded that it's best to invest in low cost index funds rather than trying to beat the market. This was the premise under which Vanguard was founded. The career expense of $40K (or $20K with scholarships) sounds very reasonable, but I would say that you are best off doing this knowing that it is more for personal fulfillment than for financial reasons. There is nothing wrong with pursuing a career that you find personally rewarding, which it sounds like this is the case. The main downside that I see here is that both you and your spouse will be doing the exact same type of work. Couples can reduce the risk of a down market by working in completely different industries and occupations, so that hopefully if one industry is slow, the other is doing well. But again, you have to balance this with personal satisfaction in your careers. You've thought this through very carefully, and I know you will make the best decision for your careers. Trust your judgment and you will be fine!

I don't think they need to worry about a down market for Speech-Language Pathology anytime soon. I am a Speech-Language Pathologist and I am constantly (daily) being called and emailed with job offers. There is a nationwide shortage, although it varies between geographical areas of the US.

[NanoSour]

That is a most impressive 401K balance after only 9 years of putting in 10K/year. Wish I could get that fund manager to manage my 401K.

To answer you question, keep doing what ur doing and you'll be part time in no time.

[daylatedollarshort]

We both left corporate jobs and now both work at low stress jobs at home, have pensions and investment income, and will eventually both get Social Security.

Your plan sounds fine. I'd go for it. Our only regret is not doing something similar years earlier. If our current self employment income dried up, we would both go back to school for something different we could do part time or work at home. I like working and making money, but I want to do something where I can get out in the sun during the day, and break up the office work with hikes, movies and visits to the park.

[Gumbo]

Quote:

Originally Posted by NanoSour That is a most impressive 401K balance after only 9 years of putting in 10K/year. Wish I could get that fund manager to manage my 401K. To answer you question, keep doing what ur doing and you'll be part time in no time.

That would be extremely impressive. The 401k balance is mine + my wife's (she worked 7 years before we had kids). Prior to kids, we were both hitting the max (~$15k at the time).

[someguy]

My DW and I are headed that route. I consider myself early semi-retired (ESR'd) and she is taking steps to get there as well. We're a little different in that we're working toward both geographic independence and PT.

I've been this way the past few years or so and it was nice to have me doing consulting work and making quite a bit and DW having the steady paycheck making less. Now, we're comfortable with the idea of us both doing consulting type work, neither full time. For a while, DW had more geographical and hours flexibility and it was AMAZING. Unfortunately, that got pulled back, but she is close again.

There are some potential difficulties you might face. At the moment, it's tough for DW, with me having a lot more free time and schedule flexibility than her. Since I make a lot more, too, I have to be careful about that. Sometimes it feels weird to be making 4 times as much and be at home doing laundry for both of us.

It can also be difficult to modulate the "part-time" reliably. Work doesn't always come in at precisely 30 hours/week (or whatever you want). It can be difficult to turn down an extra x hours, especially if/when someone really wants you and makes it extra lucrative. And, many workplaces are geared toward full-time only. They may initially be ok with 30 hours a week, but if you're good they will find every way to nudge you to 40+ and if you're not a top performer, to zero.

Health insurance is always a concern, although we are getting to the point where our income is high enough that it almost doesn't matter. We think that Obamacare will provide a backstop on costs if nothing else. Worst case, DW has to go back to a regular job with regular HI.

On the other hand, when DW finally gets permanently to the part-time point, our quality of life will be nearly ideal. Our goal is to spend the nice warmer months in our current location near both families and spend the cold winter months somewhere warmer.

What happens if you get a therapy gig one place and DW another? That is where the geographical freedom comes in for us. I want my work and income to be sustainable no matter where in the world I am. THat is different than having work want me in one place one quarter and another the next. I've done both and the former is MUCH better.