45 year old newbie from Cincinnati

[Cinti_Headhunter]

Hi All - I've been viewing the site for a few months and thought I would say hi and get some thoughts from the group.

I am 45 and my wife is 42. 2 children ages 8 and 10. I started my own business within the last 15 months (a professional services business) and I need a little sanity check. My wife is a school teacher and really enjoys the work. Our finances break down as follows:

401(k) - $300,000
Brokerage Account - $110,000
Savings Account - $32,000
House - Owe $100,000 is worth $260,000. Currently on a 15 year mortgage with 13 years left
College Fund - $40,000

Debt - One Car loan with $15,000 left on it. No other debt besides what is left on the house.

Our expenses are about $5500 a month

My business has no debt on it and any money I put into getting it started has been repaid and I have about 10 months of personal and business expenses saved in the business account. This money is not included in the amounts above. I have not put any money into savings/retirement since I started the business as I sleep a little better knowing I have the money to pay the expenses for a while. At times I don't know where my next check in coming from!

My wife has a pension through the state teachers union. Assuming she continues to teach and has a fully funded pension and I continue to pay into SS we will receive roughly $75,000 a year at ages 63 and 60. She will have access to Healthcare until 65 as will I through the teachers fund.

I am freaking out a little because I am not currently putting any money away into a retirement account or into the college fund. I am hoping to be able to do so in the next 8-10 months. Much of this depends on how the business goes.

I didn't get serious about money until I was about 32, same with my wife. So we have saved what we have currently in about 13 years. Am I way behind? I am not sure what to expect as far as growth from our current 401(k) and brokerage account.

I would welcome any thoughts or questions.

 

[Red Badger]

1. Keep reading here.
2. Keep your 401K in low cost index funds.
3. Max out 401K (if you can).
4. Live Below Your Means (LBYM)

If your DW is on board, you've won at least one lottery.
Best wishes!

 

[38Chevy454]

Welcome to the forum. Sounds like you are doing OK with savings so far, but agree that you do need to start the 401k/IRA contributions. Assuming your current 401k/IRA is in good diversified low cost equities, since you are in a fairly long term outlook. But of course your risk tolerance is what matters for allocation amounts. Keep up the LBYM and saving. It's OK to have the break while developing the business.

As Red Badger suggested, keep reading here to learn. You'll get more comfortable as your knowledge increases. You still have a 15 year approx timeframe per your timetable, so just keep saving and let compounding work its magic.

 

[gerntz]

I think Cincy_Headhunter would be a better name.

 

[38Chevy454]

I think Cincy_Headhunter would be a better name.

Cinti is a common and accepted abbreviation for Cincinnati

 

[Cinti_Headhunter]

Thanks! The funds in the 401(k) are distributed in low cost Vanguard index funds. 80% stock funds 20% bond fund. The brokerage account has a little more individual stocks.

I appreciate the comments!

 

[HawkeyeNFO]

Hi Headhunter - I don't have much to add to Badger's comments, so check out some of the other threads here. I used to live in Mt. Airy back in the 90's for a little while. Cincy can be a fun town.

 

[TheRunningMan]

Just to cover a couple of basics, congrats on starting your own business and choosing to raise your family in a great town. We raised our daughters in Loveland. As for planning, stay the course and continue to follow mainstream guidance on this site. You are a bit behind where we were at your age but you have two earners and a pension to help. Also, don't get caught up in the "keeping-up" trap...it is mission impossible as others are always willing to take on more debt to win!

 

[brucethebroker]

Here is "another take". First though, how long will you be working? When do you want to "walk away"? Can you sell your business when you retire? How much cash flow do you want at retirement age of ____?

Look at your current retirement/investment account savings. $410k. Let's say you never add another penny-just let it compound. At 6%, your money will double in 12 years, every 12 years (rule of 72). So, at 57 it will be $820k, perhaps $900-1M at age 60. How much retirement savings will make you comfortable with $75,000 (inflation adjusted?) of cash flow? With your mortgage paid off (13 years), how much do you need? 4% of 1 M is $40k a year, plus $75k.

Is it possible you don't need ANY more retirement contributions unless you need the IRA/SEP deduction?

I think you may have already won.

 

[Cassius King]

Welcome aboard Cinti_Headhunter from another Cincinnati member. I think you are in good shape and will be in great shape if the business takes off. And a friendly reminder that was also stated above, this is your retirement story, Don't compare yourself to anyone else.

 

[Golden sunsets]

It seems to me that the success of your business is the crucial piece of your financial future. At some point it needs to start making enough for you to resume saving. As a self employed person you will have several options to shelter larger amounts from taxes than most employed individuals which more than offsets the fact that you currently pay both sides of Suta/futa/fica. Have you set a date by which you need to generate meaningful earnings and do you have a Plan B if that date comes and goes without achieving that goal?


Sent from my iPad using Early Retirement Forum

 

[Cinti_Headhunter]

Thanks for the comments. I agree on the business being a crucial piece on when I would be able to retire. If it takes off there will be no worries and hopefully we can push that retirement date up a couple years. I have been doing it for about 15 months and will give it another 12 months before making a decision.

Unless I grow the business and add employees I do not think I could sell it. However I could work part time in my later life if I needed the income. I can turn it on and off as needed.

The family is much happier that I am working for myself and not in the corporate world. The kids no longer need to go to any type of day care or latch key pre and post school. Plus I am able to do more things with them in the summer and on breaks. It is a balancing act right now and I am still trying to figure it out.

I am not burning through any savings but not adding to it either at this point. Our spending, which is not too much, has not been effected by this.

 

[haha]

Our spending, which is not too much, has not been effected by this.

Good point. The most helpful thing, especially when starting a business, is to have a manageable monthly nut.

Ha

 

[pb4uski]

Suggest that you use Quicken Lifetime Planner to put together your lifetime/retirement plan. It has some what'if capabilities where you can seeow different assumptions change you plan and either adopt ot reject those changed assumptions.

Once you have a plan together, I further suggest that you monitor your progress with Quicken.

 

[Cayman]

Welcome Cinty. You're off to a good start, congrats! The advice offered to you thus far is spot on. You voiced concern about suspending your contributions to a college fund for your 2 children, and college expenses will start in just 7 or 8 years. PB4USki's advice to use Quicken LP or similar will help you plan for edu. costs within the context of your lifetime plan.

 

[oldphd]

I'd like to offer a little different perspective to consider. I'm a fellow Ohioan whose DW is retired under STRS and am vested with a modest number of years in OPERS.

For DW - since she started to collect her pension several years ago, expected COLAs have been changed. First reduced from 3% to 2% with a year off, and then removed with the promise of "reevaluation" in 5 years. They have also removed the Medicare subsidy. They have routinely said "health care is not promised".

For me - I had achieved a point where I had enough time to qualify for health care through OPERS when I retire in a couple of years. However, they upped the requirement which removed me from qualification. "Health care is not promised". They have also removed spouses from health care. Can't even buy in as part of the group. Future retirement qualifications have been changed, early retirement reduction was drastically reduced. Future COLAs have recently been changed for all. These changes have been modest for some, more significant for others. I am in a sweet spot where I get hit particularly hard. Old rules, collect 85% pension at age 60 in health care plan (I'd pay a chunk, but get to participate). New rules, 52% pension at age 60 with no health care. Old rules, 100% at 65, new is 92% at 65, 100% at 66.

This is intended to support my personal philosophy of "belt and suspenders". Hope for the best, but plan for the worst.

Given the timeframe you have until you could collect, consider the possibility of changes. Folks on here sometimes discount whether they will collect 100% SS or not, but pensions are changing as well. And the Ohio plans in question are decently funded, we're not talking Ill. or others with obvious problems. To their credit, they are trying to ensure that the systems are sustainable.

 

[gerntz]

Cinti is a common and accepted abbreviation for Cincinnati

Having lived in the area, I personally don't think so.

Regardless, I've yet to hear a person verbally abbreviate it to cin-TEE versus the everyday cin-SEE.

 

[braumeister]

Having lived in the area, I personally don't think so.

Regardless, I've yet to hear a person verbally abbreviate it to cin-TEE versus the everyday cin-SEE.

Actually, it's in common usage, but most people tend to use Cincy when speaking and Cinti when writing an address. Really more common for the natives to just say Cincinnati, but abbreviations are often useful. Another short form sometimes heard, especially by younger folks, is Nati.