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Have the net worth, but not the income.
06-11-2012, 08:42 AM
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#1
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Recycles dryer sheets
Join Date: Aug 2006
Location: London
Posts: 58
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Have the net worth, but not the income.
Hi. I started out on these boards in 2006. Learned a lot. Took some great advice then life got insane and we got lazy about RE.
About us: I'm 34. DH is 41. No kids. We'd like to retire yesterday So time to get serious about getting our ducks in a row. We've managed to stash lots of money away, but we do a rubbish job of having it provide income for us.
Goals: To figure out what we need to do to ditch the paychecks for passive income. Really concerned about the health insurance piece; especially as we're thinking we want to have kids.
Looking forward to spending lots more time here.
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06-11-2012, 08:57 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2007
Posts: 7,746
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So you have between $2.575 million and $2.91 million depending on whether you count the home equity. Just using rules of thumb, you can pull $80,000 to $116,000 from these investments each year. Is that enough to fund your projected lifestyle? How does that compare with what you want to spend or currently spend?
One comment on investments - you have almost half your financial assets in cash, probably earning very little. Think about whether that is the best investment to get you where you want to be.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (8, 13, and 15).
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06-11-2012, 09:05 AM
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#3
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
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You can retire yesterday.
Welcome (back) to the boards!
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
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06-11-2012, 09:20 AM
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#4
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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The OP was asking about turning assets into passive income. There there is a problem with today's environment. The equity index funds will generate less than 2% if you stay with the broadly diversified funds. CDs are barely paying 1% if you go out almost three years. After that you have the option of a SPIA which would be a horrible mistake at your ages.
Your only real option is to have faith that things will return to "normal." FIRECalc assumes "normal" over a long time frame and this current situation, if it continues indefinitely, guarantees massive retirement failures that were based on FIRECalc.
I you believe "normal" will return "soon" you are ready to retire. If not, keep working. We all have to decide when the reward exceeds the risk.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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06-11-2012, 10:01 AM
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#5
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Hi Gillette, and welcome back to the ER Forum.
I wouldn't want anyone reading this thread to think that we normally allow more than one username per member, so I"m just posting to mention that I have sent you a PM about it and we will get this figured out via PM (personal message). Thanks.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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06-11-2012, 10:29 AM
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#6
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Recycles dryer sheets
Join Date: Aug 2006
Location: London
Posts: 58
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Sorry about that. I looked around for a way to change the SN on the old account, but didn't see anything so I created a new one. I'm well known on a different message board by my old SN. Trying to be a little more incognito here. I'll send you a PM though.
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06-11-2012, 10:56 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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Quote:
Originally Posted by Gillette
Sorry about that. I looked around for a way to change the SN on the old account, but didn't see anything so I created a new one. I'm well known on a different message board by my old SN. Trying to be a little more incognito here. I'll send you a PM though.
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I was told they always catch the double dippers but you made it too easy.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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06-11-2012, 11:05 AM
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#8
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Full time employment: Posting here.
Join Date: Nov 2008
Posts: 728
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One thing to think about........kids! I had one later in life and can't believe the expense and limitations it put on retirement. They HAVE to go to school, you probably would want a college fund.......the house has to be bigger to accomodate them....the list goes on and on.
So, think through how many kids you want and what YOU feel your obligation will be in those areas, such as housing and college funds. They say each kid costs $275,000 to raise.....that's looking to the past.....looking towards the future, you might have to double that cost.
but......they are worth it.....at least my DW and I think so.
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06-11-2012, 11:16 AM
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#9
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Full time employment: Posting here.
Join Date: Oct 2007
Posts: 798
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$275K per kid, through 4 years of college is not realistic. If they go to a public, in state college, figure at least $450K from birth through graduation. If you want them to go to a private college, up it to more like $600K to $750K. And that's in today's dollars and does not include private schools for K through 12. Both options have nowhere to go but up .
We also think they are well worth the cost - of course we haven't gotten to the stage where we will find out if THEY are willing to change our diapers .
__________________
Mission accomplished - not necessarily ER, but certainly R.
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06-11-2012, 11:16 AM
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#10
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,708
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Quote:
Originally Posted by jerome len
One thing to think about........kids! I had one later in life and can't believe the expense and limitations it put on retirement. They HAVE to go to school, you probably would want a college fund.......the house has to be bigger to accomodate them....the list goes on and on.
So, think through how many kids you want and what YOU feel your obligation will be in those areas, such as housing and college funds. They say each kid costs $275,000 to raise.....that's looking to the past.....looking towards the future, you might have to double that cost.
but......they are worth it.....at least my DW and I think so.
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I dunno. We have 3, and at $275K each that would be $825K for the 3 of them. If someone came along and offered me a choice - take the cash or the 3 kids, I'd have to think about it.
Edit: I didn't see beowulf's post. At $600K per kid, @3, that's a cool $1.8M. No choice there - I'd take the cash.
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06-11-2012, 12:15 PM
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#11
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Moderator Emeritus
Join Date: Sep 2007
Posts: 17,774
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Here you go: Cost of Raising a Child Calculator | BabyCenter
This calculator includes things like a few grand for housing the child--oops, forgot to spend that! Another grand for transportation for 8-year-olds--oops, forgot to spend that! And I don't think the tax breaks are included. Reminds me of the economists' calculation of the value of the stay at home parent.
Gillette, are you in the UK per your profile? Is health insurance a concern for you?
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
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06-11-2012, 12:22 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Quote:
Originally Posted by beowulf
$275K per kid, through 4 years of college is not realistic. If they go to a public, in state college, figure at least $450K from birth through graduation. If you want them to go to a private college, up it to more like $600K to $750K. And that's in today's dollars and does not include private schools for K through 12. Both options have nowhere to go but up .
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You and I must live in alternative universes. We put two daughters through public universities, paid for their weddings and our combined costs for both were probably 1/3 of what you estimate for a single child.
__________________
Numbers is hard
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06-11-2012, 12:31 PM
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#13
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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+1 REWahoo, I'm in your alternative universe. Had I read cost estimates such as those earlier in this thread, before getting pregnant, my lovely sweet daughter would have never existed.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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06-11-2012, 12:35 PM
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#14
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,708
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I can't even get close to that number.
Quote:
Originally Posted by Bestwifeever
Here you go: Cost of Raising a Child Calculator | BabyCenter
This calculator includes things like a few grand for housing the child--oops, forgot to spend that! Another grand for transportation for 8-year-olds--oops, forgot to spend that! And I don't think the tax breaks are included. Reminds me of the economists' calculation of the value of the stay at home parent.
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I think Feever is on to something, that might be "theoretical economic cost" and not out of pocket cost. In economic costs those amounts aren't so bad because DW made about the same each year doing things she didn't get paid for, so they pretty much even out.
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06-11-2012, 12:37 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,363
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Quote:
Originally Posted by Bestwifeever
.....
Gillette, are you in the UK per your profile? Is health insurance a concern for you?
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Her OP said her house was $335k so she's probably NOT in the UK unless she is living in a shack.
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06-11-2012, 12:47 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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You don't necessarily have to generate passive income to live on. There's really not much difference in generating $100K in passive income vs. having your investments increase by $100K and withdrawing that amount. There's nothing wrong with the passive income strategy, but don't get hung up on it. What you really want is the best return, with an acceptable amount of risk. At this point, I would still be trying to build up the nest egg, while also figuring out what your income needs will be, especially if you do have kids. The large chunk in the money market probably isn't helping build up the nest egg, though maybe that's just a short term strategy while watching the market.
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06-11-2012, 12:50 PM
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#17
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Recycles dryer sheets
Join Date: Aug 2006
Location: London
Posts: 58
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I do live in a shack in the UK but it's only temporary. 1 year work assignment.
Quote:
Originally Posted by Bestwifeever
Gillette, are you in the UK per your profile? Is health insurance a concern for you?
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Currently in the UK. Health insurance will be a concern though since it's temporary.
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06-11-2012, 01:00 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,363
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So once you return to the US let's say you sell the house you don't intend to live in and buy the house you do intend to live in, let's say you have $2.5m of financial assets. At a 3% withdrawal rate that would provide ~$75k of income. Since there are many families who live reasonably well on that, I would say whether you can pull it off depends where you live and the lifestyle that you need to have.
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06-11-2012, 01:04 PM
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#19
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Full time employment: Posting here.
Join Date: Feb 2012
Posts: 648
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Regarding the side discussion on kids.
They say kids are expensive, but I think like most things in life you adjust spending accordingly. Some also say that if you always bought a car 2 years old and drove it for 8 years instead of the same car new every 2 years you'd be able to save $300,000-$400,000 over your life. That may be true by the numbers (with certain expectations on growth)... but in reality, if you didn't spend that money on the car it likely would have gone somewhere else.
People who can save... tend to still be able to save with kids. People who can't save, tend to still not be able to save without kids. As long as a family is comfortably above the poverty line, I don't think having one or two children will change retirement plans as much as some of these calculators can lead us to believe.
I have 3 yr old and an 8mo old, so I'm certainly not into the expensive part yet, but I'd estimate approx 12-18 months less ER for every child I have. I'm willing to work to 55 instead of 50... just to enjoy being a grandparent to many grand kids someday (hopefully)
Remember, having children is not something you can get a do-over on when you reach retirement. Well, I guess some have the option... most do not. If you want to have children, don't let the cost deter you... it'll all work out in the end.
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06-11-2012, 02:32 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2007
Posts: 7,746
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Quote:
Originally Posted by EvrClrx311
Regarding the side discussion on kids.
They say kids are expensive, but I think like most things in life you adjust spending accordingly. Some also say that if you always bought a car 2 years old and drove it for 8 years instead of the same car new every 2 years you'd be able to save $300,000-$400,000 over your life. That may be true by the numbers (with certain expectations on growth)... but in reality, if you didn't spend that money on the car it likely would have gone somewhere else.
People who can save... tend to still be able to save with kids. People who can't save, tend to still not be able to save without kids. As long as a family is comfortably above the poverty line, I don't think having one or two children will change retirement plans as much as some of these calculators can lead us to believe.
I have 3 yr old and an 8mo old, so I'm certainly not into the expensive part yet, but I'd estimate approx 12-18 months less ER for every child I have. I'm willing to work to 55 instead of 50... just to enjoy being a grandparent to many grand kids someday (hopefully)
Remember, having children is not something you can get a do-over on when you reach retirement. Well, I guess some have the option... most do not. If you want to have children, don't let the cost deter you... it'll all work out in the end.
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I'll echo this sentiment. We are on kid #3 (1.5 months old right now). I have not run the numbers and don't have a good estimate of what the kid will cost through age 22. But I have a feeling it won't extend the FIRE date by more than 12-18 months. We'll end up with about a $3000 tax break during our working years for the extra kid. Add to that the many low(er) income programs we will qualify for during ER (free/reduced student lunches, obamacare health insurance, etc).
We still drive our Honda Civic and Accord even with 3 kids. It is a squeeze but doable for now. A minivan may be in the future but isn't outrageously expensive vs the small or mid size cars we already own (and would own anyway in order to carry adults in them occasionally).
Our house is a 4 bedroom (the 2 oldest currently bunk in the same room). No plans to upsize the house. Possibly repurpose an office or 2nd living room to accommodate the third child at some point. This is about as much house as we would probably have even without kids, since the DW wanted a yard and a certain amount of space anyway.
Other than college costs, we don't expect a lot of major expenses, and the tax benefits largely outweigh the marginal costs of kids for us. But we are very frugal apparently.
As for health insurance, obamacare health insurance premiums (if the current law remains law after this summer) are tied to family size. Earn less than $90k with a family of 4 and your premiums will be subsidized to some extent. This is one leg of our ER stool and should make our health insurance premiums not exceed $1000 or so per year while the kids are on the plan.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (8, 13, and 15).
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