37 with a wife and 2 kids wanting to know how we're doing

[cucumber]

Hi, I've recently rediscovered this website and am very interested in how I'm doing as I feel like I'm way behind compared to others on this forum. My wife and I are both 37 and we have 2 kids, 6 and 2 years old. I would like to retire at 60 or earlier but considering our circumstances I have resigned to the fact that realistically it's more like 65. Here is some of our info.

• My IRA - $109.3k
• Wife's IRA - $56.5k
• My Roth IRA - $32.3k
• My Profit Sharing Plan - $25.7k
• Private School Savings for Child 1 (VG) - $29.4k
• Private School Savings for Child 2 (VG) - $25.5k
• 529 Plan for Child 1 (VG) - $7.4k
• 529 Plan for Child 2 (VG) - $3.5k
• Education Savings IRA for Child 1 (Ameriprise) - $13.6k
• Education Savings IRA for Child 2 (Schwab) - $5.6k
• Cash Surrender Value of VUL - $8.8k
• Aquila Hawaiian Tax-Free Trust (HULAX) - $20k

We earn a combined $130k/year and our expenses are $80k/year not including the contributions we make to all of our different savings and retirement accounts. We also both have small pensions from our employers. We also have about $250k in equity in our home.

Hopefully you all can help me with your expertise and provide me any advice. I'd also like to know if it looks good so far if we could retire at 60 or if it's looking more like age 65.

I'm a newbie so I know I'm making many mistakes. Just anxious to learn from them before it's too late. Thank you!!

 

[DrRoy]

Cucumber, you have an above average start here and are saving $50K/yr or 38% of income which is very strong. That along with some pension will likely put you in pretty good shape by 60 if you keep your spending under control. A fair bit will depend on what returns you get over the years. Do not over save in the education accounts. It may not seem likely now but what if one of your kids does not go to college?

 

[Another Reader]

You are doing well with your savings, but I would consider making some changes in where and how you are saving and investing. In your shoes, I would move any money you have with Ameriprise to Vanguard, Schwab or Fidelity immediately. You will hear nothing positive about that company here. It also looks like you were sold life insurance as an investment. That's likely something you will want to dump ASAP as well. You do likely need life insurance. Look into term insurance in place of the VUL.

I would echo the suggestion that you review your savings for the kids' education. You don't mention 401k's or similar work savings vehicles, just small pensions. I would look at those work savings vehicles as well, funding them before saving for the kids' education.

 

[Mdlerth]

Hi, I've recently rediscovered this website and am very interested in how I'm doing as I feel like I'm way behind compared to others on this forum. My wife and I are both 37 and we have 2 kids, 6 and 2 years old. I would like to retire at 60 or earlier but considering our circumstances I have resigned to the fact that realistically it's more like 65.

Au contraire. You are miles ahead of me. You have a robust saving rate and a half million NW, including provision for future education expenses. At your age, I was just starting the first of my five children into college, with zero saved up for it and a net worth consisting of three old cars, a handful of garden tools and my collection of bowling league shirts. I didn't get serious about retirement prep until about age 40, and now I'm on the way to going out at 60 in ~twenty months. Once I gained traction on boosting saving and investing, it worked like magic, despite two big market drops and a major career bust.

I will offer some advice worth twice what you paid for it: Comparing your situation to others' is a guilty pleasure like sugar or reality TV, but don't let it affect your planning. ER is not a competition. You win when you go out on a satisfactory timetable in satisfactory comfort.

Godspeed, cucumber.

 

[Cassius King]

I will offer some advice worth twice what you paid for it: Comparing your situation to others' is a guilty pleasure like sugar or reality TV, but don't let it affect your planning. ER is not a competition. You win when you go out on a satisfactory timetable in satisfactory comfort.

Godspeed, cucumber.

I love this. We are all on this site because we are already wired the same. I'd be doing my personal retirement plans an injustice to compare them to many on here. And I'd be doing myself a further injustice if i thought I needed what most here are targeting for retirement.

 

[phil70]

It also looks like you were sold life insurance as an investment. That's likely something you will want to dump ASAP as well. You do likely need life insurance. Look into term insurance in place of the VUL.

+1 on dumping the VUL. Any form of permanent insurance is not efficient unless you are extremely wealthy and trying to solve estate tax problems. We dumped our permanent insurance two years ago, bought more term insurance and invested the balance in Vanguard funds.

The agents will try to dazzle you with mumbo jumbo about tax-free loans, etc. The bottom line is that the tax benefits of insurance are no better than a 401k/IRA. Given the commissions and costs charged for these products you are better off without them in your situation.

 

[aida2003]

Cucumber, you have an above average start here and are saving $50K/yr or 38% of income which is very strong.

Are you sure the OP saves $50k/yr? The way I read the post is the gross earnings are $130k, but the cash spending is $80k. Unless the $130k is net earnings taxes will reduce the earnings.

If $80k spending cannot be reduced then all you need is patience to save over the years and/or consider to enhance your income somehow.

You definitely sound generous parents with regards to the future college education of your kids.

 

[kcowan]

$50k a year for 22 more years? Plus ROI on the savings? Take the advice here about changing your invetsment vehicles and you should be fine.

 

[cucumber]

Cucumber, you have an above average start here and are saving $50K/yr or 38% of income which is very strong.

Actually we probably save more along the lines of $20k/yr in various savings and retirement accounts. The rest goes to taxes.

Do not over save in the education accounts. It may not seem likely now but what if one of your kids does not go to college?

The education accounts are mainly for the kids' private school for high school. The public school system isn't the best in Hawaii.

You are doing well with your savings, but I would consider making some changes in where and how you are saving and investing. In your shoes, I would move any money you have with Ameriprise to Vanguard, Schwab or Fidelity immediately. You will hear nothing positive about that company here. It also looks like you were sold life insurance as an investment. That's likely something you will want to dump ASAP as well. You do likely need life insurance. Look into term insurance in place of the VUL.

I've learned the hard way. I've actually moved most of our funds out of Ameriprise thanks to the guidance of experts on these forums. We also have term insurance. I decreased the VUL payments to the minimum just to cover the insurance and no investments. We do have a cash surrender value though due to our initial payments. I haven't cashed it out because we need to wait another few years in order not to lose our investment. I was very unhappy about that when I found out too late.

I would echo the suggestion that you review your savings for the kids' education. You don't mention 401k's or similar work savings vehicles, just small pensions. I would look at those work savings vehicles as well, funding them before saving for the kids' education.

Sorry, I combined my profit sharing with my 401k. I contribute 2% and my employer contributes 5%. We are saving for private school tuition for our children's high school education as the public school system is not great where we live. We put a minimal amount into their 529 accounts every month.

I will offer some advice worth twice what you paid for it: Comparing your situation to others' is a guilty pleasure like sugar or reality TV, but don't let it affect your planning. ER is not a competition. You win when you go out on a satisfactory timetable in satisfactory comfort.

Great words of advice! It's difficult not to when I hear such great planning and savings situations on here. But you're right! Everyone's situation is different.

Are you sure the OP saves $50k/yr? The way I read the post is the gross earnings are $130k, but the cash spending is $80k. Unless the $130k is net earnings taxes will reduce the earnings.

If $80k spending cannot be reduced then all you need is patience to save over the years and/or consider to enhance your income somehow.

You definitely sound generous parents with regards to the future college education of your kids.

You're right! We probably save more along the lines of $20k a year and the rest sadly goes to taxes.

We contribute $50/month to each of the 529 plans. The other education savings accounts are for their high school tuition which will most likely be $20k/year for each child. YIKES!!

I appreciate everyone's feedback!! It's definitely very helpful. If anyone has any more feedback or advice, I'm eager to learn! Thank you!

 

[NgineER]

I would vote for you saving in retirement accounts now and hopefully in ten years, your salary will have increased enough to be able to cash flow the private high school. If it hasn't, maybe consider public school.

 

[Aerides]

At your age with two young kids I'd also recommend a healthy cash/emer fund, so you never have to disrupt the rest.

You are doing well, and way ahead of your peers. Considering the young kids you're probably ahead of most at your age that are even starting to plan for retirement, and most at least 10 years older than you that aren't.

Given your youngest will be out of college by the time you are 60, you should be fine with the earlier side of your goal if you keep things up (and yes, dump AMP).

 

[jzajzz]

you're doing the most important thing ..which is saving.. being a great saver is more important than being a great investor.. though now that you're saving .. you might as well do it more efficiently ...

I'm no fan of the VUL .. but replacing the VUL with term sounds awful.. I would assume anyone with a VUL typically has term for pure death benefit while the kids are young .. comparing term with VUL would not apply here .. My 2 major issues with VUL is that
1. The compounding of losses in a down market.. when the market is down especially if you haven't really accumulate much cash yet.. it forces you to pay even more premium to keep the policy alive and in good shape.
2. one o f the great advantage of Cash value life insurance is that it's non correlated asset.. During market downturn .. you can turn to your cash value to withdraw so you can allow your market asset to recoup... it allows you to be more aggressive on your other invesments in the market. You lose that diversification tool with VUL ..

The only scenario I see with VUL is someone savvy with market timing . .. using it as a tax shelter for their gains.. but they have to understand the risk of VUL in a down market.. For others.. just pay the taxes and just buy mutual funds ... you will appreciate the peace of mind

 

[Koolau]

My guess is that a lot of folks on the FIRE forum do not understand the issues you are facing with providing good education for your kids in Hawaii. Though there are some good public schools in Hawaii, its sort of "pay your money and take your choice." To have a good public school, you have to pay a fortune to live in an expensive neighborhood. Otherwise, you probably have to go private - and the expense is truly staggering.

We fortunately raised our kids before moving to the Islands so I don't have very good figures on private school costs, but IIRC, they START in the $15K/year/student range - and that's grade school. If you desire to remain in HI, it's just one of the costs of Paradise. I feel for you.

It may be difficult to save the kind of nest egg you need because of all the added costs. But, believe it or not, ONCE you retire, it gets better. Exemptions for the "elderly" reduce RE taxes (which are not ridiculous to begin with) and SS and most pensions are state tax exempt. Hawaii loves and respect its kupuna (senior citizens).

Curious which Island you call home. Do you have opportunity (or desire) to move to the mainland? Raising kids in Hawaii will strain your FIRE plans I fear. So good luck and keep at it.

 

[thumbs]

I think you are in a good spot for someone who is 37. Like the others said, keep spending under control, and save as much as you can. I think it was Bill Gates that said "people often over estimate what they can do in a year, and underestimate what they can do in a decade".