Married 50 year old with 2 young kids, looking to retire at 55

[dcoy]

Hi All,

Thank you for taking the time to read my post. I am hoping to retire by 55, but with two little kids I just don't see how that is possible until they get much older. I am hoping this community can help or provide a fresh prospective and advice.

Me: 50 years old. 2 kids (7 and 9), Married, everyone in good health, living in Seattle. Wife does not work. I work in high tech sales and at 50 I am a dinosaur in the industry.

Assets:
Home equity: $1M
IRA and 401k (100% stocks and ETF): $700,000
Taxable equities and ETF: $1.1M
Future inheritance (property and equities): $1M
529's: $65K and $53K
Annual income: $300K

Expenses: $15K/month

Ideally I would like to get out of Mega Corp now, but realistically I think the soonest would be when I am 55. However, with two young kids I am concerned about leaving the Mega Corp too soon as at my age I'll never get back in. To lower expenses, I we could move to a cheaper city and downsize, but my wife would not be happy. Given our expenses and assets now and the inheritance to be realized in the not distant future do you think I am set up for FIRE by 55? What advice could you offer to better help me prepare over the next 5 years? My biggest worry about leaving the work force is health insurance and unforeseen big expenses.

thank you!

 

[COcheesehead]

Save more. You need to be around $4.5mil at your current expenses to retire. If you can reduce expenses meaningfully, than you can get by on less, but with kids there could be lots of unplanned expenses.

 

[MoneyIsMyHobby]

dcoy,

It is doable, and doable now, it is just a matter of what you want to give up and how much risk you want to take. If you downsize (and pay cash, maybe $300k) for your next home in a less expensive area, that would leave you 2.1MM in your own accounts. If you trust the 4% rule, that gives you $84k to live off (and you won't have a mortgage payment - did you play with the FIRE Calculator?) which is certainly doable (ignoring healthcare). I'm ignoring the inheritance because that is what I do in my own finances because I don't feel like they 'owe' me anything, so if they decide to give that the charity or whatever, so be it. Now, I would probably consider a second career to provide Heathcare for your family, plus a bit of spendable cash. Perhaps you always wanted to be a school teacher or college professor (take summers off?) or some other lower-paying-more-rewarding career with health benefits.

I would point out that it is great if you can pay for your kids college, but of course you don't owe them that. I sorta feel like I owe my kids that, as my parents paid for my college and I'm paying it forward.

It is really just a matter of how badly you want out of your current situation.

The biggest eye opener is probably to go look at the exchange for quotes on health insurance. It is a real bear right now... and arguably the scariest part of trying to FIRE.

To be realistic, if I were you, I would give it that extra 5 years, try and reduce your spending, and save save save. As you've already read, reducing your spending has the double-sided benefit of reducing what you need after retirement and increasing what you have in your nest egg. I'm sure you already are, but I would be putting as much as possible in tax advantaged accounts (i.e. that 401k). I'm basing that on your earnings (tax benefit and inability to directly Roth) and your age (have plenty outside investments to get you to 591/2).

MIMH

 

[MoneyIsMyHobby]

P.S. Don't forget that Healthcare costs will outpace inflation as they're increasing faster than inflation and you will also get older each year (making it more expensive). I worry that many of the really-young FIRE folks haven't considered that what they pay for insurance at 45 or 50 isn't what they'll pay at 55 or 60.

 

[dcoy]

thank you. I do like the idea of a second career in something fun and less stressful/demanding. Even in 5 years my kids will still only be 14 and 12, still at home and will still require health insurance. A new career makes sense...i just need to find/create one

 

[marko]

I work in high tech sales and at 50 I am a dinosaur in the industry.

Speaking from experience you could end up 'retiring' involuntarily. Finding tech work over age 50 can be quite the challenge. Been there.

The good news is that you're trying to prepare now, whether your retirement is your idea.
As you note, perhaps a change of career might help.
As others note, a change of COL might help.

 

[bloom2708]

Expenses: $15K/month

You could retire at 55, but not with these expenses.

Would you move to a Low Cost area? Spend ~$60k/year?

Would your wife downsize her life? Would the kids move?

I am 47 with a 10 year old. Long way to go. 55 is my target but we live in a much lower cost of living area.

 

[dcoy]

Moving and or downsizing now is not in the cards, not at least until the kids are grown and out of the house. As a kid I liked growing up in one house, living in one neighborhood, keeping consistent friends, keeping close to family. I want all the same for my kids....so for now I guess I keep my head down and continue at mega corp. The pink slip will come eventually and when that day comes I plan to be prepared. This forum and the responses you all have provided help me in my preparation, so thank you all!

 

[MBAustin]

Welcome dcoy! If you haven't found them already, we have a helpful list of things to think about as you are planning ahead.

Some Important Questions to Answer

I'll echo others who say it's really about your choices regarding spending. Suggest you and your wife have some serious discussions on what you would like your futures to look like. Would she be interested in working now that the kids are in school? What would you do if the pink slip came on Monday? What spending changes could you agree on now to reduce your risk and improve your odds of getting out of the rat race in your 50s? What second career might work for you and what would it take to get there? Etc.

You'll find lots of helpful info and folks here, and we look forward to your contributions!

 

[joeea]

Ideally I would like to get out of Mega Corp now, but realistically I think the soonest would be when I am 55.

What will you do with yourself if you do retire soon?

Have you considered having the wife work while you stay home and handle the home and kids?

 

[Bigdawg]

What will you do with yourself if you do retire soon?

Have you considered having the wife work while you stay home and handle the home and kids?

+1

 

[dcoy]

I have an endless amount of hobbies, so filling my retirement day is not an issue. I've taken multi-year breaks from work prior to marriage and loved the freedom. Having the wife work is a great idea and something that I will be working on.

 

[daylatedollarshort]

Our expenses used to be similar to yours and we decided one day we would rather not work longer to save more and cut expenses instead. We stayed in a HCOL area and kept the house but started making the house energy efficient, dropped the landline, price shopped more and a hundred or so other changes that all added up. We thought we could always downsize or move to a lower COL area but in the end neither turned out to be necessary as we had a lot of expenses in the budget we haven't missed or were paying too much for. We put our expenses in the same format as the Consumer Expenditure Survey and found lots of good areas of opportunity to cut back rather painlessly.

 

[rodi]

Welcome dcoy -

My goal was always to retire at 55. I was able to save more, spend less and retired at 52. But our expenses, even with 2 kids under roof, were less than yours.

Your idea of retiring when the kids are home is a good one IMO. I am able to be involved, hands on, aware... of my kids in their teen years. There have been several times when I've been super grateful I was home and able to help them, advise them, and just able to schlep them around as needed. (My kids were 11 and 13 when I retired 4 years ago.) When I was working I didn't have the time or emotional bandwidth to be as involved with them.

For me - the biggest thing was to look for ways to cut expenses... and any extra savings I invested... It snowballed pretty quickly. I found I could save more, needed a smaller nest egg, and still live a pretty awesome lifestyle.

 

[daylatedollarshort]

In our case we both worked at home initially, but really cutting expenses was where we got the most bang for our buck. Making $100K for one year after taxes might add $70K to retirement funding, but if you have high expenses, cutting them ~$50K a year permanently for the next 50 years drops the amount needed to fund retirement by $2.5M. And with cutting expenses for us we've been keeping our MAGI low enough for ACA subsidies worth close to $20K a year and our kids received grants for college tuition.

 

[dcoy]

Thank you all. I am hearing you all loud and clear: Re-prioritize and cut expenses, consider part time work, consider having the DW work. All good advice and with 5 years to go I will start taking action.

 

[Closet_Gamer]

dcoy, I would suggest coming to terms with your college expense plans ASAP. Determine what you're goals are in terms of what you'll pay and what you'll expect the kids to pay. Then get a very specific plan in place to reach those goals and keep an eye on college inflation and how it impacts your plans.

No judgement here in terms of the answers to those questions, but college is astoundingly expensive and continues to accelerate faster than inflation. With a big asset base you're likely to get zilch in terms of financial aid.

Our kids are just entering college. I've been preparing very aggressively (saving, detailed college cost tracking and investing with an eye to liability matching) since the DD1 was 12 months old. Even with all that prep, I find myself surprised by the financial hurricane of college and finding some of my assumptions were off a bit. My wife and I have discussed many times how much harder this whole thing were be if we hadn't planned properly -- particularly for our kids.

Failing to have a solid plan for this and then coming to terms with it after you retire could be a very bitter combination.

My $0.02.

 

[dcoy]

Thank you Closet_Gamer: Healthcare, college expense and the unknown expenses worry me. I do have 529's set up for each kid: 7 yo has $53K and 9 yo has $65k. I am contributing $400/month into each and will continue until they get into college. That should be "enough" to at least get them through public schools, I hope. If they want to go private they will have to borrow.

 

[daylatedollarshort]

Aid for college depends on what type of assets the parents and student own. They can be in the millions for FAFSA if in exempt assets classes, like a small business, personal residence or retirement accounts and not count against financial aid.

With financial aid, in state public schools, online and community college credits, education tax breaks, paid internships, and tutor jobs our kids college hasn't cost us too much. Our oldest child's payback period for our out of pocket college costs after graduating was 6 months.

 

[ncbill]

Aid for college depends on what type of assets the parents and student own. They can be in the millions for FAFSA if in exempt assets classes, like a small business, personal residence or retirement accounts and not count against financial aid.

With financial aid, in state public schools, online and community college credits, education tax breaks, paid internships, and tutor jobs our kids college hasn't cost us too much. Our oldest child's payback period for our out of pocket college costs after graduating was 6 months.

Don't forget the military for those of us in the USA.

IIRC many posters here used that route to pay for college.

My kids have chosen that route as well (oldest commissions next year)

Don't have to go active either - in several states joining the Guard covers 100% tuition @ public schools.

 

[SnowBound]

Thank you Closet_Gamer: Healthcare, college expense and the unknown expenses worry me. I do have 529's set up for each kid: 7 yo has $53K and 9 yo has $65k. I am contributing $400/month into each and will continue until they get into college. That should be "enough" to at least get them through public schools, I hope. If they want to go private they will have to borrow.

Spend $21.99 on "Paying for College With Going Broke", Princeton Review. Read it and understand how to apply it to your situation. Don't get a used copy from the library, a lot has changed in the past two years.

Also rethink the cost of living area. I live in New York State, very high cost of living area. Public college was free for my son (still had to pay room and board). Will not stay in NY once retired (actually will likely be completely moved out before FIRE).

 

[45th Birthday]

dcoy, I would suggest coming to terms with your college expense plans ASAP.

Failing to have a solid plan for this and then coming to terms with it after you retire could be a very bitter combination.

Thank you Closet_Gamer: Healthcare, college expense and the unknown expenses worry me. I do have 529's set up for each kid: 7 yo has $53K and 9 yo has $65k. I am contributing $400/month into each and will continue until they get into college. That should be "enough" to at least get them through public schools, I hope. If they want to go private they will have to borrow.

OP, I'm kind of surprised at your response to Closet_Gamer. I don't think hoping that what you are doing should be enough falls into the category of getting a solid plan ASAP.

 

[daylatedollarshort]

In our area community college tuition is around $1K a year and U.C. Berkeley is $13K or San Jose State is $5.5K plus books, commute and living at home costs. Minimum wage is $11 an hour for part-time jobs. San Jose State grads actually beat out the more elite schools for some of the best tech jobs. For our area parents really wouldn't need a solid plan, even without any financial aid, since college doesn't cost that much, even for some of the highest paying majors / starting jobs. Student part-time and full-time summer work could gross almost $10K each year and cover some of the college costs and spending money.

 

[MoneyIsMyHobby]

In our area community college tuition is around $1K a year and U.C. Berkeley is $13K or San Jose State is $5.5K plus books, commute and living at home costs. Minimum wage is $11 an hour for part-time jobs. San Jose State grads actually beat out the more elite schools for some of the best tech jobs. For our area parents really wouldn't need a solid plan, even without any financial aid, since college doesn't cost that much, even for some of the highest paying majors / starting jobs. Student part-time and full-time summer work could gross almost $10K each year and cover some of the college costs and spending money.

This is crazy to me. My kids are 7 and 8 and the estimation tools say I should estimate $24k-$27k/year for in-state school (In KANSAS)... that includes room & board & books, but not entertainment money. $100k for 4 years of college is still a good investment, but something most of us need to plan for (generally not something parents could cover without a savings account, especially if they have multiples in school at the same time).

The other thing is the tax-advantages of those savings accounts. In our state, you avoid tax when you contribute AND when you withdraw, plus the federal withdraw savings similar to a RothIRA...

My goal isn't to have 100% saved before college starts (there is always a possibility your kid doesn't go to college for 4 full years for whatever reason) but to have most of it in the bank. If I were going to try to RE before they start/finish school (which I'm considering) I would definitely want to have it all saved up with adequate planning.

MIMH

 

[daylatedollarshort]

This is crazy to me. My kids are 7 and 8 and the estimation tools say I should estimate $24k-$27k/year for in-state school (In KANSAS)... that includes room & board & books, but not entertainment money. $100k for 4 years of college is still a good investment, but something most of us need to plan for (generally not something parents could cover without a savings account, especially if they have multiples in school at the same time).

The other thing is the tax-advantages of those savings accounts. In our state, you avoid tax when you contribute AND when you withdraw, plus the federal withdraw savings similar to a RothIRA...

My goal isn't to have 100% saved before college starts (there is always a possibility your kid doesn't go to college for 4 full years for whatever reason) but to have most of it in the bank. If I were going to try to RE before they start/finish school (which I'm considering) I would definitely want to have it all saved up with adequate planning.

MIMH

Which is the crazy part? We retired early, oldest has finished college and has a good STEM job and had multiple job offers as did the college roommates and followed similar paths. College for our oldest child had a 6 month pay back period on our out of pocket costs. That was even with paying for room and board for two years in a high cost of living area and subsidizing one of the roommates R+B. I guess it depends where you live but in California there are many good public school options and state grant money for tuition along the lines of the ACA limits. I believe the tax savings accounts for college count against financial aid?