Author Topic: Case Study - 9 kids with a pension but high cost of living area. 50 too early?  (Read 1583 times)

Ednjenn

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Thank you all in advance for your advice and comments.   We are a family of 11 in Southern California in a high cost of living area. Starting to build a stache... but a knuckle-dragging novice at moment.   I want to retire in 8 years at 50 to spend my time and personal capital developing what will then be 5 boys ages 10-12-14-16-18.   My gals will also benefit even if in college or moving on. (started with 4 daughters).  Being a larger than average family I know things move slower and I must accept a pace more reserved.  The blessings for us have far outweighed me even having to work my max length as described in the post.

Here's the horsepower:

Married filing joint/ wife is a stay at home mother. Claiming Married 12 and always getting a large return despite.

I am a government employee in public safety with a remarkable pension.  My gross salary at present is around 135,000.  I can retire in 8 years with an 81 percent pension which will gross about $10,300 a month.  A net gain over what I make now with mandatory pension contributions. (This pension is very secure)

Own a home valued at around $750,000.   3.5% 30 year fixed with a payment of $2334 with impounds. around $1800 without taxes and insurance.  Balance on the mortgage is $375,000. 

My 401k = $140000.  Roth IRA 12,000 wife 12,000 (Just started these a couple years ago)

Debts =  Car loan for a small bus which hauls our family dozen around town and gear... 3.5% $23,451 owed on it
HELOC = Used for a home emergency (slope issue) and solar panels.  $45,000 at around 6%.

Other obligations are only simple utilities and food.  (so much food!)   

With tons of fat we can still get badass with.... Our monthly budget without any kids college, wedding plans, etc... is around $6500 a month to maybe $7000.  This includes the payments on aforementioned debts.

My questions is this... Can I retire at 50?   It seems I can...   I can contribute the max to my 401k of $18,500 between now and then as well as maxing out our Roth IRA's.     This should give me more than I need to live even before taking spending to badass levels.

I have the option of working in a deferred retirement area until 58, but at that point I would gain an additional 600,000 in a deferred retirement account and an additional 10% bringing my net income up A LOT more.   

I just don't want to work at the expense of my boys and lose those years.  But that income could do a lot.   What do you think?


Monthly spending across all categories including charity (tithe) and food etc  is $6596.   

I do not know what help we can give or would give with the kid's college costs with nothing saved specifically for this to date.  Mom home-schools the kids but it still has an expense since it is a private parochial program.  (Annual cost for the family is around $5000)

I would expect expense after retirement to go up due to trying to cover health care costs etc.  This may prove prohibitive.  In that case I will work until 58 years old for a gross pension income of closer to $14,000 a month.  (with an annuity for a 5 year deferred retirement fund).  This MAY cover health care etc and some college assistance.

Thanks for any advice.

Ed
« Last Edit: October 30, 2018, 03:41:03 PM by Ednjenn »

CNM

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What is your monthly or annual spending?  Is there a difference between your current spending and what you can project after retirement?  Any large expenses that you will need to plan for (such as education for younger children)?

Ednjenn

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Monthly spending across all categories including charity (tithe) and food etc  is $6596.   

I do not know what help we can give or would give with the kid's college costs with nothing saved specifically for this to date.  Mom home-schools the kids but it still has an expense since it is a private parochial program.  (Annual cost for the family is around $5000)

fatcow240

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I can retire in 8 years with an 81 percent pension which will gross about $10,300 a month.  A net gain over what I make now with mandatory pension contributions. (This pension is very secure)


$10k/month in, $7k budget; I would say the pension makes it a yes.  You also mentioned that your monthly net would increase in retirement.
Is the pension fixed or adjust with inflation?
What are your plans for contributing to weddings, cars, college, etc.?

Ednjenn

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The pension adjusts with a COLA for inflation.  (The 13th check).  It is until death, then the spouse would get 1/2.   

We have grateful kids (at this point) who would be more than happy with humble and simple weddings etc.  They're also willing and able to choose an institution commensurate with their hopeful occupation and returns on investment.  Some perhaps want vocations of service (religious) or military etc....   So we shall see.  I will help but only if I can and still invest the time with them etc.... and do for each roughly equally.  I also get a 100,000 fund for my healthcare provided by my employer.   My wife and I would also consider selling our home and relocating if it meant we could take this San Diego money to a lower cost of living locale should it be needed. But would rather stay
« Last Edit: October 30, 2018, 04:03:00 PM by Ednjenn »

CNM

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Monthly spending across all categories including charity (tithe) and food etc  is $6596.   

I do not know what help we can give or would give with the kid's college costs with nothing saved specifically for this to date.  Mom home-schools the kids but it still has an expense since it is a private parochial program.  (Annual cost for the family is around $5000)

Ah, sorry I missed that in your original post.  Seems like you probably can.

TrMama

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The pension adjusts with a COLA for inflation.  (The 13th check).  It is until death, then the spouse would get 1/2.   


This is the bit I'd want to be sure of before retiring. If you retire and then die the next day, will your spouse (and any remaining dependent children) be able to afford to live? I suspect the answer is yes, but you've got time to crunch the numbers to be sure.

calimom

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Even with the minimal saavings and car loan, you might be able to retire at 50 or so if you're willing to do some side gigs. And your wife, with the current $12K in retirement, might be well advised to get any sort of job where she can continue to add to retirement, make contributions to her social security account, and assist grown kids with education needs.

If you are really and truly supporting this brood on $7K per month and paying down that big mortgage, that's great.

fatcow240

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The pension adjusts with a COLA for inflation.  (The 13th check).  It is until death, then the spouse would get 1/2.   


This is the bit I'd want to be sure of before retiring. If you retire and then die the next day, will your spouse (and any remaining dependent children) be able to afford to live? I suspect the answer is yes, but you've got time to crunch the numbers to be sure.


I would recommend managing this risk with life insurance.

ixtap

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It depends a lot on what that ~$7k monthly spend includes. Is that averaged over several years so that it includes home maintenance, car replacement, etc.?

Have you looked into what healthcare costs would be for your family?

MDM

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My questions is this... Can I retire at 50?
What do you see if you use the simple "Time to FI" calculation in the case study spreadsheet and/or more sophisticated calculations in one or more of Best and/or Recommended Retirement Calculator - Bogleheads.org?

Ednjenn

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Thank you all!  I have used the calculators and overlooked what was mentioned.  Including forecasting health care and cars etc...   It looks like with the 9 kiddos and seeing everything mapped out in fact NO... it was too simplistic a goal.   I am now on YNAB and some other resources more and fully mapping it out I have my answer.  WORK ON!  Luckily I love my job but I will be able to move and downsize and relocate if things necessitate and be fine at 50.  Just not living in san diego in my current home.   Thanks again!

Ed and family.

fuzzy math

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My understanding is that 529s can now be used for private school expenses so it would be worthwhile to see if your kiddos' homeschool programs are eligible. It would allow you to shield more income. Also, check out maximum 529 contributions per year, and see if you can put some of your tax refund into it