Author Topic: Remarriage and Financial Goals - What to Prioritize?  (Read 2487 times)

Sweetpotatofries

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Remarriage and Financial Goals - What to Prioritize?
« on: January 14, 2021, 06:08:10 AM »
I am a 30y woman with a 4y son from my prior marriage. My partner and I plan to marry next year. He is 42 with no children or prior marriages. We intend to buy a home later this year in the area we currently live in (it's relatively HCOL and unfortunately I am stuck in the vicinity due to my custody agreement for the foreseeable future). My partner fully admits that while he's made a healthy living for a long time he's always been somewhat spendthrift. No debt, always living within his means, but not saving enough. We need to figure out what to prioritize now (my thinking is super-charged retirement savings, throwing everything we have at that, but would like Mustachian input!)

**Edited all the below to simplify and with better details**

My assets:
80K in Roth IRA
80k 401k from old job rolled into new solo 401k
300k taxable brokerage (100k in regular account, 200k in trust account - inheritance from grandparent earmarked for my and my son's health, education, and living expenses)
2014 Subaru Outback (inherited)

**I contribute 6k to the Roth IRA annually as well as 6k to a solo 401k for my business that I opened in 2020

His assets:
300k SEP IRA (he owned his own software company until recently and they didn't do a 401k)
150k Vanguard brokerage
**New 401k at new job, starts contributions this month
2015 Subaru Forester (bought with cash)
30 ft sailboat (he won't be spending anything else on this beyond the mooring and storage which is around $2500 annually. We may sell it whenever we have a baby and he's spending zero time sailing. He did live on the boat this past summer for two months, between moving from his old apartment into one closer to me and my son)

I have an income of about $24k from freelancing and $24k from child support annually. We do not plan to put child support into our family budget for living expenses. Instead, it will all go into an account earmarked for my son. I would only spend from this amount on costs for my son (preschool - one more year, summer camp or extracurricular activities) that are clearly just for him. The balance, he could use it later in life for education or a down payment on a home. This is my partner's personal preference. I agree with it.

My partner earns about $200k annually at the new job (same as what he was earning when he was running his own company). There is a possibility of $25-50k profit sharing annually from his old company as he's still a shareholder, or a sale in the 5-10 year horizon that would net him a few hundred thousand or so. We don't want to count on that though.

Our pressing questions now. Do we throw a lot into a down payment for the house with a smaller mortgage? Or do we take advantage of low interest rates and use the cash as retirement? If so, at his age, other than maxing his IRA and now the new 401k available at his new company, what other options are there available for retirement savings? I'm concerned that even if he works until 70, the power of compound interest is limited. I had the benefit of realizing this at 22. He's a little later to the party.
« Last Edit: February 02, 2021, 09:03:46 AM by Sweetpotatofries »

ericrugiero

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #1 on: January 14, 2021, 07:09:07 AM »
So... our pressing questions now. Do we throw a lot into a down payment for the house with a smaller mortgage? Or do we take advantage of low interest rates and use the cash as retirement? If so, at his age, other than maxing his IRA, given that his new startup doesn't have a 401k, what other options are there available for retirement savings? I'm concerned that even if he works until 70, the power of compound interest is limited. I had the benefit of realizing this at 22. He's a little later to the party.

Between the two of you, you have about a million dollars of investible assets.  That's plenty to see compounding work.  Plus, he has a great income and could potentially invest considerable money starting now. 

The big hurdle for early retirement is your spending.  With that income and limited savings he has been spending quite a bit.  Does he want to change that to retire early, or is he happy spending at that level and working till 65-70?

I would caution you to be sure he is on the same page.  If you both share a desire to live frugally and retire early it's VERY doable.  If he wants to stay a spendthrift you are asking for trouble forcing him to cut way back (especially since it's his income).   

2704b59cc36a

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #2 on: January 14, 2021, 08:12:26 AM »
Do what makes you feel comfortable regarding the mortgage. I like low monthly payments (lowers the e-fund) so I put 30% down when I bought my house but rates were higher at the time. I don't regret my decision knowing I could have made more in the stock market and refi'ed into today's low rates.

I agree with the above poster about caution. I don't see how a 42 year old spendthrift is going to suddenly change. Sell the boat. If I was planning on having a kid I'd be selling my toys to fund their 529s. I wouldn't be working at startups if I had a family either. Why not find a job with a 401k?

His salary seems kind of low for a HCOL software engineer. I'm a 39 year old MCOL software engineer and my pay is $165K to $170K depending on bonuses.

Paper Chaser

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #3 on: January 14, 2021, 08:16:38 AM »
My conservative nature sees a household that's dependent on a single earner, who's a decent amount older than you, and working for a startup. That sets off lots of "risk" alarms in my head. What happens if your soon-to-be husband's income is greatly reduced or disappears completely? Then you've got two kids, an expensive house and a $48k income (including child support).

I'd want to make sure that your expenses were low enough to deal with any hiccups in your husband's employment. Is your inherited brokerage your emergency fund? Is that where a house downpayment would come from too?

MissPeach

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #4 on: January 14, 2021, 08:29:07 AM »
I am in a HCOL area and the only reason I bothered buying is to keep my expenses low and fixed because rent has been going up like crazy and salaries aren't. With the risk from his job and with largely being dependent on one income if it were me I would want to keep expenses low and put as much as possible into retirement or investment accounts.

I would work out what you would like your ideal budget to be and see if you can play with things to get to those numbers in a way that would be sustainable for you.

I see two pricey things you have mentioned - private school and the boat. If it were a small, paid off boat that can sit on a trailer then I wouldn't worry if I had the storage (but it sounds like a sailboat so that might not be practical). But if you're paying marina fees I would look into that at the very least. Could it go to a cheaper marina? Be moved to a mooring? As for the school, while education is important to me, I wasn't willing to pay the tuitions here. I researched the local schools and charter schools and was able to find one I was happy with.

socaso

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #5 on: January 14, 2021, 10:32:24 AM »
Please do research your local schools. We have our child in local charter schools and have been very pleased with the experience. I also feel my child is getting a more diverse school experience by attending a charter. Our school had an international evening and it was so cool to learn about all the different countries the other families came from.

I think it makes a lot of sense to buy in a HCOL area, particularly since you can't move right now. We bought in a HCOL area 5 years ago and I'm astounded by how much houses in our neighborhood have gone up. Plus, as others have noted, it keeps your cost of living stable. If I were in your shoes I would do a pretty high down payment, maybe 30% but not throw everything I had at it. You can probably make more keeping your cash in investments.

Sandi_k

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #6 on: January 14, 2021, 11:24:10 AM »
Make sure that the high earner has substantial life insurance.

cool7hand

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #7 on: January 14, 2021, 12:08:09 PM »
Maybe invest in some couples coaching/counselling to really focus on your values and goals prior to getting married? No plan survives the first punch to the face, but a couple that's truly aligned will have the values, goals, and conflict-resolution approach to agree on the response to that punch.

le-weekend

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #8 on: January 14, 2021, 12:23:58 PM »
You're only 30 and seem to be quite astute and on-point with your finances. He is 42 and an admitted spendthrift. I would strongly suggest you wait on getting married for a few years. And, as Dan Savage would say, "Don't scramble your DNA yet" either. It's possible that he will be a great and responsible husband but it's possible he won't. Protect yourself and your child's future first!!!!

ericrugiero

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #9 on: January 14, 2021, 12:30:28 PM »
I'm going to disagree with previous posters a little here.  This couple has $550K in brokerage accounts (combined) right now.  Him being laid off a job isn't a big short term worry because they have plenty of money to get by for a good while. 

Also, keeping a boat that's paid for isn't a huge deal as long as it's not a big ongoing expense.  I feel like there is more benefit to optimizing the ongoing budget and he might be more willing to participate if he gets to keep his boat.  My biggest concern is still him being on board with changing his spendthrift ways (or them reaching a compromise that makes them both happy). 

In my marriage, my wife is much more of the spendthrift so we spend more than I would prefer and less than she would choose.  But, we have reached a compromise that keeps us both fairly content.  (ex: I don't criticize spending on coffee and she is doing a much better job of optimizing groceries and clothing)

Paper Chaser

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #10 on: January 14, 2021, 04:55:16 PM »
I'm going to disagree with previous posters a little here.  This couple has $550K in brokerage accounts (combined) right now.  Him being laid off a job isn't a big short term worry because they have plenty of money to get by for a good while.

It's not super clear, but it sounds to me like a big chunk of that brokerage money may go towards a downpayment on a house. Yeah, they've got enough to handle a temporary setback, but it might be a significantly smaller number after they're homeowners. And what if it's not a temporary setback?
I'm not in the tech field. How difficult is it for a 40something to find another $200k job? How about if they're 50-something when they need a job?
He's 12 years older than her. He's likely to have higher medical costs, sooner. If they get pregnant now, he'll probably be 43 when the kid is born, and he'll be in his 60s when the kid graduates high school. That's a rough time to be staring down college costs, retirement, and a hefty mortgage.

I'm sorry to bring this last part up, but there's also the chance of divorce or death, which could leave this woman in a pickle. They're different ages, Have fairly different spending habits, and they'll be vastly different income levels which can get uncomfortable. Add a step kid/ex husband into the mix and there are lots of potentially dangerous dynamics to navigate. I love the idea of some pre-marital counciling with the goal of outlining their views, and planning how they want to live together. Knowing where they're most aligned, and where they're least aligned might help avoid pitfalls.

formerlydivorcedmom

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #11 on: January 18, 2021, 05:24:16 PM »
I remarried, with two kids under 7, to a man with a 5-year-old.  I had 200k savings; he did not, and I made 3x what he did.  We have no kids together.

What worked for us was to make sure that the we set financial and life goals together, before we got married and bought a house together.  We worked through these kinds of questions:

Are you both comfortable with "our" money versus his and hers money?  It is critical to be on the same page when one partner vastly outearns the other.

Is he planning to treat your son, financially, in the same was as his future biological child?  We treat our 3 combined kids equally - same college fund goals, same opportunities, inheritances will be equal, etc - even though 2 get hefty child support to pay for part and 3rd doesn't.

Can you agree on the same long-term financial goals?  Ours were that we needed $X to retire, we planned to put $Y in each kid's college fund, we don't intend to leave the kids much of an inheritance, we wanted house paid off by the time my child support ended, and we would take a vacation up to $Z every year (I insisted on that one)

As long as you have the same long-term goals, you'll be in a good place to make the short and medium term decisions.  We pushed retirement off a year so that H could quit his job and go back to school for 3 years. We pay a little extra on the house every month so it will be paid off when youngest kid graduates.

Once you and your fiance have agreed on your goals, then you'll be able to see if a bigger down payment is best...or not.

Also, get lots of life insurance, now, when you're both relatively young.

And good luck!  My h and I have been married 8 years now.  We are much happier than either of us was before, and youngest kid once happily told his therapist that he has 4 parents - the "main" parents and the "second" parents, who all love him the same.

Sweetpotatofries

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #12 on: February 01, 2021, 06:14:25 PM »
Thanks to everyone who responded. It's much appreciated!

Regarding all the advice for counseling - that is something we are DEFINITELY doing. It's been on the back burner due to the pandemic, but we absolutely intend to seek (secular) counseling prior to actually tying the knot.

My partner is definitely on board with being more frugal. His perspective is until we met, he was used to living a "showier" lifestyle as women in NYC who are highly educated/high income themselves expect that in dating, and his goal was to find a life partner. He also never really learned to be frugal in his upbringing (I did, actually, despite having wealthier parents, they're the kind of wealthy who drive cars literally into the ground and my dad will go to the further gas station/grocery for a lower price on gas or food). He's willing to change -- to an extent. Possibly even to the extent of giving up the boat or at least not spending anything else on it beyond a mooring (we got into that this weekend) which is still going to be a couple of thousand dollars a year. Beyond that, since I'll be the one doing the shopping and handling the investments, it's a situation where he's open to learning but doesn't know where to start.

Regarding my son - my partner would treat him financially in the same manner on his/our future biological child. This includes paying for "my" share of his college to the extent it's split with my ex (his father).

Regarding school - my son is in private PreK and our kid would have to be because we don't have public PreK in our district. It's typically only offered for special ed in the suburbs where we live. We plan on public school from K-12 for sure and are both the product of fantastic public schools.

Regarding timeline - given his age, I think neither of us would want to wait *too long* before getting married and trying to have a child together. Maybe waiting an extra 6-12 months, but not several years. As someone said, even if we had a child at the end of next year (when he is 44) he'll be 62 when he/she graduates high school.

Regarding his job - he's pretty secure in being able to find another job at the same salary should this startup not work out. That said, he has a skillset and is in a position where someone else who commented is right, he's not making the very top $$$ you could at Google or Facebook. This is partly because he ran his own company for 10 years and didn't jump from place to place climbing the ladder. His company was hit hard by Covid, so he found a new job. We are in a bit of an odd position because he's the earner, but I'm the one who is likely to, way way down the road (I hope very far in the future) receive a sizable inheritance from my parents.

Again, thanks to all who commented! I appreciate the insights. Certainly counseling sooner than later, as well as diving deeper into some of the details on how we plan to live (I feel very confident about my son in all of this but in other aspects) is the top priority.

Sweetpotatofries

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #13 on: February 01, 2021, 06:16:25 PM »
Please do research your local schools. We have our child in local charter schools and have been very pleased with the experience. I also feel my child is getting a more diverse school experience by attending a charter. Our school had an international evening and it was so cool to learn about all the different countries the other families came from.

I think it makes a lot of sense to buy in a HCOL area, particularly since you can't move right now. We bought in a HCOL area 5 years ago and I'm astounded by how much houses in our neighborhood have gone up. Plus, as others have noted, it keeps your cost of living stable. If I were in your shoes I would do a pretty high down payment, maybe 30% but not throw everything I had at it. You can probably make more keeping your cash in investments.

I don't know where I gave the impression we're doing private schools but to clarify - my son is in private preschool as we don't have public or UPK in our district. We are doing public school K-12 for sure.

TheFrenchCat

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #14 on: February 02, 2021, 07:18:57 AM »
Just wanted to mention that lots of counselors are doing virtual counseling now.  So if going in person was your concern, that can be avoided.  I've been seeing my therapist through a secure service virtually since this all started.  My insurance company is even waiving the copay since I'm going virtually.

WSUCoug1994

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #15 on: February 03, 2021, 09:39:27 AM »
You have received great advice above.  I have a somewhat similar situation - I was 43 when I married my wife who was 32 at the time.  She had a job with the family business and I worked at a professional services firm (there was a large income delta).  We got married relatively quickly and had two kids.  We were pretty aligned on budgeting and saving but it was a pretty big shift for her and she had few assets when we met.  I also have a boat - that is a non-negotiable in my world.  I would just stress the importance of prenuptial agreement. We did this before we got married and it was set up more to protect her (as well as my assets) as we had decided she was going to stay home with kids and that would jeopardize her long-term earning potential.  It would also work to provide financial protection for your son and future children if for some reason the relationship wasn't successful long-term.

Sweetpotatofries

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Re: Remarriage and Financial Goals - What to Prioritize?
« Reply #16 on: February 03, 2021, 09:49:59 AM »
You have received great advice above.  I have a somewhat similar situation - I was 43 when I married my wife who was 32 at the time.  She had a job with the family business and I worked at a professional services firm (there was a large income delta).  We got married relatively quickly and had two kids.  We were pretty aligned on budgeting and saving but it was a pretty big shift for her and she had few assets when we met.  I also have a boat - that is a non-negotiable in my world.  I would just stress the importance of prenuptial agreement. We did this before we got married and it was set up more to protect her (as well as my assets) as we had decided she was going to stay home with kids and that would jeopardize her long-term earning potential.  It would also work to provide financial protection for your son and future children if for some reason the relationship wasn't successful long-term.

Thank you! Good to know about another boat non-negotiable man still being Mustachian :) We are definitely doing a pre-nup as well as estate planning that spells out what happens for my son if I should (a) have other children and/or (b) pass away unexpectedly while he is still a minor.