Author Topic: $32,000/yr Budget in Early Retirement. Critique.  (Read 24136 times)

RootofGood

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$32,000/yr Budget in Early Retirement. Critique.
« on: November 01, 2013, 05:59:20 PM »
Here's my retirement budget that our family of 5 will live on indefinitely.  It's me, Mrs. RootofGood, and our 3 kids between age 1 and 8. 



Much more detail and discussion about the budget here.

I developed the budget by taking my historical spending for the last 3 years, then adding to that spending a projection of expenses that will change during retirement.  We have been spending $24,000 annually on core expenses, and added about $8,000 of net increases to cover different spending patterns during retirement.  Boom - $32,000 spending per year.  I retired recently, and the $32k/yr represents a withdrawal rate slightly under 3% from our investment portfolio.

Thoughts? 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #1 on: November 01, 2013, 08:16:22 PM »
If I were RE, I will spend at least 10k on travel.  I see you have 4k in vacations, but I think that with more time, I would stretch my dollar significantly but still easily spend more.  I want to see all of the national parks, and maybe go overseas once a year.  But, full disclosure, I plan to retire on a higher SWR.  Some people like their local scene and interpersonal interaction which makes your budget work, and I can respect that.

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #2 on: November 01, 2013, 08:20:58 PM »
Will your kids do any activities that cost money? Summer camps in their future?

That's the only think I would need considering. You may opt to do some things for them that will cost money.  Otherwise, it sounds good!

Yes to summer camp.  They do 4-5 weeks per summer right now, and that is included in my "historical spending".  I'm sure they will get bored with the camps at some point. 

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #3 on: November 01, 2013, 08:37:43 PM »
Any big ticket items down the road? I'm thinking replacements for things like cars/roofs

I annualized the cost and added it to "home maintenance/repair" and "auto".  Auto costs actually went down in the retirement budget because we won't be driving nearly as much, and we will go to 1 car.  It cheaper to maintain and cheaper to replace just 1 car. 

Quote
How will your healthcare expenses change as you age? (Premium changes, big expenses like colonoscopy)

With Obamacare, the premiums should remain relatively constant (in real terms).  And the plans we qualify for have low copays.  Our historical expenses also include paying for delivery of our son, so we had some lumpy healthcare expenses averaged into our historical expenses. 

Quote
Any big expenses for the kids? (Contributing to first car, college, wedding?)

About half the in state tuition costs for the 3 kids are set aside in 529s.  The rest of whatever we pay will be funded out of our portfolios if it won't put the portfolios at risk (with a 3% withdrawal rate, I expect our portfolio to grow in real terms over the next 10-20 years when we will be paying for college).  Back up plan includes me getting a side hustle going MMM style to scratch up some college funds.  Knowing my kids, they will have enough money from their entrepreneurial activities to fund their own college ha ha. 

Wedding - maybe a small amount.  Kids tend to get married later in life these days, and we certainly don't care for an extravagant wedding.  We'd be happy to split the $50 marriage license or maybe even a weekend in Vegas and a fancy chapel out there.  I look at weddings as huge ridiculous parties, which are awesome.  When someone else is paying for them.

Car - undecided.  The kids each have over $2k saved already.  We might match that or somehow help out.  Cars are relatively inexpensive.  We do live in a walkable area and near 3-4 bus routes, so there's a chance they may not want to drive at 16 (which would be awesome for us in a way too!). 

Overall, kid expenses might bust the $32k budget for a few years, but then we should have a few decades of no kid expenses (if we did our parenting job correctly). 

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #4 on: November 01, 2013, 08:44:53 PM »
If I were RE, I will spend at least 10k on travel.  I see you have 4k in vacations, but I think that with more time, I would stretch my dollar significantly but still easily spend more.  I want to see all of the national parks, and maybe go overseas once a year.  But, full disclosure, I plan to retire on a higher SWR.  Some people like their local scene and interpersonal interaction which makes your budget work, and I can respect that.

Our actual travel budget is around $5300 (far right column).  I added 4k extra above what we have been spending to account for more free time to travel.

We'll be doing some international travel, but on the cheap.  Credit card bonuses for free tickets and free hotels, for example. 

We'll probably take a cruise occasionally.  It's actually a very relaxing vacation with kids, and relatively inexpensive. 

And there is a good chance our portfolio will increase in real terms over time, so we might bump the travel up a little if things look really rosy.  Or cut it back if things get ugly or we have unexpected expenses elsewhere.  We could camp a lot more and spend way less than $5k/yr. 

imustachemystash

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #5 on: November 01, 2013, 09:40:56 PM »
I think it looks good.  I'm glad you mentioned you already have 529's for your kids halfway funded.  The charity looks a little low, but now that you are retired maybe you will have some free time to volunteer.  Also, you are so young, if you ever need to make a little extra money you still have lots of time.  Congratulations!

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #6 on: November 01, 2013, 10:01:55 PM »
I think it looks good.  I'm glad you mentioned you already have 529's for your kids halfway funded.  The charity looks a little low, but now that you are retired maybe you will have some free time to volunteer.  Also, you are so young, if you ever need to make a little extra money you still have lots of time.  Congratulations!

I'm fairly involved in a couple volunteer things right now.  I help out at my kids' school a decent amount.  Not like making photocopies and using glue sticks to make classroom decorations though.  This weekend I'll spend an hour or two drafting an awesome letter to hopefully win the school national recognition in a certain competition.  I provide advice to the school board occasionally, and I recently did some public speaking and political outreach to help secure some funding for the school and the school system.  I also participate in the school's annual career week that emphasizes the school's focus, since it overlaps closely with my former professional life. 

We don't give a lot to charity today, but if our investments do well, we will certainly give more at some point.  Warren Buffet style. 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #7 on: November 02, 2013, 06:56:40 AM »
I don't really have anything to say but 'good job'. It must be an awesome feeling having control over your spending and being able to live the life you want. As a fellow 33 year old, I say hats off to you.

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #8 on: November 02, 2013, 08:43:52 AM »
I've read the whole thread and you seem to have covered a lot.  I'll just say kids tend to become more expensive as they get older.  And periodic one-off expenses need to be planned for:  a new car, a new water heater, an expensive medical bill from time to time, etc.

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #9 on: November 02, 2013, 09:57:38 AM »
Instead of giving to charity, I'd probably pay off my student loans.

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #10 on: November 02, 2013, 12:58:26 PM »
I've read the whole thread and you seem to have covered a lot.  I'll just say kids tend to become more expensive as they get older.  And periodic one-off expenses need to be planned for:  a new car, a new water heater, an expensive medical bill from time to time, etc.

New(er) car, new water heater, roof, house painting, new carpet, etc are all covered in the $32,000 budget. Depending on how expensive the medical bill, those are captured in our budget too - I padded the budget a little, and we paid for delivery of our son, so there are $$$'s in our historical expenses that formed the basis of my projections.  Who knew anesthesiologists were so expensive, even after insurance?

CDP45

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #11 on: November 03, 2013, 06:08:19 PM »
Wow less than $2,000 for Property taxes and insurance?? I'm at $5k already (tax assessment at $280k)...what the heck.. Thank you for posting your budget, that's an excellent "target" for people to aspire to.

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #12 on: November 03, 2013, 06:17:03 PM »
No need to critique here.

If I remember your blog correctly, you'll be able to grow that budget between your spouse income and a low SWR.  I think you'll spend more on home maintenance as you get into projects with your excess time

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #13 on: November 03, 2013, 07:10:23 PM »
Wow less than $2,000 for Property taxes and insurance?? I'm at $5k already (tax assessment at $280k)...what the heck.. Thank you for posting your budget, that's an excellent "target" for people to aspire to.

Modest house ($150k assessment??) in a low property tax area.  State income tax is a different story...


RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #14 on: November 03, 2013, 07:16:35 PM »
If I remember your blog correctly, you'll be able to grow that budget between your spouse income and a low SWR.  I think you'll spend more on home maintenance as you get into projects with your excess time

Hopefully the budget will remain relatively constant in real terms.  The portfolio should grow with another year or two of spousal income and by virtue of only pulling 3% from a portfolio that should grow 5-6% annually in real terms over the long term. 

I haven't been bitten with the home improvement bug (yet), although I'm planning a few projects in the next few years that will probably be DIY to some extent.

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #15 on: November 03, 2013, 07:18:59 PM »
Kids do get more expensive as they get older.  Paid $5,600 for daughter's braces a couple years ago and have the boy coming up in a couple years!

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #16 on: November 07, 2013, 07:45:52 AM »
Wow less than $2,000 for Property taxes and insurance?? I'm at $5k already (tax assessment at $280k)...what the heck.. Thank you for posting your budget, that's an excellent "target" for people to aspire to.

Modest house ($150k assessment??) in a low property tax area.  State income tax is a different story...

Yeah, this is probably biggest difference to for mine - mine are about $8k more than yours....modest house/high tax area.

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #17 on: November 07, 2013, 08:52:27 AM »
Wow less than $2,000 for Property taxes and insurance?? I'm at $5k already (tax assessment at $280k)...what the heck.. Thank you for posting your budget, that's an excellent "target" for people to aspire to.

Modest house ($150k assessment??) in a low property tax area.  State income tax is a different story...

Yeah, this is probably biggest difference to for mine - mine are about $8k more than yours....modest house/high tax area.

That would be a budget killer for us.  Our tax assessment is right around $1,400/yr, and has held steady for 4-5 years.  Even 10 years ago when we bought the house, I think tax was $1,300/yr.  Our city and county are extremely financially responsible, yet they still do a decent job providing services (police, fire, parks and rec, quality K-12 and community college education, etc).  I can't complain too much about a state income tax, since local taxes are so low. 

oldtoyota

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #18 on: November 07, 2013, 09:30:03 AM »
Does anyone else think the gas/electric sounds high?

Other than that, looks good!

Also, it's awesome you are sharing this. Full of good ideas and showing how it's done!

« Last Edit: November 07, 2013, 09:38:02 AM by oldtoyota »

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #19 on: November 07, 2013, 05:08:33 PM »
You have so much in your discretionary spending lines, and you're withdrawing such a low percentage from your investments, that unless you've invested in something really stupid you should have enough flexibility to deal with even fairly large unforeseen expenses.

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #20 on: November 07, 2013, 07:14:13 PM »
Does anyone else think the gas/electric sounds high?

Other than that, looks good!

Also, it's awesome you are sharing this. Full of good ideas and showing how it's done!

It's definitely higher than what it would be if we were in a townhouse or condo.  But with an 1800 s.f. house built 40 years ago, it isn't too bad.  We're in North Carolina, and it tends to be in the 90's a lot during the summer, and December-February are cold (below freezing at night a lot).  About $1000 of our energy expenses are heating/cooling.  We do keep it unmustachianly warm in winter and cool in summer (70 and 76 respectively, cooler at night), so we could probably cut the energy costs $50-100 per year by modifying the thermostat a few degrees.  Not worth it given the marital discord it would cause!  Alimony and child support are way more than $100/yr...

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #21 on: November 07, 2013, 07:17:07 PM »
You have so much in your discretionary spending lines, and you're withdrawing such a low percentage from your investments, that unless you've invested in something really stupid you should have enough flexibility to deal with even fairly large unforeseen expenses.

Yeah, I did a quick check and we could probably cut spending by $7000-8000 if times got tough.  And realistically, a $40,000/yr budget would only represent a 3.6% withdrawal rate for us.  That's why I'm not too worried if our kid related expenses balloon for a few years before they hit college (or during college).


ThisIsBananas

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #22 on: November 07, 2013, 08:51:08 PM »
Bro, It sounds like you have the life. No correction needed.

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #23 on: November 08, 2013, 07:37:18 AM »
I don't see a line for student loan repayment.  I ask because that was a topic of discussion on a recent thread, and you indicated you'd decided not to stiff those who paid for your education and trusted you to fulfill your obligation. 

Yes, I live in NC too, and my taxes and insurance are under $2000 for my primary residence, and when we leave the city and move to our country land (after the last of our children is out of high school), it'll be considerably cheaper still.  The South is an affordable place to live, which many people up North are discovering. 

I have teens right now, and I assure you that your budget will go up when yours reach this age!  Ours are far from spoiled and don't ask for outrageous things . . . but their braces are expensive, their car insurance is expensive (yet we want them to learn to drive), and college is expensive (even with scholarships).  These are all things we want to provide and are able to provide without financial sacrifice, but the costs are high! Some things are negotiable (i.e., cost of a prom dress, whereas others are fixed).  As you indicated, we see this as a blip on the radar -- a decade or so when our expenses are high.  You do need to enter these years with a realistic expectation of what you'll be paying.     

And, yes, you do need to be sure you have what we term "short term savings" for unexpected big costs; for example, I will probably be buying a new dishwasher next week.  Things always happen.



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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #24 on: November 08, 2013, 08:20:27 AM »
Bro, It sounds like you have the life. No correction needed.

Exactly. Anyone who can retire at 33 with three children should be giving us advice, not the other way around!!

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #25 on: November 08, 2013, 04:55:32 PM »
I don't see a line for student loan repayment.  I ask because that was a topic of discussion on a recent thread, and you indicated you'd decided not to stiff those who paid for your education and trusted you to fulfill your obligation. 

Yes, I live in NC too, and my taxes and insurance are under $2000 for my primary residence, and when we leave the city and move to our country land (after the last of our children is out of high school), it'll be considerably cheaper still.  The South is an affordable place to live, which many people up North are discovering. 

I have teens right now, and I assure you that your budget will go up when yours reach this age!  Ours are far from spoiled and don't ask for outrageous things . . . but their braces are expensive, their car insurance is expensive (yet we want them to learn to drive), and college is expensive (even with scholarships).  These are all things we want to provide and are able to provide without financial sacrifice, but the costs are high! Some things are negotiable (i.e., cost of a prom dress, whereas others are fixed).  As you indicated, we see this as a blip on the radar -- a decade or so when our expenses are high.  You do need to enter these years with a realistic expectation of what you'll be paying.     

And, yes, you do need to be sure you have what we term "short term savings" for unexpected big costs; for example, I will probably be buying a new dishwasher next week.  Things always happen.

The south is great in some regards.  Are you planning on sending your kids to in state schools?  NC has some great values.  I think UNC consistently makes top rankings for "most affordable school in the US" when they factor in quality of education. 

I'm also not discounting scholarships. I was chatting with our school system's superintendent yesterday and he mentioned HS graduates in Wake County received $100,000,000 in scholarship money this year.  Pretty amazing amount of money sloshing around. 

I won't be surprised if kid expenses go up.  What portion of those expenses we pay is negotiable of course.  There's always savings, part time jobs, side hustles, raking leaves, mowing grass, etc that the kids can do to make some $$.  Let's just say each kid won't be getting their own car when they turn 16.  The good news is that at some point (after HS or college) the expenses will drop precipitously. 

Short term savings are accounted for in my house and car budgets.  I have $1500/yr for house replacement items like roof, carpet, appliances (like dishwasher), etc.  And $1000/yr for car replacement.  In my planning, I assumed I could get a mid range dishwasher for $350 on sale and that the dishwasher would last 8 years on average.  Our last dishwasher (3.1 years ago) was mid-range and we paid $270 delivered (after rebates).  I'm handy enough to install these things myself, and I can watch youtube, so I can replace parts as they break.  Realistically we'll get more than 8 years out of the DW (it's running like new right now at almost half my estimated service life, with zero repairs to date). 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #26 on: November 08, 2013, 04:57:29 PM »
Bro, It sounds like you have the life. No correction needed.

I'm pretty comfortable.  It's not for everyone, but every day is pretty awesome.   It's hard to explain but everything seems more "real" now.  More genuine.  No more faking it at a job. 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #27 on: November 08, 2013, 06:21:04 PM »
I don't see a line for student loan repayment.  I ask because that was a topic of discussion on a recent thread, and you indicated you'd decided not to stiff those who paid for your education and trusted you to fulfill your obligation. 


He did say he would repay the loans, but then I realized that he was just mocking those of us who thought his use of the "need-based" loophole was unethical.  My understanding is that he continues to, as you, Mrs. Pete, say, "stiff those who paid for [his] education".

If I decided to not repay my loans, I could retire tomorrow and post a very impressive $10,000 annual budget.






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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #28 on: November 08, 2013, 06:42:56 PM »
I don't see a line for student loan repayment.  I ask because that was a topic of discussion on a recent thread, and you indicated you'd decided not to stiff those who paid for your education and trusted you to fulfill your obligation. 


He did say he would repay the loans, but then I realized that he was just mocking those of us who thought his use of the "need-based" loophole was unethical.  My understanding is that he continues to, as you, Mrs. Pete, say, "stiff those who paid for [his] education".

If I decided to not repay my loans, I could retire tomorrow and post a very impressive $10,000 annual budget.

Why not start your IBR plan tomorrow, follow your dreams and join the peace corps?  Or are you talking about defaulting on your loans and not participating in a particular repayment program? 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #29 on: November 08, 2013, 08:05:46 PM »
About half the in state tuition costs for the 3 kids are set aside in 529s.  The rest of whatever we pay will be funded out of our portfolios if it won't put the portfolios at risk (with a 3% withdrawal rate, I expect our portfolio to grow in real terms over the next 10-20 years when we will be paying for college).

How are you sizing the 529s?  If that's current in-state tuition costs, and you've got the money invested well, then I suspect you don't have a lot of risk of having to go outside the plans.  (Which is great.)  If you're projecting what well-invested investments will look like when they're in college, I'd recommend considering targeting 100% by just moving a bit more over into the 529 plans, and adjusting your SWR up a smidge to offset.  Since you consider yourself on the hook for the money (you'd work to make up the difference), might as well get it all in tax efficiently.  You have a lot of tax-free years of growth to look forward to before they get out of high school.

Also, it seems worth pointing out that the market is likely a little frothy right now.  A pullback is probably more likely today than is usual.  I suspect you're pricing that in with your low SWR, and/or anticipating some side gigs and cutbacks to stay in your comfort zone if it happens, but it seems worth mentioning just in case.  Seems worth considering contingencies in budgeting.

Congrats!

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #30 on: November 08, 2013, 08:28:36 PM »
About half the in state tuition costs for the 3 kids are set aside in 529s.  The rest of whatever we pay will be funded out of our portfolios if it won't put the portfolios at risk (with a 3% withdrawal rate, I expect our portfolio to grow in real terms over the next 10-20 years when we will be paying for college).

How are you sizing the 529s?  If that's current in-state tuition costs, and you've got the money invested well, then I suspect you don't have a lot of risk of having to go outside the plans.  (Which is great.)  If you're projecting what well-invested investments will look like when they're in college, I'd recommend considering targeting 100% by just moving a bit more over into the 529 plans, and adjusting your SWR up a smidge to offset.  Since you consider yourself on the hook for the money (you'd work to make up the difference), might as well get it all in tax efficiently.  You have a lot of tax-free years of growth to look forward to before they get out of high school.

Also, it seems worth pointing out that the market is likely a little frothy right now.  A pullback is probably more likely today than is usual.  I suspect you're pricing that in with your low SWR, and/or anticipating some side gigs and cutbacks to stay in your comfort zone if it happens, but it seems worth mentioning just in case.  Seems worth considering contingencies in budgeting.

Congrats!

We have enough to pay for 2 years tuition per kid today.  The kids are 9, 10, and 17 years away from college (respectively), and I anticipate the investments slightly outpacing tuition inflation, so we should have more than 2 years worth of tuition when those liabilities come due.

The 529's are invested in vanguard funds with only a tiny additional management fee (and I may switch the fund assets to the NY Direct 529 plan soon since our state tax credit is gone). 

I don't want to put too much into 529's in case we just don't need the college savings (scholarships, obsolescence of college in a decade or two, etc).  Tax wise, it won't really save us a lot of money, and there are extra (tiny) fees involved with 529's.

I agree on the market frothiness.  I can't predict market movements, but I have a gut feeling we are in fair to slightly frothy valuations today.  A 10%+ correction wouldn't surprise me and I'm ready for it.  They happen fairly frequently after all.

We have a few years in cash to ride out bumpiness, and the slightly under 3% WR helps.  The portfolio could drop 20% and we would still be spending at a 3.6% WR.  And that spending includes significant discretionary spending (travel mainly). 

On top of that, the wife is still working for another year or two, and we are living off part of her paycheck and saving the other 40%.  So the ultimate WR will be even lower and/or we'll have a bigger cash buffer. 
« Last Edit: November 08, 2013, 08:31:56 PM by RootofGood »

MrsPete

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #31 on: November 09, 2013, 05:25:15 AM »
I don't see a line for student loan repayment.  I ask because that was a topic of discussion on a recent thread, and you indicated you'd decided not to stiff those who paid for your education and trusted you to fulfill your obligation. 

Yes, I live in NC too, and my taxes and insurance are under $2000 for my primary residence, and when we leave the city and move to our country land (after the last of our children is out of high school), it'll be considerably cheaper still.  The South is an affordable place to live, which many people up North are discovering. 

I have teens right now, and I assure you that your budget will go up when yours reach this age!  Ours are far from spoiled and don't ask for outrageous things . . . but their braces are expensive, their car insurance is expensive (yet we want them to learn to drive), and college is expensive (even with scholarships).  These are all things we want to provide and are able to provide without financial sacrifice, but the costs are high! Some things are negotiable (i.e., cost of a prom dress, whereas others are fixed).  As you indicated, we see this as a blip on the radar -- a decade or so when our expenses are high.  You do need to enter these years with a realistic expectation of what you'll be paying.     

And, yes, you do need to be sure you have what we term "short term savings" for unexpected big costs; for example, I will probably be buying a new dishwasher next week.  Things always happen.

The south is great in some regards.  Are you planning on sending your kids to in state schools?  NC has some great values.  I think UNC consistently makes top rankings for "most affordable school in the US" when they factor in quality of education. 

I'm also not discounting scholarships. I was chatting with our school system's superintendent yesterday and he mentioned HS graduates in Wake County received $100,000,000 in scholarship money this year.  Pretty amazing amount of money sloshing around. 

I won't be surprised if kid expenses go up.  What portion of those expenses we pay is negotiable of course.  There's always savings, part time jobs, side hustles, raking leaves, mowing grass, etc that the kids can do to make some $$.  Let's just say each kid won't be getting their own car when they turn 16.  The good news is that at some point (after HS or college) the expenses will drop precipitously. 

Short term savings are accounted for in my house and car budgets.  I have $1500/yr for house replacement items like roof, carpet, appliances (like dishwasher), etc.  And $1000/yr for car replacement.  In my planning, I assumed I could get a mid range dishwasher for $350 on sale and that the dishwasher would last 8 years on average.  Our last dishwasher (3.1 years ago) was mid-range and we paid $270 delivered (after rebates).  I'm handy enough to install these things myself, and I can watch youtube, so I can replace parts as they break.  Realistically we'll get more than 8 years out of the DW (it's running like new right now at almost half my estimated service life, with zero repairs to date).

You're not going to address the question about loan repayment, are you? 

The South is great in every regard.  I will never live anywhere else.

Yes, my oldest is a student at one of the sixteen UNC-system schools right now, and I am very pleased with both the education she's receiving and the cost of that education.  I am a huge proponent of our state schools.  Our average state school is stronger academically than our average private school; I have the impression that isn't true in other places. 

However, scholarship money isn't quite so ample as you seem to think.  In my daughter's graduating class, only one boy received a full-ride, and he was going military (they're about the only ones who still get one-source full-rides).  My daughter is on about 50% scholarship, and I think she was #2 in terms of scholarship money earned in her class.  The majority of our students get nothing in the way of scholarships.  So how should you approach this?  Save.  Save.  Save.  Save as if you will pay the entire bill yourself.  Then have the student apply for scholarships, and hope that you don't spend all you saved.  My oldest applied for probably 40, and she won two.  Because I am a teacher at her school, I know that she was runner-up for about four more, and I almost wish I didn't know she'd been that close.  Incidentally, she was an ideal candidate:  she graduated with a 4.6 GPA, lots of AP classes, huge number of extra-curriculars and community service, and she is in a scholarship-heavy major (some majors offer more scholarship money than others).  My same-aged niece, who had a similar GPA and academics but fewer activities and a different major . . . won nothing, and she'd tried just as hard.  Getting a scholarship is tough.  Again, the majority of our students, even those with excellent grades, get nothing.

Having said that, I would not be surprised to learn that Wake county students earn more scholarship money than students from other counties.  Why?  Look who lives in the area:  The children of the professors from several colleges.  The children of the high-tech workers in the Research Triangle.  Public schools in that area (and the surrounding vicinity) are always ranked best in NC, and it has to do with the kids who feed into those schools.  Lots of educated parents, lots of parental support, lots of successful students.  That also means that the competition is tighter in those areas. 

msilenus

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #32 on: November 09, 2013, 12:35:15 PM »
We have enough to pay for 2 years tuition per kid today.  The kids are 9, 10, and 17 years away from college (respectively), and I anticipate the investments slightly outpacing tuition inflation, so we should have more than 2 years worth of tuition when those liabilities come due.

...

I don't want to put too much into 529's in case we just don't need the college savings (scholarships, obsolescence of college in a decade or two, etc).  Tax wise, it won't really save us a lot of money, and there are extra (tiny) fees involved with 529's.

The tax benefits could be enormous.  You have an average time-to-college of 12 years.  If you think your *nominal* rate of return over 12 years is more than 6%, then *most* of college-savings dollars at the end of 12 years will be gains, relative to today.  (And since that's a nominal rate of return, 9%-11% is probably a more reasonable guess.)

Scholarships aren't a concern, AFAIK.  My understandings is that if a kidlet gets a scholarship, and it gets used for a qualified expense, then you can do a qualified withdrawal in the same amount.

For your kids this is a defined-benefit situation, not a defined-contribution situation, but I think it would help to firm up your thinking a bit on how much should be in the plan today to plausibly meet those liabilities.  I'm not suggesting that you ought to plan for Harvard Medical, but if you run some projections and find that there are no reasonable scenarios under which the 529 will cover everything you want to provide for them, then you're probably leaving some money on the table for the tax man.

I'd recommend not feeling married to a 3% SWR if that's what's keeping some of the money in your 'stache.  With your wife working for two years, your survivability should be off the charts.  And I don't think it would take a big shift to maximize your tax efficiency.

That being said, the final word should probably be that you're totally fine no matter what you choose to do. :)  Congratulations.

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #33 on: November 09, 2013, 05:30:49 PM »
The South is great in every regard.  I will never live anywhere else.

Yes, my oldest is a student at one of the sixteen UNC-system schools right now, and I am very pleased with both the education she's receiving and the cost of that education.  I am a huge proponent of our state schools.  Our average state school is stronger academically than our average private school; I have the impression that isn't true in other places. 

However, scholarship money isn't quite so ample as you seem to think.  In my daughter's graduating class, only one boy received a full-ride, and he was going military (they're about the only ones who still get one-source full-rides).  My daughter is on about 50% scholarship, and I think she was #2 in terms of scholarship money earned in her class.  The majority of our students get nothing in the way of scholarships.  So how should you approach this?  Save.  Save.  Save.  Save as if you will pay the entire bill yourself.  Then have the student apply for scholarships, and hope that you don't spend all you saved.  My oldest applied for probably 40, and she won two.  Because I am a teacher at her school, I know that she was runner-up for about four more, and I almost wish I didn't know she'd been that close.  Incidentally, she was an ideal candidate:  she graduated with a 4.6 GPA, lots of AP classes, huge number of extra-curriculars and community service, and she is in a scholarship-heavy major (some majors offer more scholarship money than others).  My same-aged niece, who had a similar GPA and academics but fewer activities and a different major . . . won nothing, and she'd tried just as hard.  Getting a scholarship is tough.  Again, the majority of our students, even those with excellent grades, get nothing.

Having said that, I would not be surprised to learn that Wake county students earn more scholarship money than students from other counties.  Why?  Look who lives in the area:  The children of the professors from several colleges.  The children of the high-tech workers in the Research Triangle.  Public schools in that area (and the surrounding vicinity) are always ranked best in NC, and it has to do with the kids who feed into those schools.  Lots of educated parents, lots of parental support, lots of successful students.  That also means that the competition is tighter in those areas.

Good to hear you're able to take advantage of the state schools.  Takes the edge off of paying our relatively high state income tax.

I hear you on the scholarship money. I guess in my graduating HS class, I knew so many people that made out like bandits on scholarships that I figured it was pretty par for the course if you finish in the top 10-15% or so of your class.  Of course they tended to have GPA's 5.0 and over (highly competitive school needless to say).   And you are right - coming from an excellent school in an excellent school system can be a detriment, particularly when applying for a large endowed scholarship like the Parks or Morehead.  When I was graduating HS, they only picked 1-2 per school or per county or something, so the fact that you are knee deep in extremely academically successful students (who are also Eagle Scouts and multi-lettered varsity athletes of course) meant lots of qualified applicants didn't win the big local scholarships and had to go farther away to get a full ride. 

I didn't win any scholarships my first year because my HS grades were horrible.  In college, I set myself apart academically, and ended up with 11 scholarships for my 2nd and 3rd years (of 3 total years of college).  More than a full ride.  They were giving out money like crazy, and often they were begging for applicants for smaller $1000-2000 scholarships. 

It obviously was major-dependent in my case, since other areas didn't have as many scholarships. 

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #34 on: November 09, 2013, 05:37:23 PM »
We have enough to pay for 2 years tuition per kid today.  The kids are 9, 10, and 17 years away from college (respectively), and I anticipate the investments slightly outpacing tuition inflation, so we should have more than 2 years worth of tuition when those liabilities come due.

...

I don't want to put too much into 529's in case we just don't need the college savings (scholarships, obsolescence of college in a decade or two, etc).  Tax wise, it won't really save us a lot of money, and there are extra (tiny) fees involved with 529's.

The tax benefits could be enormous.  You have an average time-to-college of 12 years.  If you think your *nominal* rate of return over 12 years is more than 6%, then *most* of college-savings dollars at the end of 12 years will be gains, relative to today.  (And since that's a nominal rate of return, 9%-11% is probably a more reasonable guess.)

Scholarships aren't a concern, AFAIK.  My understandings is that if a kidlet gets a scholarship, and it gets used for a qualified expense, then you can do a qualified withdrawal in the same amount.

For your kids this is a defined-benefit situation, not a defined-contribution situation, but I think it would help to firm up your thinking a bit on how much should be in the plan today to plausibly meet those liabilities.  I'm not suggesting that you ought to plan for Harvard Medical, but if you run some projections and find that there are no reasonable scenarios under which the 529 will cover everything you want to provide for them, then you're probably leaving some money on the table for the tax man.

I'd recommend not feeling married to a 3% SWR if that's what's keeping some of the money in your 'stache.  With your wife working for two years, your survivability should be off the charts.  And I don't think it would take a big shift to maximize your tax efficiency.

That being said, the final word should probably be that you're totally fine no matter what you choose to do. :)  Congratulations.

You've persuaded me that it's worth taking a second look.  I'm also twiddling my thumbs at the moment since I'm not sure whether my state will re-enact the 529 contribution credit.  It used to be worth $350/yr.  The tea leaves say it might get re-enacted as soon as 2015, and I could contribute $5k/yr and get that $350 benefit.  Maybe I'll skip 2014 contributions and see where the political landscape ends up (North Carolina politics have been flipped upside down in the last year). 

One thing I have to keep in mind is that I need income to qualify for the Obamacare subsidy.  Can't let my MAGI drop too low.  And LT Cap Gains are a great way to get MAGI up there yet pay no tax.  But more modeling is required. 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #35 on: November 09, 2013, 08:00:43 PM »
So you are not paying back your student loans?


RetiredAt63

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #36 on: November 11, 2013, 08:47:52 AM »


It's definitely higher than what it would be if we were in a townhouse or condo.  But with an 1800 s.f. house built 40 years ago, it isn't too bad.  We're in North Carolina, and it tends to be in the 90's a lot during the summer, and December-February are cold (below freezing at night a lot).  About $1000 of our energy expenses are heating/cooling.  We do keep it unmustachianly warm in winter and cool in summer (70 and 76 respectively, cooler at night), so we could probably cut the energy costs $50-100 per year by modifying the thermostat a few degrees.  Not worth it given the marital discord it would cause!  Alimony and child support are way more than $100/yr...


LOL - "below freezing some nights" is November and April.  Try -30C at night (-45C at times) and -20C during the day - that is winter cold. 

My utility costs are higher now that I am home during the day (country living, water = pump = more electricity, heat not turned way down while I am at work, etc.).  If someone was home anyway with little kids, this may not change much for you.

And yes, children get more expensive as they get older - and you want to limit part-time work hours (I'm coming from teaching - after 10 hours/ week in a part-time job, students grades go down).

BobJax

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #37 on: November 11, 2013, 10:22:30 AM »
The BIGGEST part of my $33,000 retirment budget, 7 years ago, was INSURANCE!!! Health, car, home, long term health care.
That part of the budget creeped up. Recent budget over $40,000 primarily because insurance costs creep fast.  Until I just went on Medicare. I bought the very best medicare supplement plan (plan f) with no deductibles versus the previous $5,600 deductible and saved $5,500 per year on health insurance for me. Thank goodness for ObamaCare, which will save about $6,000 for my wife who is not on Medicare. And her plan will improve.

I would STRONGLY suggest that you pull up copies of newspapers from 20 years ago and check grocery ads, see what you are instore for. PRICES GO UP, UP, UP.

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #38 on: November 11, 2013, 02:53:31 PM »
The BIGGEST part of my $33,000 retirment budget, 7 years ago, was INSURANCE!!! Health, car, home, long term health care.
That part of the budget creeped up. Recent budget over $40,000 primarily because insurance costs creep fast.  Until I just went on Medicare. I bought the very best medicare supplement plan (plan f) with no deductibles versus the previous $5,600 deductible and saved $5,500 per year on health insurance for me. Thank goodness for ObamaCare, which will save about $6,000 for my wife who is not on Medicare. And her plan will improve.

I would STRONGLY suggest that you pull up copies of newspapers from 20 years ago and check grocery ads, see what you are instore for. PRICES GO UP, UP, UP.

I don't even have to go back 20 years!  It's scary to think what a gallon of milk was 6-7 years ago when my oldest kids were on the bottle.  I recently paid almost $4/gallon (it has since dropped back down) now that our new toddler has a milk addiction. 

I'm pretty in tune with inflation, and some costs go up (food, energy, health/age related insurance), while other costs go down (manufactured goods, tech).  I'm relying on my stock heavy portfolio to match inflation over the years. 

Obamacare really helped bring some consistency to my retirement budget (in addition to lowering my budgeted health insurance costs significantly).

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #39 on: November 11, 2013, 02:58:37 PM »
LOL - "below freezing some nights" is November and April.  Try -30C at night (-45C at times) and -20C during the day - that is winter cold. 

My utility costs are higher now that I am home during the day (country living, water = pump = more electricity, heat not turned way down while I am at work, etc.).  If someone was home anyway with little kids, this may not change much for you.

And yes, children get more expensive as they get older - and you want to limit part-time work hours (I'm coming from teaching - after 10 hours/ week in a part-time job, students grades go down).

I figured some on here (cough Canadians cough) would find my definition of "cold" humorous.  We were outside today playing around and my kid was shoeless and shirtless.  Probably 60+ degrees (F) and rather warm in the sun. 

So far I haven't seen much of a difference in utilities (2 months into retirement).  Water is about the same, electric+nat gas maybe $10 higher due to more consumption, but that could be temperature related.  Obviously I'm here more, so I'm flushing more toilets, washing hands more, etc.  Also using heat and a/c during the day and lights/computer.  I'll be curious percentage wise how much the utilities increase. 

I'm with you on working - I don't expect them to work a ton of hours during the school year (if any, particularly if their school work suffers).  But there are long summers and long breaks that they could work if that interests them. 

RetiredAt63

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #40 on: November 11, 2013, 05:49:39 PM »
I figured some on here (cough Canadians cough) would find my definition of "cold" humorous.  We were outside today playing around and my kid was shoeless and shirtless.  Probably 60+ degrees (F) and rather warm in the sun. 

I'm with you on working - I don't expect them to work a ton of hours during the school year (if any, particularly if their school work suffers).  But there are long summers and long breaks that they could work if that interests them.

I am sure those in northern New York State and Minnesota were laughing too  ;-)   Right now it is alternating between rain and snow flurries, and heading for a low of -8C.  60+F sounds wonderful. I'm trying to remember what the sun looks like. I think it is that bright thing that sits low in the sky and and mostly hides behind clouds.

I would definitely encourage paid work while they are in high school - they learn how much work goes into earning money, if it is a crummy job they start to think about how to earn more less painfully, they start to build a resume, they learn better time management.  My DD had a part-time job at the local Tim Horton's her last years of high school, she worked part-time (not Tim's) all through CEGEP and university, and she has acquired a variety of job skills.  She has never been unemployed for more than a few weeks.  Being fluently bilingual in Montreal and then Ottawa hasn't hurt either (that was our investment, private French high school instead of public English one).

MrsPete

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #41 on: November 13, 2013, 06:44:53 AM »
So you are not paying back your student loans?
The question's been asked several times and ignored.  I think we all know the answer.

Bro, It sounds like you have the life. No correction needed.

Exactly. Anyone who can retire at 33 with three children should be giving us advice, not the other way around!!
Usually I'd agree, but it appears that a portion of Root's plan is to skip out on his financial obligations.  I wouldn't take that advice. 

I would definitely encourage paid work while they are in high school - they learn how much work goes into earning money, if it is a crummy job they start to think about how to earn more less painfully, they start to build a resume, they learn better time management. 
The key is moderation.  For decades the studies have said the same thing:  Students who work a small number of hours tend to learn the skills you mention, and their grades are either unaffected or improve. 

But as a high school teacher, I see all too many students who begin a good thing . . . but take it too far:  They work too many hours, and it cuts into their schoolwork.  Year after year, I have a small number of students who are working 30+ hours while in high school.  These students often arrive at school too tired to take part effectively (keep in mind that about half my seniors are 18, so they aren't restricted by restrictions on work hours), and they miss school more often than their non-working or moderately-working counterparts.  These students end up dropping school activities, which is a shame:  They have these few years to be teens, to be in clubs, to take part in athletics, and to be kids.  And so often they do it so they can take on a car payment or have a SmartPhone.  These kids also tend to pick up spend-y habits; after all, if you're living in your parents' house and eating their food, minimum wage is pretty good spending money -- so they're able to buy a new outfit every week, to eat fast food constantly, etc.  Then when they get out on their own, and the money doesn't stretch as far as it did before, they're prime candidates for credit card debt or disappointment.  No, working too many hours in high school has too many pitfalls. 

The obvious answer is parental guidance.  Parents need to be involved in their teen's work choices, and they need to be sure that kids 1) maintain school as priority #1.  2) begin good habits by saving a portion of their earnings. 
« Last Edit: November 13, 2013, 06:56:11 AM by MrsPete »

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #42 on: November 13, 2013, 08:30:44 AM »
I figured some on here (cough Canadians cough) would find my definition of "cold" humorous.  We were outside today playing around and my kid was shoeless and shirtless.  Probably 60+ degrees (F) and rather warm in the sun. 

I'm with you on working - I don't expect them to work a ton of hours during the school year (if any, particularly if their school work suffers).  But there are long summers and long breaks that they could work if that interests them.

I am sure those in northern New York State and Minnesota were laughing too  ;-)   Right now it is alternating between rain and snow flurries, and heading for a low of -8C.  60+F sounds wonderful. I'm trying to remember what the sun looks like. I think it is that bright thing that sits low in the sky and and mostly hides behind clouds.
Apparently some folks up north were kind enough to share an arctic blast with us down here.  I saw like 7 snow flakes yesterday.  Almost had to put on a coat when I went out last night.  I even wore long pants to walk the kids to school this morning (I think it may have been hovering around freezing?).  Of course I had to unzip my jacket on the way back home (didn't want to sweat too much).  This weekend it'll be in the 60's again.  :)

Quote
I would definitely encourage paid work while they are in high school - they learn how much work goes into earning money, if it is a crummy job they start to think about how to earn more less painfully, they start to build a resume, they learn better time management.  My DD had a part-time job at the local Tim Horton's her last years of high school, she worked part-time (not Tim's) all through CEGEP and university, and she has acquired a variety of job skills.  She has never been unemployed for more than a few weeks.  Being fluently bilingual in Montreal and then Ottawa hasn't hurt either (that was our investment, private French high school instead of public English one).

I agree on the benefits of work.  I learned a ton of different hard and soft skills at the handful of jobs I had in high school.  Even learned some technical skills that helped me a lot during my professional career.  Although I was probably an atypical HS student who decided to pursue a job that would be relevant to my intended professional career.

Mrs Pete cites 10 hours per week as the most that a HS student should work.  That's probably a good rule of thumb but should be adjusted based on each kid.  More responsible students can probably handle more, while irresponsible kids can't handle any work and still do well at school. 

I wasn't so fond of the "clubs" in high school.  Some seemed to be devoted to the task of self perpetuation and didn't really do anything.  In other words, the main activities were talking about the benefits of the club and promoting the club to others - as if maximizing headcount meant a "win" somehow.  Or making posters to talk about largely irrelevant stuff.  I fail to see how these clubs are more useful to the development of a well rounded adolescent than doing something productive that also results in financial remuneration.  Learning about responsibility, decision making, customer service, computer systems, business concepts, food safety, industrial health and safety, facilities maintenance, and leadership (typical things learned in HS type part time jobs) seem way more relevant and useful than some of the clubs that exist in HS.  I'm not talking debate or marching band or some academic clubs of course. 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #43 on: November 15, 2013, 12:02:33 PM »
Mrs Pete cites 10 hours per week as the most that a HS student should work.   
No, I didn't give any specific number, but I did ask about the student loan thing a couple times. 

RootofGood

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #44 on: November 15, 2013, 08:53:15 PM »
Mrs Pete cites 10 hours per week as the most that a HS student should work.   
No, I didn't give any specific number...

You are right!  RetiredAt63 mentioned the 10 hours per week figure as the point at which academics start to suffer.   Mea culpa. 

MrsPete

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #45 on: November 17, 2013, 10:39:10 AM »
Mrs Pete cites 10 hours per week as the most that a HS student should work.   
No, I didn't give any specific number...

You are right!  RetiredAt63 mentioned the 10 hours per week figure as the point at which academics start to suffer.   Mea culpa.
Yeah, I'd say the number would vary depending upon the student, the work, and other factors. 

What I find most interesting, though, is that you deleted the question about paying off the student loan. 

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #46 on: November 17, 2013, 10:47:04 AM »
Moderator note: MrsPete: You don't need to keep harping on the student loan repayment issue (aside from the OP's posts, you are the last 3 posts in this thread, all mentioning it).  You've made your point, everyone knows what Root is planning to do (not repay his debts or cleverly utilize a federal program available to him, depending on your point of view on the matter), and we know your opinion on that.   You don't need to keep bringing it up over and over in the same thread.  Thanks!
« Last Edit: November 17, 2013, 10:49:30 AM by arebelspy »
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

RootofGood

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    • Root of Good
Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #47 on: November 17, 2013, 01:56:44 PM »
Moderator note: MrsPete: You don't need to keep harping on the student loan repayment issue (aside from the OP's posts, you are the last 3 posts in this thread, all mentioning it).  You've made your point, everyone knows what Root is planning to do (not repay his debts or cleverly utilize a federal program available to him, depending on your point of view on the matter), and we know your opinion on that.   You don't need to keep bringing it up over and over in the same thread.  Thanks!

I appreciate the moderation, but I'm enjoying her repeated questions.  It's actually part of my clandestine plan to repay my student loans in full.  I'm printing out and framing each of her inquiries and selling them to the Society for Redundancy Society members.  Only $79,997 to go till I have enough $$$. 

CDP45

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #48 on: November 17, 2013, 05:12:48 PM »
Mod Edit: Please go read rule #1 of the forums.
« Last Edit: November 17, 2013, 05:25:44 PM by arebelspy »

MrsPete

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Re: $32,000/yr Budget in Early Retirement. Critique.
« Reply #49 on: November 17, 2013, 06:51:21 PM »
Moderator note: MrsPete: You don't need to keep harping on the student loan repayment issue (aside from the OP's posts, you are the last 3 posts in this thread, all mentioning it).  You've made your point, everyone knows what Root is planning to do (not repay his debts or cleverly utilize a federal program available to him, depending on your point of view on the matter), and we know your opinion on that.   You don't need to keep bringing it up over and over in the same thread.  Thanks!
I know this.  I was just wondering how many times Root would ignore a legitimate question.