How Have You and Your Spouse Resolved Disparate Views on Required Nest Egg Size?

[NYCMiniBee133]

My husband and I have discussed at length and regularly for over a year now how much we would need in a nest egg to retire. We have each done research to build a line item by line item budget in various cities. The net of it is that there is probably a $1 million dollar difference in our view of nest egg size (he thinks we need $4 million, I think we need $3 million, both seem like ridiculous numbers).

- We plan to have kids but don't have kids now. This causes a huge budget gap because we want to be in good public school districts and he and I have different views on how much we should pay for kid enrichment activities, whether we should save $200k per kid to send them to college, etc.. These are VALUE differences, not research differences (he not only wants to pay for college, he wants to be able to pay for the most expensive private education).

- We have different views on the tradeoff of high cost of living/tax burden vs a nicer location to live in. For example, we love city living and if taxes and cost of living were not an issue, we'd probably live in San Diego, NYC area, or something similar. Instead we are looking at places like Austin where there is no state tax, and some like Denver and Chicago which are in between on the income tax and cost of living scale. Yes, income tax brackets do have a significant effect for us. We've calculated that between the cost of living adjustment and tax burden, living in a tony Boston suburb like Newton or in a NJ suburb of NYC with good schools would cause us to have to build $700k more in nest egg than living in income tax-free Austin. My husband is convinced we won't find Austin liberal, intellectual, etc. enough.

The quantum of our nest egg discussion isn't the issue here but rather the two main issues of location and raising kid costs relative to the 'cost' of working more years to support the 'premium' option. Were these major issues that took serious resolving for any of you? Any insight as to what helped you come to a resolution on it?

[bogart]

I don't have answers, but I do have some thoughts that might or might not be relevant to your situation.  A couple questions for you -- How long between now and when you want to start your family?  How big is your nest egg right now?

[dandarc]

On the plus side, once you've gotten to 3 million, if you get a 7% annual return and don't put any more in at all, you're less than 4.5 years from 4 million.  So the difference is not quite as vast as "1 million dollars" may seem.

[DollarBill]

I've never lived in a big city except being 20 min south of DC up until the 9th grade. I've always hated the traffic and I would never go back to a place that is too crowed. For me, I don't think I would enjoy a place over 750,00 people (and that's pushing it). IMO, I've never seen the draw to a big city...too busy and fast paced for me. Houses were I live are more than half the price in the area I grew up (Yes it's Kansas but it is nice). With that said I do want to move but only because I want mountains or to be closer to the ocean...other wise I love it here. But I will never find myself on the East Coast again.

As for taxes, all the places that don't have an income tax normally have higher property taxes and sales tax so they kind equal themselves out.

Sounds like you guys have a high level of expectations. $3M would bring an income of about $90K to $120K a year. I think you could make it anywhere at that level. That's auto pilot level!

[stuckinmn]

If austin is not liberal or intellectual enough for you, then where the heck are you considering?  Cambridge or Berkeley?

[innerscorecard]

The problem is too much choice. I bet if you were in either your husband's choice or your's, you would both be happy. They're not so different in the end. At some point you have to just decide on a plan and stick with it.

[act0fgod]

If the difference in the nest egg is due to a difference in opinion on what expenses you should cover for your kids it seems like a discussion on you opinions of the topic is a good starting point.  My wife and I see eye to eye on this.  We both elected to go to affordable schools (we got paid), while our parents paid for our siblings college.  Guess how that turned out?  My sister dropped out of school after 2 years and only 1 of my wife's 4 siblings has a stable job.  Clearly there are people who are able to succeed when their parents foot the bill of their education.  Did your husband have his education funded by his parents?  Did you?  Does your husband have a good strategy for teaching your future kids the value of and dollar and the value of higher education?

[deborah]

Go for the higher figure in the time frame for FI with the lower figure, and see how much you can shave off your spending - that will make both of these ridiculous amounts that are far more than you will end up needing.

[I'm a red panda]

If austin is not liberal or intellectual enough for you, then where the heck are you considering?  Cambridge or Berkeley?

I agree with this statement, but at the same time, if you are really liberal Austin can be a bit infuriating- because you have to deal with the state around you.  Even if everyone in your city thinks what is going on is nuts, the policies passed by Texas lawmakers still apply in Austin.  It can be a very frustrating life.

But intellectual enough? The city has a major university and a few smaller ones, and a pretty educated populace.  There is always some sort of lecture or event going on.

[NYCMiniBee133]

I don't have answers, but I do have some thoughts that might or might not be relevant to your situation.  A couple questions for you -- How long between now and when you want to start your family?  How big is your nest egg right now?

Probably 5 years until we add kiddoes? To folks who have asked what could be more liberal than Austin, my husband's concern is more being surrounded by the rest of Texas as one poster mentioned. We need to spend more time there on an extended visit but for now, that's his view.

[DoubleDown]

Hopefully this isn't too elementary, but I feel compelled to point out that using a 4% SWR you get the following annual spending in real dollars (adjusted up for inflation every year) not even counting Soc. Sec. or any other income sources:

$3M = $120k annually
$4m = $160k annually

Do you really anticipate spending that much money every year for the rest of your lives? Because that's a helluva lot of money that on this forum usually qualifies as "an exploding volcano of wastefulness" (- MMM).

[Apples]

 A quick thought is to agree to a base level life on the smaller number, and hash out the living arrangement with that.  Then worry about college costs, enrichment programs, etc. as the kids grow up.  Once they're in school all day I don't think educated parents in an upper or middle level neighborhood would have a hard time finding some side income, which could beef up expenditures on kids activities and college savings.  And if your kid turns 16 and really wants to drive a long haul truck like one local valedictorian, then you'll hold off on the giant college savings.  I think it's impossible to plan for spending on an entire kid's life before the kid in question is even here.  You and your husband will also likely change your viewpoints as your kids grow up.  So I say start low and build later.

[CommonCents]

But intellectual enough? The city has a major university and a few smaller ones, and a pretty educated populace.  There is always some sort of lecture or event going on.

Well, OP did suggest Boston as an option.  Boston has well more than a major university and a few smaller ones - 56 according to this list:  http://en.wikipedia.org/wiki/List_of_colleges_and_universities_in_metropolitan_Boston  If that's the environment she's seeking, they're not really comparable.  (That said, just FYI that that many colleges/universities can be annoying at times.)

Posting largely to follow.  I have this issue too.  DH thinks we need hella lot more than I think we do.  He worries about retirement a lot, even though many on here would think we have plenty.

[Us2bCool]

If austin is not liberal or intellectual enough for you, then where the heck are you considering?  Cambridge or Berkeley?

I agree with this statement, but at the same time, if you are really liberal Austin can be a bit infuriating- because you have to deal with the state around you.  Even if everyone in your city thinks what is going on is nuts, the policies passed by Texas lawmakers still apply in Austin.  It can be a very frustrating life.

But intellectual enough? The city has a major university and a few smaller ones, and a pretty educated populace.  There is always some sort of lecture or event going on.

I'll add to this that there's a big difference between Austin proper and some of the surrounding suburbs. We lived in Cedar Park for over 15 years, and my feeling is that Cedar Park, Round Rock, and Circle C (technically still Austin but a bit separate) are very conservative, even for Texas.

[Thegoblinchief]

Both of those nest egg numbers seem crazy to me, even factoring high COL.

[Jon_Snow]

There is no doubt my wife thinks we need more. She continues to work, while I consider myself an early retiree. I have every confidence that she could quit tomorrow and we would be more than fine. She has expressed that she would like the OPTION of having a higher lifestyle than we currently do once she joins me in retirement. Fair enough. Every year she works from here on out will, in theory, allow us to crank up our spending in retirement - but I will stress again that I am perfectly happy with our level of spending now.

I truly think she still enjoys her job and this is probably her main reason to work - but I think she is very happy to bolster the "stache" further.

[Goldielocks]

As others indicated, planning for FIRE before kids are here is not easy, especially if medical issues arise.

Have you tried looking at it this way:

1)  Determine a target age to retire (e.g., 50)
2) Determine a target retirement amount for 2 persons similar to today's lifestyle (e.g., $60k/yr, plus paid off home for spend-a-liciousness and travel, or 2.5 million total capital)
3) Save now agressively for XX years, then stop.  The growth of the fund between when you stop saving and target retirement will get you the rest of the way.  You may only need to save half of this...

4)  Now you only need enough income to match your annual spending rate, until age 50.  Only work after that if for some strange reason you want to spend more than $60k per year with no mortgage.......   If you keep your housing costs small over the next decade(s),  you could retire entirely or cut back on working to part time that much sooner.

(All assuming today's dollars, run your calculations to reduce annual returns to net of inflation)

Mod. to Add:   My husband is of a mindset that one works until retirement age, and I am looking for a number target to FIRE, so you and your SO are in closer agreement than you think!

[Capsu78]

"My husband and I have discussed at length and regularly for over a year now how much we would need in a nest egg to retire. We have each done research to build a line item by line item budget in various cities. The net of it is that there is probably a $1 million dollar difference in our view of nest egg size (he thinks we need $4 million, I think we need $3 million, both seem like ridiculous numbers)."

The "choice" to hope to live in a Blue State bubble, where the norm is politically in line with preferred views, makes these projections pretty valid. You wont be FIRE in non flyover land without this much in your nest egg.     

[bogart]

Probably 5 years until we add kiddoes? To folks who have asked what could be more liberal than Austin, my husband's concern is more being surrounded by the rest of Texas as one poster mentioned. We need to spend more time there on an extended visit but for now, that's his view.

OK.  So -- in my experience it's hard to know (fully) how you'll want to manage raising kids until you have kids.  For example, I've just got one and my experience looking back on ~7 years is that if I could have done one thing differently earlier, I should/could have spent more money on care/activities for him.  He enjoys them, and DH I enjoy the fatigue, well, let's be honest, reduced energy level, they induce in him.  Nowadays I've embraced this and sign him up for everything (e.g. next week, two teacher workdays = 1 lego robot building program $33 and two arts programs, $45 each.  All half day.  OTOH there are plenty of parents who have kids and suddenly realize they want to spend all their time with them and outsource nothing.  That's not us -- and we spend plenty of time with and do plenty with DS -- but it's plenty of people).

Basically my short advice would be to save as much as you can now, especially if RE is a goal, but not cut off other options (e.g. a $4 million nest egg rather than a $3 milliion nest egg) until you're parenting, given that that's a goal.  And, as you describe, to try living or at least visiting other places you might consider living, if that's something you want to explore doing.

[retired?]

My husband is convinced we won't find Austin liberal, intellectual, etc. enough.

It's well known as the most liberal city in Texas.  Some may joke that that doesn't mean much, but it's pretty liberal.  Keep Austin Weird.  I am not even sure what "intellectual enough" really means in practice.  There are smart people in any large city.  Big college there, too.

[retired?]

The rest of Texas is fine.  I mean how much does what goes on in Houston/Dallas/San Antonio affect your daily life in Austin?

But, my big caveat to moving to Texas (I live in Houston) is that, unlike Boston or DC or many cities, there is not much within driving distance that is interesting.  It's a reasonable flight to most of the U.S., but it'd be better to have those things "in your back yard".  Austin is much more "interesting" than the other cities in TX.  But, we have a hard time getting people to visit us in Houston.

Aside - have you ever lived in the South?  Seems to me that many/most Northerners think the South is just a bunch of backwards hicks.  Not true, but you'll never convince them otherwise.  But, take ATL for example.  The amount of 'transplants' there is incredible.  Lots of Northerners escaping high costs and cold winters.

btw - research Chicago a little more.  You'll find the tax burden is higher than you think.  Around 8%-11% sales tax, 5% income tax (raised from 3% about 4 years ago) and 2% prop tax on market value (they base it off something else, but it comes to about 2% of market)

But, to the nest egg question - rather than think about it in terms of egg (since it doesn't appear you are there yet, haven't had the kids yet, etc.) just try to save as much as possible.  Seems your thinking is a little cart before the horse.

RE college savings - at first, I thought I'd save enough for a compromise - out of state public. But, those are now almost as much as any private.  I now aim for in-state since we have quality schools.  I'll tell 'em 'do well at UT and you can go to grad school (free) almost anywhere".  My reasoning is thus - if it comes down to working a few more years so my kids can go to any school without cost (i.e. I pay), then nope, sorry, UT, Texas A&M are fine....you can pay the difference.

 

[gimp]

Vancouver right across the river from Portland has no state income tax. Portland has no consumption tax (at least not on most things.) Portland is a great, cheap city.

[retired?]

On the plus side, once you've gotten to 3 million, if you get a 7% annual return and don't put any more in at all, you're less than 4.5 years from 4 million.  So the difference is not quite as vast as "1 million dollars" may seem.

Not to be a party-pooper, but 7% net of taxes and inflation.  Good point, though.  Would be interesting to see how many 5 year periods produced that.

I think once they get to 3M, the question will become "what are we getting for working until 4M?" and is that worth it.  Granted, I think setting yourself up to make it easier (moving to the right locale) is the right move regardless of the actual outcome.

[retired?]

Vancouver right across the river from Portland has no state income tax. Portland has no consumption tax (at least not on most things.) Portland is a great, cheap city.

Portland is very neat, but has very high state income tax.  My sister lives there and works as a teacher and hits the 9% rate.  She pays more in state income tax than many 4-person, 100k households pay in federal taxes.

5 percent on the first $3,250 of taxable income.
7 percent on taxable income between $3,251 and $8,150.
9 percent on taxable income of $8,151 and $125,000.
9.9 percent on taxable income of $125,001 and above.

So, live in Vancouver as suggested.