bogleheads - can I scale it back?

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schmitz
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bogleheads - can I scale it back?

Post by schmitz »

Hi bogleheads,
Always get good advice here so I'm back for more. I will try my best to make this clear and if you'd like me to provide more details or information, please ask.

Basically, my story goes like this. I am 37 and wife is 35. We recently had our first child (less than a month old). Through a lot of hard work (working 60+ hours/week sometimes, often working weekends, etc), learning basic investing/financial strategies, some lucky timing and just simply spending less than we earn, we have done pretty good for the last 10 years. A decade ago we probably had a net worth of 0 combined (we weren't married at the time) and now its over 1 million. Its broken down to ~70% retirement/investments, ~20% home equity and ~10% cash.

Our current expenses are in the $7000-8000/month range. That includes both of us maxing our ROTHs ($916/month). Our mortgage is about $1550/month. My wife brings home around $4500 per month with a stable job that provides health insurance as well.

I feel like I am getting burnt out at my job and want to know if we are in a good enough position that I can scale it back a little. I have worked crazy hours for years and want to start working a little less hoping that time is on our side. Also if this is possible, it will probably be good for my health and allow me to spend more time with the family.

Basically, what I want to do is be able to work just enough to get by each month (with maybe a little cushion left over, ~$500) and let time/compounding interest do its thing on our portfolio (which I hope is ~800k within the next 8-10 months) so that it can grow and be large enough to allow myself to retire in my early 50s. Wife would continue to work until around 60-62. I am self employed so I have the ability to work less and earn just enough that we need for our monthly expenses.

During this time I must also note we will continue to max both our ROTHs and her TSP. I also want to have the mortgage paid off by the time we retire (or downsize to a paid off home). I expect our monthly expenses by then to be around $5500-6000, although its difficult to estimate that far into the future.

So bogleheads...is this possible? If not, are we even close? What kind of things can we do to make it more realistic?
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Re: bogleheads - can I scale it back?

Post by The Wizard »

Scaling back sounds fine to me.
Make sure you get a good handle on what the child-raising expenses will involve over the next 20 years before you target the end game too precisely.
You say your monthly expenses are $7-8K including Roth contributions; I would not normally include long-term investment contributions as part of "expenses". If you were putting aside $X00 a month to buy a new car, then yes, I'd include that.
But yes, you can say that the Roth contributions are part of your Cash Flow requirements...
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flyingaway
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Re: bogleheads - can I scale it back?

Post by flyingaway »

You can use a retirement calculator to see if you can reach your retirement goals with your scaling back.

I have scaled back my work load since 2008 by not working and not getting paid in summer months.
kaudrey
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Re: bogleheads - can I scale it back?

Post by kaudrey »

Hi,

Congratulations on the baby!

I, too, would suggest running the basics through a retirement calculator, but I did a quick spreadsheet with simple assumptions (starting portfolio of $750K, 5% growth per year, max TSP and Roths at 28.5K a year through 2030), and based on that, you'd easily be able to withdraw $6K a month (it would be less than 4% withdrawal a year).

That doesn't take into account any SS, and assumes you'll never increase how much you save each year.

Life is always about balance, and it sounds like you are in good shape to tilt the balance a little more toward family and less toward work. Good for you.
freddie
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Re: bogleheads - can I scale it back?

Post by freddie »

I would curious to know how you retiring in your early 50s and the wife continuing to work for another 10 years works out:) Does she get a pension?

You don't mention it, but I assume (guess based on income your up in the 25%+ bracket) you both are doing 401(ks).Would those continue with the reduced work schedule? Is there a middle ground (i.e. you skip out on working some weekends maybe and drop the hours from 60+ to 50) where you still make enough to save some money? My experience was that the difference between 80 and 60 was huge. 60 to 40 wasn't anywhere near as big. YMMV
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Re: bogleheads - can I scale it back?

Post by angelescrest »

I won't comment on the finances much, but I would just say a hearty word of celebration in your new child. Spending time with your child may be the most rewarding thing you will ever experience, so I wholly applaud your decision to cut back if only for what it will allow over the next few years. Financially, there's no question you can do it. If I were in your shoes I would simultaneously cut way back on expenditure as you reduce your hours. The next few years are a precious time, and being conservative at the beginning will enable you to get a hold on the transition and protect your nest egg.
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Re: bogleheads - can I scale it back?

Post by Fallible »

boroc7 wrote:I won't comment on the finances much, but I would just say a hearty word of celebration in your new child. Spending time with your child may be the most rewarding thing you will ever experience, so I wholly applaud your decision to cut back if only for what it will allow over the next few years. Financially, there's no question you can do it. If I were in your shoes I would simultaneously cut way back on expenditure as you reduce your hours. The next few years are a precious time, and being conservative at the beginning will enable you to get a hold on the transition and protect your nest egg.
Very much agree with this and a word of caution to the OP: often by the time people talk about feeling burned out on the job, they already are.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Pizzasteve510
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Re: bogleheads - can I scale it back?

Post by Pizzasteve510 »

Been there, basically did that (though without kids), without regrets (both wife and I are earning roughly half our market value if we pursued max revenue career moves.

Congratulations of good life decisions. Finding and marrying a boggleheadish partner is the 'best investment' one can make in a good life, IMHO. Invest some of your extra time in making your partner happy (cook nice dinner, plan a surprise trip) and your family will thank you. Time with loved ones is priceless and can't be bought in retirement with your nest egg.
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Re: bogleheads - can I scale it back?

Post by Planner »

I think you can do it -- there is an early retirement community on the internet with good tips about scaling back (i.e., retiring). Mr. Money Mustache comes to mind. Maybe you'll find some helpful ideas on there regarding your finances, health, and family for your situation.

And congrats on the baby!
joerh
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Re: bogleheads - can I scale it back?

Post by joerh »

If you been here long enough, I'm sure you're familiar with emergdoc's website, but this post in particular may help you make your decision... http://whitecoatinvestor.com/the-concep ... ?print=pdf.

And this may or may not be an option, but what about hiring others to help reduce your time, but still not have to "just make it." This might be hiring a new college grad to learn from you and possibly buy into as a partner, or something like hiring a virtual assistant to take over some of the simple task and help you stream line the one's you have to do yourself. I've used http://easyoutsource.com/ in the past. It might take a little time to get things set up, but you can find great help for $3-$10/hour depending on your needs. If your business is something you can eventually sell, then it keeping revenue up may be the thing that puts you over the top for early retirement.
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Re: bogleheads - can I scale it back?

Post by Grt2bOutdoors »

Read this post from MnD on this thread-------> http://www.bogleheads.org/forum/viewtop ... t#p1642329

Then decide whether you can trim back or not........
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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schmitz
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Re: bogleheads - can I scale it back?

Post by schmitz »

wow - thanks to everyone for all the great replies, information and well wishes on the baby. i really appreciate it. :)

boroc7 wrote:I won't comment on the finances much, but I would just say a hearty word of celebration in your new child. Spending time with your child may be the most rewarding thing you will ever experience, so I wholly applaud your decision to cut back if only for what it will allow over the next few years. Financially, there's no question you can do it. If I were in your shoes I would simultaneously cut way back on expenditure as you reduce your hours. The next few years are a precious time, and being conservative at the beginning will enable you to get a hold on the transition and protect your nest egg.
good advice. thanks.
Fallible wrote:
boroc7 wrote:I won't comment on the finances much, but I would just say a hearty word of celebration in your new child. Spending time with your child may be the most rewarding thing you will ever experience, so I wholly applaud your decision to cut back if only for what it will allow over the next few years. Financially, there's no question you can do it. If I were in your shoes I would simultaneously cut way back on expenditure as you reduce your hours. The next few years are a precious time, and being conservative at the beginning will enable you to get a hold on the transition and protect your nest egg.
Very much agree with this and a word of caution to the OP: often by the time people talk about feeling burned out on the job, they already are.
something i have thought of and was fearful of.
The Wizard wrote:Scaling back sounds fine to me.
Make sure you get a good handle on what the child-raising expenses will involve over the next 20 years before you target the end game too precisely.
You say your monthly expenses are $7-8K including Roth contributions; I would not normally include long-term investment contributions as part of "expenses". If you were putting aside $X00 a month to buy a new car, then yes, I'd include that.
But yes, you can say that the Roth contributions are part of your Cash Flow requirements...

I count them as expenses because they are something i wanted to "pay for" every year no matter what. I felt it was a necessity.
kaudrey wrote:Hi,

Congratulations on the baby!

I, too, would suggest running the basics through a retirement calculator, but I did a quick spreadsheet with simple assumptions (starting portfolio of $750K, 5% growth per year, max TSP and Roths at 28.5K a year through 2030), and based on that, you'd easily be able to withdraw $6K a month (it would be less than 4% withdrawal a year).

That doesn't take into account any SS, and assumes you'll never increase how much you save each year.

Life is always about balance, and it sounds like you are in good shape to tilt the balance a little more toward family and less toward work. Good for you.
thanks! and which retirement calculator do you recommend? or are they all pretty much the same?

and yes I have ignored SS - dont know how to even consider that in my planning.
freddie wrote:I would curious to know how you retiring in your early 50s and the wife continuing to work for another 10 years works out:) Does she get a pension?

You don't mention it, but I assume (guess based on income your up in the 25%+ bracket) you both are doing 401(ks).Would those continue with the reduced work schedule? Is there a middle ground (i.e. you skip out on working some weekends maybe and drop the hours from 60+ to 50) where you still make enough to save some money? My experience was that the difference between 80 and 60 was huge. 60 to 40 wasn't anywhere near as big. YMMV
wife works in government and has a TSP which I believe includes a FERS pension? im not 100% sure on this.

I have a SEP IRA and she has the TSP (no 401ks). i would continue to max out my SEP every year i work.
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Re: bogleheads - can I scale it back?

Post by RadAudit »

schmitz wrote:and yes I have ignored SS - dont know how to even consider that in my planning.
There's been a lot of discussion on the forum about this. Might be worth a quick search. From what I recall, I believe the amount from SS is considered to be a reduction in the amount of money the pensions and portfolio are required to spin off each year to meet your projected annual expenditures in retirement. There are a lot of calculators for future SS monthly / yearly benefits. The government's SS site has a calculator that is OK.
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Re: bogleheads - can I scale it back?

Post by DonCamillo »

I have changed careers several times, including my balance of time available versus salary. A good start on retirement is a big help if you switch to a career that gives you more time with your new baby. They grow up so fast, try not to miss too much of it. I think the key is LBYM. As long as you live below your means, you have a lot of flexibility.

I went from 80 hours a week at age 35 to 55 hours a week at age 45 to 30 hours a week at age 55. I always had more than enough to pay my bills, and do not regret that progression.
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Re: bogleheads - can I scale it back?

Post by leonard »

what are you spending $7-$8k on?

Personally, before I scaled back to much - I'd make sure I understood where the money is going. That seems like a lot of spending.

As an exercise, you might keep a detailed spending records for a month or 2 - just to ensure you have a handle on spending.
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Re: bogleheads - can I scale it back?

Post by BogleBoogie »

Calculator +1

Remember, you will never get this time back with your baby and the extra hours/stress may lead to long term health issues. I say that to redirect what is really important. Obviously you can continue to work extra, amass a larger retirement account, etc. but at what COST? Best of luck and nice work on what you have achieved thus far!!!
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Re: bogleheads - can I scale it back?

Post by YDNAL »

schmitz wrote:Basically, my story goes like this. I am 37 and wife is 35. We recently had our first child (less than a month old). Through a lot of hard work (working 60+ hours/week sometimes, often working weekends, etc), learning basic investing/financial strategies, some lucky timing and just simply spending less than we earn, we have done pretty good for the last 10 years. A decade ago we probably had a net worth of 0 combined (we weren't married at the time) and now its over 1 million. << snip >>

I feel like I am getting burnt out at my job and want to know if we are in a good enough position that I can scale it back a little. I have worked crazy hours for years and want to start working a little less hoping that time is on our side. Also if this is possible, it will probably be good for my health and allow me to spend more time with the family.
Congratulations on the new baby!

Life is a balance.... family, spiritual (if applicable), friends, work, etc., in the order of our choosing.

Only YOU can determine and decide if working 60+ hours a week, often weekends, is something that allows you to balance your life. I find it hugely inappropriate to interlope in this area.
schmitz wrote:Our current expenses are in the $7000-8000/month range. That includes both of us maxing our ROTHs ($916/month). Our mortgage is about $1550/month. My wife brings home around $4500 per month with a stable job that provides health insurance as well.
1. I'm struggling to reconcile what $916 monthly to Roths mean ($10,992 annually).
2. Since your wife has access to TSP (per below), are her TSP contributions also in the $7-$8K monthly?


Basically, what I want to do is be able to work just enough to get by each month (with maybe a little cushion left over, ~$500) and let time/compounding interest do its thing on our portfolio (which I hope is ~800k within the next 8-10 months) so that it can grow and be large enough to allow myself to retire in my early 50s. Wife would continue to work until around 60-62. I am self employed so I have the ability to work less and earn just enough that we need for our monthly expenses.

During this time I must also note we will continue to max both our ROTHs and her TSP. I also want to have the mortgage paid off by the time we retire (or downsize to a paid off home). I expect our monthly expenses by then to be around $5500-6000, although its difficult to estimate that far into the future.
3. There is a large discrepancy between $7-$8K expenses now and $5-$6K later.

So bogleheads...is this possible? If not, are we even close? What kind of things can we do to make it more realistic?
That in blue aside for the moment, anything is possible to accomplish (within reason), when we set out to do it.

Good luck!
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: bogleheads - can I scale it back?

Post by abuss368 »

Hi Schmitz,

A few things:

1) Congrats on the birth of the baby! Enjoy this time as it goes very fast.

2) Expenses - a little high at $7,000 - $8,000 per month. Is there any way to properly review and decrease? That would help if you have lower expected income.

3) Net Worth - congrats on your achievement at such a young age. Keep it up.

4) Retirement - how do you get early retirement again and your spouse keeps the daily grind???

Best.
John C. Bogle: “Simplicity is the master key to financial success."
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schmitz
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Re: bogleheads - can I scale it back?

Post by schmitz »

RadAudit wrote:
schmitz wrote:and yes I have ignored SS - dont know how to even consider that in my planning.
There's been a lot of discussion on the forum about this. Might be worth a quick search. From what I recall, I believe the amount from SS is considered to be a reduction in the amount of money the pensions and portfolio are required to spin off each year to meet your projected annual expenditures in retirement. There are a lot of calculators for future SS monthly / yearly benefits. The government's SS site has a calculator that is OK.
my confusion with SS comes from not knowing whether itll even be there for my wife and I. I dont really want to consider it when im not 100% sure ill get anything.

but Ill play around with the calculator and see what it says.

DonCamillo wrote:I have changed careers several times, including my balance of time available versus salary. A good start on retirement is a big help if you switch to a career that gives you more time with your new baby. They grow up so fast, try not to miss too much of it. I think the key is LBYM. As long as you live below your means, you have a lot of flexibility.
thanks for the words of advice. i think lowering our expenses can certainly go a long way.

leonard wrote:what are you spending $7-$8k on?

Personally, before I scaled back to much - I'd make sure I understood where the money is going. That seems like a lot of spending.

As an exercise, you might keep a detailed spending records for a month or 2 - just to ensure you have a handle on spending.
monthly expenses:
mortgage/insurance/taxes: $2150
HOA: $100
Car insurance: $177
life insurance: $100 (we dont have this yet but my internet research says itll be about $100/mo)
Utilities (gas/electric/water/garbage): ~$200
cable/internet/phone: ~$400 (I know its high :-( )
Food/sundries: $1000 (also high. we eat out a lot)
Pets: $150
Gas: $600 (I drive a lot for work)
Car registrations/repairs/maintenance: $200
Tolls: $150 (again for work)
ROTHs: $920
gardener: $50
pest control: $40

this adds up to around $6240

so then I round up to around $7000-8000 when you add in other stuff like plane tickets, random household service calls (AC, plumbers, sprinklers, computer repair, etc), haircuts, clothes, etc...

im not proud of our expenses. I see a lot of places to bring down the costs and will definitely try to do this. I know if I was able to retire, it would automatically cut down the gas, tolls, cell phone and food bills instantly (which totals a pretty decent amount).
BogleBoogie wrote:Calculator +1

Remember, you will never get this time back with your baby and the extra hours/stress may lead to long term health issues. I say that to redirect what is really important. Obviously you can continue to work extra, amass a larger retirement account, etc. but at what COST? Best of luck and nice work on what you have achieved thus far!!!
yes - i agree! thanks!

YDNAL wrote:
schmitz wrote:Basically, my story goes like this. I am 37 and wife is 35. We recently had our first child (less than a month old). Through a lot of hard work (working 60+ hours/week sometimes, often working weekends, etc), learning basic investing/financial strategies, some lucky timing and just simply spending less than we earn, we have done pretty good for the last 10 years. A decade ago we probably had a net worth of 0 combined (we weren't married at the time) and now its over 1 million. << snip >>

I feel like I am getting burnt out at my job and want to know if we are in a good enough position that I can scale it back a little. I have worked crazy hours for years and want to start working a little less hoping that time is on our side. Also if this is possible, it will probably be good for my health and allow me to spend more time with the family.
Congratulations on the new baby!

Life is a balance.... family, spiritual (if applicable), friends, work, etc., in the order of our choosing.

Only YOU can determine and decide if working 60+ hours a week, often weekends, is something that allows you to balance your life. I find it hugely inappropriate to interlope in this area.
thank you!
schmitz wrote:Our current expenses are in the $7000-8000/month range. That includes both of us maxing our ROTHs ($916/month). Our mortgage is about $1550/month. My wife brings home around $4500 per month with a stable job that provides health insurance as well.
1. I'm struggling to reconcile what $916 monthly to Roths mean ($10,992 annually).
2. Since your wife has access to TSP (per below), are her TSP contributions also in the $7-$8K monthly?
hope I address your point correctly but: (a) I include the $916 per month as an expense because I want to make sure its taken into consideration for what we spend per month. (b) however I dont include her TSP in the $7-8k because it is taken out of her paycheck before we get her take home amount. so i dont consider it an "expense."
Basically, what I want to do is be able to work just enough to get by each month (with maybe a little cushion left over, ~$500) and let time/compounding interest do its thing on our portfolio (which I hope is ~800k within the next 8-10 months) so that it can grow and be large enough to allow myself to retire in my early 50s. Wife would continue to work until around 60-62. I am self employed so I have the ability to work less and earn just enough that we need for our monthly expenses.

During this time I must also note we will continue to max both our ROTHs and her TSP. I also want to have the mortgage paid off by the time we retire (or downsize to a paid off home). I expect our monthly expenses by then to be around $5500-6000, although its difficult to estimate that far into the future.
3. There is a large discrepancy between $7-$8K expenses now and $5-$6K later.

So bogleheads...is this possible? If not, are we even close? What kind of things can we do to make it more realistic?
That in blue aside for the moment, anything is possible to accomplish (within reason), when we set out to do it.

Good luck!
the difference in the $7-8k now vs the $5-6k later comes from (a) having no mortgage which I would like to do before I retire, (b) reducing a lot of other expenses in retirement. for example (like I mentioned in a reply to someone else), when i retire our monthly expenses on gas, tolls, food and cell phones instantly drop and (c) i wont have to fund my ROTH while retired which is about $458/month. hopefully, when adding all these up, it can drop us from $7-8k/month to the $5-6k/month range.

although im sure other expenses will start to emerge between now and then, i want to also work on cutting down other expenses to cancel those increases out as much as possible.

abuss368 wrote:Hi Schmitz,

A few things:

1) Congrats on the birth of the baby! Enjoy this time as it goes very fast.

2) Expenses - a little high at $7,000 - $8,000 per month. Is there any way to properly review and decrease? That would help if you have lower expected income.

3) Net Worth - congrats on your achievement at such a young age. Keep it up.

4) Retirement - how do you get early retirement again and your spouse keeps the daily grind???

Best.
1) thank you!
2) yes I agree. I posted our budget along with some thoughts on it and some places I will try to reduce. let me know what you think.
3) thank you!
4) good question. i know its a complicated and each family is unique but long story short, her job is a lot less stressful, a lot better hours, has the health insurance and me working less allows me to help out more at home with the family (which in turn helps everyone out). we are a team and i would never make such a big decision without talking to her first.
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Re: bogleheads - can I scale it back?

Post by YDNAL »

schmitz wrote:monthly expenses:
mortgage/insurance/taxes: $2150
HOA: $100
Car insurance: $177
life insurance: $100 (we dont have this yet but my internet research says itll be about $100/mo)
Utilities (gas/electric/water/garbage): ~$200
cable/internet/phone: ~$400 (I know its high :-( )
Food/sundries: $1000 (also high. we eat out a lot)
Pets: $150
Gas: $600 (I drive a lot for work)
Car registrations/repairs/maintenance: $200
Tolls: $150 (again for work)
ROTHs: $920
gardener: $50
pest control: $40

this adds up to around $6240
schmitz wrote:I hope I address your point correctly but: (a) I include the $916 per month as an expense because I want to make sure its taken into consideration for what we spend per month. (b) however I dont include her TSP in the $7-8k because it is taken out of her paycheck before we get her take home amount. so i dont consider it an "expense."
I see.

Quickly reduced $7-$8K in "expenses" to $5,320 ($6240 - $920). As soon as you reduce travel to work, there's another potential $750 there. As you can see, developing a realistic and sensible budget is the first step in financial planning. And, like I said in my first post, anything is possible (within reason) if we set our mind to it.

Good luck!
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
kaudrey
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Re: bogleheads - can I scale it back?

Post by kaudrey »

Hi,

The Boglehead Wiki has a list of retirement calculators.

Firecalc is popular; Fidelity has a good one (you have to sign up, but not be a client, I think). And there are a bunch of other ones. You can put in all kinds of assumptions to try out different scenarios (including getting SS).

Best of luck!
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Re: bogleheads - can I scale it back?

Post by Dandy »

If you can afford to scale back then go for it. High stress, long hours do damage to health and relationships. No way to live if you don't have to. After a period of recharging you might be ready for a bit more work -- or not.
OpenRoad
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Re: bogleheads - can I scale it back?

Post by OpenRoad »

Separate from the money/early retirement aspects, scaling back sounds like would give you more balance in your life which is sustainable - lack of balance is not, or at the very least can come at a great cost. Some people are ok with that cost (career v family, money v health, etc). Others are not, it sounds like you are not.

You may find early retirement is less of a goal once you get things balanced. So here's a vote for scaling back with the purpose of finding balance in your life such that it works for you - regardless of what the retirement calculators tell you!

P.S. We're in similar situations (age, I have 3 kids- 8 mos, twin 3 yr olds), for your expenses, I'd highly recommend some budget software if you are not using already - we use YNAB (You need a Budget) - its on our phones, our computers, everywhere. We've been using it for a few years now and love it.
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Re: bogleheads - can I scale it back?

Post by drawpoker »

The fact that you & your wife do not have life insurance yet is worrisome.

Having had a recent baby, it is the most important thing you can do to protect your family. If anything happened to you your wife could not make it on what social security survivor benefits pay. And, if your death occurred right when a bear market hit, she might be having to sell equities to meet living expenses, and possibly triggering early withdrawal penalties from retirement funds as well!
You must obtain good life insurance policies a.s.a.p. ! This is so important, ( I can't believe no one else here has mentioned it)
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Re: bogleheads - can I scale it back?

Post by YDNAL »

drawpoker wrote:The fact that you & your wife do not have life insurance yet is worrisome.
Honest question, I don't want to reread everything Schmitz (OP) has written.... How do you know that to be a "fact?"
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AspiringDoc
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Re: bogleheads - can I scale it back?

Post by AspiringDoc »

YDNAL wrote:
drawpoker wrote:The fact that you & your wife do not have life insurance yet is worrisome.
Honest question, I don't want to reread everything Schmitz (OP) has written.... How do you know that to be a "fact?"
schmitz wrote: life insurance: $100 (we dont have this yet but my internet research says itll be about $100/mo)
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Re: bogleheads - can I scale it back?

Post by flyingaway »

I play with the MSN retirement calculator a lot. For me, the calculator shows that I am on track to reach my minimum target number (financial independence) in three years, or in five years if the market does not cooperate. So I have been kind of scaling back a lot (not working in summer months and not working to death in the other 9 months) and increased my fun money.

If your scaling back can still get you to your retirement target number within your target years, why not scale back a little bit and enjoy your life more.
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Re: bogleheads - can I scale it back?

Post by DaveG »

What about college savings for your newborn? Do you plan to have more children in the future?
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Re: bogleheads - can I scale it back?

Post by YDNAL »

AspiringDoc wrote:
YDNAL wrote:
drawpoker wrote:The fact that you & your wife do not have life insurance yet is worrisome.
Honest question, I don't want to reread everything Schmitz (OP) has written.... How do you know that to be a "fact?"
schmitz wrote:life insurance: $100 (we dont have this yet but my internet research says itll be about $100/mo)
Thanks. I agree, life insurance is a must for a growing family (with a newborn and perhaps others to come).
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Re: bogleheads - can I scale it back?

Post by DonCamillo »

schmitz wrote: my confusion with SS comes from not knowing whether itll even be there for my wife and I. I dont really want to consider it when im not 100% sure ill get anything.
I think the future of Social Security can be implied by its history. I has been a tremendous success in lifting the elderly out of poverty, so it has great political clout. Although it is much more generous to the poor than the rich, it needs a broad mandate to remain viable. If only a small portion of the electorate thinks that they will benefit from it, the program would be in jeopardy. That makes it very likely that it will be continued as a universal benefit. When increasing life expectancy made projected costs unsustainable, Congress responded by raising the contribution rate, increasing the maximum income subject to tax, and reducing benefits (i.e., making up to 85% of benefits taxable, raising the retirement age, changing the COLA formula) to bring it back into balance. That implies that it will still be there for you, but the benefits will probably be scaled back to the level of cash flow coming into the program. You would probably be justified in estimating that you will get about 75% of the currently projected benefits. If I had thought that way when I was your age (before the changes mentioned above) I would have been approximately correct.
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schmitz
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Re: bogleheads - can I scale it back?

Post by schmitz »

YDNAL wrote: I see.

Quickly reduced $7-$8K in "expenses" to $5,320 ($6240 - $920). As soon as you reduce travel to work, there's another potential $750 there. As you can see, developing a realistic and sensible budget is the first step in financial planning. And, like I said in my first post, anything is possible (within reason) if we set our mind to it.

Good luck!
thanks! the mortgage is gonna take awhile but i can definitely cut out other things immediately.

kaudrey wrote:Hi,

The Boglehead Wiki has a list of retirement calculators.

Firecalc is popular; Fidelity has a good one (you have to sign up, but not be a client, I think). And there are a bunch of other ones. You can put in all kinds of assumptions to try out different scenarios (including getting SS).

Best of luck!
thanks!

Dandy wrote:If you can afford to scale back then go for it. High stress, long hours do damage to health and relationships. No way to live if you don't have to. After a period of recharging you might be ready for a bit more work -- or not.
good advice - thank you!

OpenRoad wrote:Separate from the money/early retirement aspects, scaling back sounds like would give you more balance in your life which is sustainable - lack of balance is not, or at the very least can come at a great cost. Some people are ok with that cost (career v family, money v health, etc). Others are not, it sounds like you are not.

You may find early retirement is less of a goal once you get things balanced. So here's a vote for scaling back with the purpose of finding balance in your life such that it works for you - regardless of what the retirement calculators tell you!

P.S. We're in similar situations (age, I have 3 kids- 8 mos, twin 3 yr olds), for your expenses, I'd highly recommend some budget software if you are not using already - we use YNAB (You need a Budget) - its on our phones, our computers, everywhere. We've been using it for a few years now and love it.
I will check YNAB out - thanks!

drawpoker wrote:The fact that you & your wife do not have life insurance yet is worrisome.

Having had a recent baby, it is the most important thing you can do to protect your family. If anything happened to you your wife could not make it on what social security survivor benefits pay. And, if your death occurred right when a bear market hit, she might be having to sell equities to meet living expenses, and possibly triggering early withdrawal penalties from retirement funds as well!
You must obtain good life insurance policies a.s.a.p. ! This is so important, ( I can't believe no one else here has mentioned it)
I know I should have it already but its on the top of my to-do list.

any suggestions where to start? is zander reputable (heard it from dave ramsey)? also does my wife need to get some as well or just myself?


flyingaway wrote:I play with the MSN retirement calculator a lot. For me, the calculator shows that I am on track to reach my minimum target number (financial independence) in three years, or in five years if the market does not cooperate. So I have been kind of scaling back a lot (not working in summer months and not working to death in the other 9 months) and increased my fun money.

If your scaling back can still get you to your retirement target number within your target years, why not scale back a little bit and enjoy your life more.
thats what id like to do - just wanted to make sure scaling back is financially responsible for us.

DaveG wrote:What about college savings for your newborn? Do you plan to have more children in the future?
maybe one more (if we can survive this first one :) )

so far no college savings but was planning on throwing $50-100 per month into a 529 (but i did just read that article that says only 3% of people do this so maybe its not the best decision? ill have to read more on that)


DonCamillo wrote:
schmitz wrote: my confusion with SS comes from not knowing whether itll even be there for my wife and I. I dont really want to consider it when im not 100% sure ill get anything.
I think the future of Social Security can be implied by its history. I has been a tremendous success in lifting the elderly out of poverty, so it has great political clout. Although it is much more generous to the poor than the rich, it needs a broad mandate to remain viable. If only a small portion of the electorate thinks that they will benefit from it, the program would be in jeopardy. That makes it very likely that it will be continued as a universal benefit. When increasing life expectancy made projected costs unsustainable, Congress responded by raising the contribution rate, increasing the maximum income subject to tax, and reducing benefits (i.e., making up to 85% of benefits taxable, raising the retirement age, changing the COLA formula) to bring it back into balance. That implies that it will still be there for you, but the benefits will probably be scaled back to the level of cash flow coming into the program. You would probably be justified in estimating that you will get about 75% of the currently projected benefits. If I had thought that way when I was your age (before the changes mentioned above) I would have been approximately correct.

thanks. even 75% of projected benefits would be nice.
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Re: bogleheads - can I scale it back?

Post by Zapped »

schmitz wrote:
DaveG wrote:What about college savings for your newborn? Do you plan to have more children in the future?
maybe one more (if we can survive this first one :) )
so far no college savings but was planning on throwing $50-100 per month into a 529 (but i did just read that article that says only 3% of people do this so maybe its not the best decision? ill have to read more on that)
$100/mo * 12 months * 18 years = $21600. $21600 might pay for just a little more than the first year of college at a good public university assuming in-state tuition in today's dollars. Even if a 529 or another investment makes a little more than inflation over the next 18 years, it's hard to imagine this college fund being worth more than a couple of years of college for one of your two children.

Remember that feeling you (probably) had when you started furnishing your first home? That was just a warning shot over the bow compared to the feelings you'll have when faced with the expenses of raising children.

Food, clothing, medical bills, dental bills including possible orthodontia, school fees even at public school, extracurricular fees (music lessons, sports), extra gas & mileage carting the little ones around, family vacations, birthday & holiday presents, helping them with a used car or insurance when they're old enough to drive - it all adds up. I'm not listing the major expense of child care if you're really going to be a (nearly) full-time caregiver, but if you are going to try to swing part-time work you may need to budget for that.

Not to be harsh, but I can't imagine "throttling back" on earnings with the kind of responsibilities you've willingly shouldered.
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Re: bogleheads - can I scale it back?

Post by Vilgan »

Can you scale it back? Of course. Some posts are talking about college costs and other stuff, but what's more important: A parent who is there during a child's early development or some money? I'd argue strongly for a parent who is there and involved. Life has been really easy for me and I can credit most of it to my parents who WERE there and not to the money they gave me for school (which was almost nothing). There are always ways to pay for school, they can join the military, they can work while going to school, they can get scholarships. Heck, in some fields (Computer Science in my case) its debatable how useful college classes are.

Instead of talking about dialing it back now and retiring at 50, why not aim for something better: Dial it back a bit now and when your kid hits 5 years old, you'll both be able to quit your jobs and spend your lives on a combination of what YOU want to do and on spending time with your kid(s). The main issue is spending, and if you keep "retirement is less than 5 years away" and tackle the spending with a sense of urgency then it shouldn't be hard to get reduce significantly.

My neighbor retired in his mid 30's and he's gone from being super grumpy to being ridiculously crazy insanely happy.

And nothing says you have to never work again if the mood takes you...

Main thing: tackle those expenses. Realize that they are what's keeping you from happiness and your kid. Spend some time reducing them and packing away savings.

Some suggested reading:
Your Money or your Life
Mr Money Mustache (I like this podcast specifically: http://www.listenmoneymatters.com/early ... -mustache/ )
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schmitz
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Re: bogleheads - can I scale it back?

Post by schmitz »

Zapped wrote:
schmitz wrote:
DaveG wrote:What about college savings for your newborn? Do you plan to have more children in the future?
maybe one more (if we can survive this first one :) )
so far no college savings but was planning on throwing $50-100 per month into a 529 (but i did just read that article that says only 3% of people do this so maybe its not the best decision? ill have to read more on that)
$100/mo * 12 months * 18 years = $21600. $21600 might pay for just a little more than the first year of college at a good public university assuming in-state tuition in today's dollars. Even if a 529 or another investment makes a little more than inflation over the next 18 years, it's hard to imagine this college fund being worth more than a couple of years of college for one of your two children.
true, but i figure if I could give him $22k when hes ready to go to college, its better than nothing?

Remember that feeling you (probably) had when you started furnishing your first home? That was just a warning shot over the bow compared to the feelings you'll have when faced with the expenses of raising children.

Food, clothing, medical bills, dental bills including possible orthodontia, school fees even at public school, extracurricular fees (music lessons, sports), extra gas & mileage carting the little ones around, family vacations, birthday & holiday presents, helping them with a used car or insurance when they're old enough to drive - it all adds up. I'm not listing the major expense of child care if you're really going to be a (nearly) full-time caregiver, but if you are going to try to swing part-time work you may need to budget for that.

Not to be harsh, but I can't imagine "throttling back" on earnings with the kind of responsibilities you've willingly shouldered.
no, i totally agree and i appreciate the feedback (thats why i love this forum). I will re-assess our new budget because of the new child and do expect a lot more expenses to come up. and even if i scaled back it wouldnt be this year anyways (more of a gradual process).

my main concern was to see if we have enough saved up in retirement/investments now, such that, if I scaled back to making enough to pay for the (new) monthly expenses, would my family be ok in the long run? (ie, if we only added in max ROTH/TSP contributions and nothing else, for the next 10-15 years, would we be in good shape in our early 50s?)
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schmitz
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Re: bogleheads - can I scale it back?

Post by schmitz »

Vilgan wrote:Can you scale it back? Of course. Some posts are talking about college costs and other stuff, but what's more important: A parent who is there during a child's early development or some money? I'd argue strongly for a parent who is there and involved. Life has been really easy for me and I can credit most of it to my parents who WERE there and not to the money they gave me for school (which was almost nothing). There are always ways to pay for school, they can join the military, they can work while going to school, they can get scholarships. Heck, in some fields (Computer Science in my case) its debatable how useful college classes are.

Instead of talking about dialing it back now and retiring at 50, why not aim for something better: Dial it back a bit now and when your kid hits 5 years old, you'll both be able to quit your jobs and spend your lives on a combination of what YOU want to do and on spending time with your kid(s). The main issue is spending, and if you keep "retirement is less than 5 years away" and tackle the spending with a sense of urgency then it shouldn't be hard to get reduce significantly.
wow...retiring in 5 years would be amazing. :D

but without paying my mortgage off i cant see how that's possible.
My neighbor retired in his mid 30's and he's gone from being super grumpy to being ridiculously crazy insanely happy.

And nothing says you have to never work again if the mood takes you...

Main thing: tackle those expenses. Realize that they are what's keeping you from happiness and your kid. Spend some time reducing them and packing away savings.

Some suggested reading:
Your Money or your Life
Mr Money Mustache (I like this podcast specifically: http://www.listenmoneymatters.com/early ... -mustache/ )
thank you! you make some great points. i can definitely see my happiness rising exponentially if i wasnt working.
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