Did you change your IPS when you discovered you were going to have kids?

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BuckyBadger
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Did you change your IPS when you discovered you were going to have kids?

Post by BuckyBadger » Fri Jan 19, 2018 12:44 pm

We have an IPS - I've had it written for several years.



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But I'm wondering if I need to rewrite it now that we've discovered that we're going to have a kid.



We will do some budget cuts to trim the fat inherent in our DINK lifestyle. Also planning on starting a 529. Not sure yet if we'll be able to manage to maintain the savings level that we've set as a goal. Of our overall savings, most of it is tax advantaged. Only about $15k yearly is in a taxable account.



I'm wondering if I should maintain the goal of maxing out tax advantaged accounts (2xRoth, 1xHSA, 403b, 401k, plus company matches all come to about $78k per year, so that would be our savings baseline) but then just put what we were putting into taxable into a 529?



Or do we push to maintain the same level of savings and make everything up via budget cuts and maintain that as long as we can until we're forced by increasing kid costs to rethink things? I know kids CAN be super cheap, but I'm not planning on this one being that! Daycare, possibly private school, camps, sports and activities - if this kid gets interested in half as much stuff as my husband and I are it's going to cost a bit of money!



What did you bogleheads do when you became parents? How did you change your future plans?



Thanks for anything you guys can add! Maybe examples of your own ISPs with kids included?



(ETA Current assets just shy of $1mil, ages 37 and 38, yearly gross just shy of $300k, ~$280k left on a ~$500k house.)

Johnny Thinwallet
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by Johnny Thinwallet » Fri Jan 19, 2018 1:45 pm

We have a seven month old son born last summer. No IPS changes for us once we found out when we were pregnant nor after our son was born. And likewise, we made no changes in the amount of money we were saving in retirement accounts.

For all baby expenses and 529 contributions, we just reduced the amount we save into taxable/cash. The key items for us, though, is that we have free daycare (grandparents) and we only contribute $2k per year into a 529 for the state tax deduction. The biggest expense last year by far was healthcare as we hit our family OOP max due to labor and delivery, but our HSA assisted with that.

For future expenses as he gets older, such as sports, activities, etc., we'll just cross that bridge when we get to it.

e5116
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by e5116 » Fri Jan 19, 2018 3:24 pm

First, congrats! It's quite an adventure.

Only change I made is to dedicate money for college education, but, in general, I had already thought about that in our plan since I knew we would have kids eventually. Daycare costs are certainly a lot, but fortunately for us, we had salary raises that year that amounted to about the same cost, so were able to keep taxable and retirement savings the same. Given that you only save $15k in taxable, might need to re-allocate some retirement contributions to taxable, but that depends on how much you already have saved in taxable which sounds like it's a lot considering your total portfolio is almost $1M. So, I probably wouldn't change much except adjust it to ensure you have enough for college education (assuming you want to fund that for your children) although some just cash flow it if able to do so.
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But, yes, going out and nice dinners get replaced by kids clothes, toys, diapers, etc. So, it's a re-allocation of funds that happens organically in some capacity.

Grt2bOutdoors
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by Grt2bOutdoors » Fri Jan 19, 2018 4:11 pm

Included a line to fund X years of state flagship university costs by age 18. Based on child academic progression, and if funds are available, increase to cover X years of more selective schools.

Now that you are expecting, increase your life insurance coverage for both husband/wife.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

youngpleb
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by youngpleb » Fri Jan 19, 2018 4:51 pm

I don't have kids yet, but mine will change when I do because I'm going to open a 529 for them to help with future college endeavors.

Benton Bair
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by Benton Bair » Fri Jan 19, 2018 9:49 pm

youngpleb wrote:
Fri Jan 19, 2018 4:51 pm
I don't have kids yet, but mine will change when I do because I'm going to open a 529 for them to help with future college endeavors.
I wonder how much longer this current education model can continue? Costs have increased to the level where loans are strangling opportunities to pursue noneconomic trials after graduation. It's 5 years for undergraduate and post is how many more before any serious money must be earned to pay back school loans. With the uncertain cost increases how can anyone plan for education, retirement and live along the way? Consumer consumption is being squeezed now and that's what drives 2/3 of US economic activity.

These issues will need to be reconsidered in view of the requirements for higher performance in an ever more automated economy. My hunch is the next 30 years will change at a faster pace than the preceding 30 years. Social organization must evolve differently or there's conflict ahead.

schwank
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by schwank » Sat Jan 20, 2018 5:45 pm

Our daughter was born in 2015 when we were roughly the same age and financial status. I bumped our planned retirement age from 55 to 60 to allow for additional accumulation in the face of anticipated education and other costs. We also do a bit less DINK type activities these days saving some cash flow, but that likely changes as she gets older and we spend on kids activities.

I'm not using a 529 yet as I prefer the flexibility of unencumbered funds, and we offer 2 years of CC in our state for free. I may fund one over the next few years but probably no more than 75K or so. We hold equities in a separate Fidelity acct for that purpose under only our names. Not likely we'll qualify for need-based aid based in any case.

Thata a conservative plan though, we may still be able to retire earlier depending on equity returns over the next 20 years. We use a more aggressive strategy though, only about 10% bonds. That has not changed at all due to having a child.

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White Coat Investor
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by White Coat Investor » Sat Jan 20, 2018 7:02 pm

I'm impressed you had an IPS before you had kids. I think that's actually pretty rare.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

BuckyBadger
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Re: Did you change your IPS when you discovered you were going to have kids?

Post by BuckyBadger » Sat Jan 20, 2018 8:42 pm

White Coat Investor wrote:
Sat Jan 20, 2018 7:02 pm
I'm impressed you had an IPS before you had kids. I think that's actually pretty rare.
All thanks to this board, I assure you! I was always inclined to this investing theory but this board is where it really crystalized for me.

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