Retirement planning with a large family

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SilverGirl
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Retirement planning with a large family

Post by SilverGirl » Sun Jan 12, 2020 3:17 pm

I feel like some of the advice doesn’t apply. Maybe I just hope it doesn’t apply. Even with maxing out a 401k and then saving 15-20k per year in Taxable, we are saving a little bit less than 10 percent of our gross income. Bad, right?

But right now we are supporting six kids and they all play club soccer and they eat a lot and have expensive birthday parties (our choice, we are enjoying life). I feel like our expenses will drop dramatically in retirement, am I kidding myself? We will travel to visit them, if they move far, but other than that, we have simple tastes and spend little on ourselves.

How do those of you with a lot of kids take that into account with regard to retirement savings? Instead of saving a percent of income I think we should be targeting our current expenses subtracting out the high cost of parenting. Does this sound right?

Perkunas
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Re: Retirement planning with a large family

Post by Perkunas » Sun Jan 12, 2020 3:21 pm

A common rule of thumb is to try to save 25x your estimated annual retirement expenses.

And as you indicated, a general estimate of your annual retirement spending would be to take your current spending and reduce it by the expenses that will disappear as the children move out: club soccer, grocery bill, mortgage?, etc.

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RickBoglehead
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Re: Retirement planning with a large family

Post by RickBoglehead » Sun Jan 12, 2020 3:22 pm

SilverGirl wrote:
Sun Jan 12, 2020 3:17 pm
I feel like some of the advice doesn’t apply. Maybe I just hope it doesn’t apply. Even with maxing out a 401k and then saving 15-20k per year in Taxable, we are saving a little bit less than 10 percent of our gross income. Bad, right?

But right now we are supporting six kids and they all play club soccer and they eat a lot and have expensive birthday parties (our choice, we are enjoying life). I feel like our expenses will drop dramatically in retirement, am I kidding myself? We will travel to visit them, if they move far, but other than that, we have simple tastes and spend little on ourselves.

How do those of you with a lot of kids take that into account with regard to retirement savings? Instead of saving a percent of income I think we should be targeting our current expenses subtracting out the high cost of parenting. Does this sound right?
Current expenses are irrelevant. Forecast your future expenses, when retired.

Percent of income is Irrelevant, regardless of number of kids.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

Topic Author
SilverGirl
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Re: Retirement planning with a large family

Post by SilverGirl » Sun Jan 12, 2020 3:26 pm

Ok I feel better. My thinking seems correct. So why do I often read on here to save x percent of your income if it isn’t relevant regardless of the number of kids? I’ve been a little worried about it.

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JoeRetire
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Re: Retirement planning with a large family

Post by JoeRetire » Sun Jan 12, 2020 3:26 pm

SilverGirl wrote:
Sun Jan 12, 2020 3:17 pm
I feel like some of the advice doesn’t apply. Maybe I just hope it doesn’t apply. Even with maxing out a 401k and then saving 15-20k per year in Taxable, we are saving a little bit less than 10 percent of our gross income. Bad, right?
(shrug)

10% may be sufficient, or it may be too little. It depends on the dollars being saved compared to your goals.

Are you maxing out a single 401k? Or two?
What is your estimate for annual expenses once in retirement? How does that compare to what you are actually saving?
At what age are you expecting to retire?

10% may be sufficient, or it may be too little.
I feel like our expenses will drop dramatically in retirement, am I kidding myself?
Only you can know that. And you may need to wait a while to determine what your expenses will be once you are empty nesters.
Instead of saving a percent of income I think we should be targeting our current expenses subtracting out the high cost of parenting. Does this sound right?
Maybe. Depends on your goals.
Very Stable Genius

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JoeRetire
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Re: Retirement planning with a large family

Post by JoeRetire » Sun Jan 12, 2020 3:27 pm

SilverGirl wrote:
Sun Jan 12, 2020 3:26 pm
Ok I feel better. My thinking seems correct. So why do I often read on here to save x percent of your income if it isn’t relevant regardless of the number of kids? I’ve been a little worried about it.
People like simplicity - "save 15%". Nuance is difficult for some.

The only correct answer to an overly-simple question like "How much should I save?" is "It depends".
Very Stable Genius

Naismith
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Re: Retirement planning with a large family

Post by Naismith » Sun Jan 12, 2020 4:43 pm

I guess it depends on the ages of your kids, but for us (with only five children), we found there was about a 17-year gap between when the youngest were in school (allowing me part-time employment with minimal child-care expenses) and when we wanted to retire.

During those years, I put most of my salary into 403b, 457 and Roth IRAs.

It is not as efficient as saving when younger, but it got the job done, at a time of life that it was easier for me to focus on career.

We gave our marching band daughter the use of my car (which saved on the constant activity driving), and I rode a bicycle to my office (which saved on trips to the gym).

We all have unique lives, families, and methods of saving.

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Horton
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Re: Retirement planning with a large family

Post by Horton » Sun Jan 12, 2020 4:49 pm

You should read this article. It is based on the concepts of "economies of shared living" and "per adult/individual living standard".

Some excerpts:
When we have children we voluntarily reduce our adult standard of living so we can raise the kids. Since our adult standard of living is lower than it would otherwise be, we don’t need to replace as much income at retirement.
We could figure this out by using actual estimates--- you can get them by Googling “cost of raising a child” or by checking the links below.

But let’s try a simpler method.

I call it the “N” factor. While there is a great deal of research on how the size and age of a household affects its cost of living, a simple algorithm comes pretty close.

Here’s the algorithm: The cost of living for a household is the square root of the number of people in the household. So if you are single, your cost of living is the square root of 1 or… 1.

But if you are recently married, your cost of living is the square root of 2, or 1.414.
Using the “N” factor, your cost of living with one child is the square root of 3, or 1.73. Have a second child and your cost of living is the square root of 4, or 2.

So how much of your cost of living is accounted for by having two children?
Answer: About 30 percent. You and your spouse account for the other 70 percent of your cost of living.
Using this rule of thumb, about 50% of your current cost of living (square root of 2/8) is attributable to your children.The true number may be higher or lower, but it at least gives you an idea.

MaxiFi is an online retirement planning tool that takes this into account. You may want to try it out.

Broken Man 1999
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Re: Retirement planning with a large family

Post by Broken Man 1999 » Sun Jan 12, 2020 4:53 pm

JoeRetire wrote:
Sun Jan 12, 2020 3:27 pm
SilverGirl wrote:
Sun Jan 12, 2020 3:26 pm
Ok I feel better. My thinking seems correct. So why do I often read on here to save x percent of your income if it isn’t relevant regardless of the number of kids? I’ve been a little worried about it.
People like simplicity - "save 15%". Nuance is difficult for some.

The only correct answer to an overly-simple question like "How much should I save?" is "It depends".
Exactly!

Most of the questions asked/discussed here should be answered "it depends".

Way too many variables for declarative statements to be of much use.

Bogleheads are a diverse group, meaning there are few simple answers that fit all situations.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Goal33
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Re: Retirement planning with a large family

Post by Goal33 » Sun Jan 12, 2020 5:41 pm

Agree with other posts that projected expenses is what’s relevant.

But I think you need to cut current expenses otherwise there will always be an excuse. How about 6 college educations, weddings, and down payments? Grandkids? It never ends and there’s always something else to spend on
A man with one watch always knows what time it is; a man with two watches is never sure.

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RickBoglehead
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Re: Retirement planning with a large family

Post by RickBoglehead » Sun Jan 12, 2020 5:46 pm

SilverGirl wrote:
Sun Jan 12, 2020 3:26 pm
Ok I feel better. My thinking seems correct. So why do I often read on here to save x percent of your income if it isn’t relevant regardless of the number of kids? I’ve been a little worried about it.
1) Because people need simplicity. Too many can't think beyond a basic tenet.

2) Because many have no clue what they actually spend. Some people will make a list of expenses, then when you go through their actual expenses it turns out they are off by a significant amount. I have a relative that will tell friends she lives on $75,000 a year, but she actually lives on 50% more than that, and it increases by 10% a year. Has no clue.

3) My suggestion - track your actual expenditures in something like Quicken. Then, after you have a year's worth of data, sit down and create a report and remove non-retirement things, add in retirement things, etc.

What is near impossible for you are things like:

a) What will our food budget be with just my husband and I?

b) How much will we spend on dining out when we're retired?

c) What about travel?
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

Scooter57
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Re: Retirement planning with a large family

Post by Scooter57 » Mon Jan 13, 2020 12:20 pm

A lot of your answer depends on your kids.

I am in my 70s and have several friends my age who are STILL supporting kids in their 30s. These are kids they put through expensive, prestigious universities. Some of the kids have mental health issues that they have been allowed to use as excuses for not working. Some have attempted careers they aren't suited to. Those parents are having some very stressful retirements, despite having worked very hard all their lives and saved. Some are still working very hard in their mid 70s just to keep everyone from being homeless.

I have also known people my age who saved not a dime and retired way too early get rescued by kids who succeeded against the odds (without parental support) or married into money. I also know a family who had as many kids as you did, didn't have much money ever, but gave the kids an extremely happy home where material goods were not what made for treats but lots of time was spent taking the kids on treks into nature, spending time with pets, etc, etc. They kids take very good care of their parents, despite not being particularly well off themselves, and the parents are among the most happy people of our age I have ever known--living only on a modest social security check.

You have no way of knowing what the job market will be like after your kids have all left home. A depression could make you unemployable. So could an unexpected disease or accident. So it might be prudent to increase your savings now, even if it means giving up some of the treats now. If you end up in great shape when the kids are gone, you will have more money to indulge in more treats.

Also, I would suggest that you do all you can to keep your kids from running up college debt. Make them work for a few years before they go to college, so they can get their partying out of the way and get a better idea of what they really want to do as adults. Urge them to go to State colleges, not snob schools, as if they are good at what they do, they can get full freight in high quality grad schools that way, without the debt.

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