Retiring at 40 ,with 2 kids... is this possible without sacrificing too much?

[anxiousplanner]

Husband (31m) and I (28F) will be trying for our first baby soon. Plan is to have 2 kids, fairly close in age.

Recently I've become a little 'obsessed' with the idea of financial independence/retiring early. A huge part of me feels like there is more to life than working, having children and retiring at 67 (or even 55, which still feels depressing). Hanging on to this idea currently gives me hope, but I'm aware that I'm just looking for a way to escape.

Husband and I are in a good financial position with relatively well paid jobs for our age, and I feel like as we are still fairly young we have options, but struggling to know what the right thing to do (for us and future family) is.

Financial details:
Household gross income c£100k (Husband earns £55-60k, I earn £50k)
Salary net of tax/NI & pension & rail fair is £5400/month

£160k mortgage on a 3 bedroom semi in SE of England
Mortgage is 30 year term, £600/month payment
Other monthly bills (incl gym £120, council tax £150, tv £70, phone/internet £60 , mobiles £60, insurance/adhoc £40, gas&elect £90, credit card £400

So total monthly commitments is £1,590

Petrol & groceries about £400-600

So total outgoings including food is currently c£2200

Leaving £3,200 as disposable income/savings

Husband and I are agreed that we are not going to chase having a bigger house/car/keeping up with the Jones' if it means that we get to have some freedom when we're relatively young and have the energy to travel when we retire.

If I assume that having a child/children will cost about an additional £500- £700 per month, then that leaves £2500 to save every month.

If we decide not to send them to private school in the next 10 years, then a saving of £2500 per month would give me about £650k of cash by the time I'm 40 (7% stock market rate).

If we were to retire at 40, and withdraw 4% of this year on year then we would have about £26k of interest income = c£2200/month which is our current expenses and standard of living.

Basically.... what do you think of this life plan? Am I missing anything here? Will our kids be missing out a lot if they don't go to private school (as we could afford to send them there but then would not have savings). Planning on bringing them up with learning the value of money, so don't want to give them everything.

Right now I just feel like I'm at a crossroads, and whatever path I take now will determine my future, and it's a little scary but also exciting if I can pull off early retirement. I just want to know how I can balance everything to get the best of both worlds (realising that I am in this very fortunate position I don't want to waste it).

Any thoughts on what you would do if you were in my position would be great, and any advice or insights on things I may have missed would be appreciated.

4% on rental is pretty doable round here. Bought my house for £122k, have spent about £4k doing it up. Round up to £130k for the sake of making sure everything was done totally properly, and to cover the bits I haven’t done yet like new internal doors.

Rental on a house like this here is approx £550-£600 a month. Go at the lower end for prudence. £6600 a year income. 5% income on capital invested. Take away a grand in maintenance costs a year (should be less) and assume you self manage, and 4% is pretty doable there. In fact you can spend up to £1400 on maintenance and still hit 4%.

Wow, love that there’s so much interest around this topic still, and that more FIRE’rs have popped up. I’ve read some pretty inspiring stuff - please do keep sharing!

To the poster that suggested creating a FIRE section in MN - that’s an amazing idea, I would love to be able to have more of a discussion about it/share tips etc outside of this thread!
My interpretation of FIRE is that It's all about getting to a place where you can have options to live the life you want, and be the happiest you can be. We only have one life, and there's so much of it to live and see and do! if I manage to reach that point in my life through just being smarter with how I spend and save my money, then there's not much to lose, but SO much I could gain.

Contrary to what some people might think in this thread - I don’t hate my life, I don’t Hate my job.. and I do make time and do plan to spend some money having fun now and in the future (though i don’t necessarily believe that I need to be taking my future children on holidays when they’re young). It just doesn't have to cost the world. My childhood was poor but I was rich in love and happiness, and it made me the frugal person I am today (which I think is a gift in itself).

I studied really hard, and invested a long time to get to where I am so I don’t think I’ll be planning on changing careers and risking the salary anytime soon - that’s what financial independence is for, in my mind anyway!

I do plan on mat leave when I’m pregnant - SO and I are planning shared leave if we're fortunate enough to have a baby soon. I could opt for part time, if I felt strongly about it.

@Queen - to answer your question - I’m a strong believer in helping out family. I would love to be able to help my future kids. If I become financially independent young (not gonna use the 'R' word as that it seems to be quite controversial - ha!), then I will have had loads of 'my time' anyway. In my culture, the grandparents help lots with childcare. I could also expect my parents to move in with me when they are very old so we can be a closer unit. Family helps family. Though I’m fortunate in that my parents have made a lot of money for themselves, retired a while ago and won’t require any financial help as they get older.

P.s... I’m not some cold hearted machine that plans to churn out kids just to tick them off my list but I guess it’s hard to judge personality over a few paragraphs over the internet!

OK OK all - point taken on my mortgage!

I might stick at overpaying' into my S&S ISA for a bit longer (maybe 5 years or so) and then payoff lots of mortgage. We'll see!

@ Etymology23 I did look into about putting money into rental property, but did the calcs and found that the tax relief changes and stamp duty would really eat into any return. On top of that is time, vacancy rate, any fees and maintenance made it unfeasible (for me anyway). I guess it's ok if you have a huge pile of cash lying around!

Also, someone mentioned they have a recommendation to speak to someone famous in the FI community - link me up please!
(Is it Escape artist?)

Anxious - I’m an accountant too and definitely agree that if you’re making more on s and s than you pay in interest it makes sense to leave it on the mortgage, with interest rates so low.

I also agree totally about FIRE - to me, and I think commonly in the FIRE sphere, retiring early doesn’t mean never working. It means having the capacity to take risks. To do a job you love for no money or little money instead of that meaning that you’re scraping by and unable to save for the future.

I’m trying to balance my savings with living my life now - I went part time a year into my career. Accounting is well paid, stable and fairly interesting - I don’t hate my job either. I don’t like the hours and will be moving to somewhere more “life friendly” in the near future. But ultimately I’d rather have stability now and freedom in the future than a job I love now and struggle now, in the future and in my old age. I too would love to have plenty of time to give back: working at the CAB, volunteering for charity, helping my kids.

The concept of FIRE also keeps me grounded. I see people doing flashy expensive things and it’s easy to get sucked in. But primarily it’s time that makes me happy. Not flashy things.

And yes I agree only viable with cash and capacity to self manage and v location dependent, but does have an audience of investors for whom it makes a good option as part of a portfolio.

Yep pretty much what Etymology said. We have a house we make more than 4% though because we bought it about ten years ago. We were looking at buying a student house in the city where our daughter studies and the figures stack up pretty well.

Have to bear in mind that they are building masses of private student halls everywhere. But buying a house on the edge of a gentrified area is a reasonable idea.

Houses that are basically student type houses but much smarter, for young professionals, is also something we have looked at.

I think your forward planning is great and saving hard now can only give you more options in the future.

£650k doesnt sound like a lot to me for 50 years of living and I'm not sure about relying on a 7% annual return. but I am no expert and perhaps it would give you enough of a cushion to downsize your job even if not retire.

Good luck! I would be interested in updates 😊

I've heard it said you need a significant cash pot alongside your investments so that you can pull down the cash in those years your investments don't make the return to avoid burning your capital. But I'm no expert!

Haven't read the whole thread sorry but agree you wouldn't be able to "retire" as such but you sound like your in greats jobs earning very well and are good at saving with no desire to keep up with the joneses as you say so I can well imagine that in the future you could definitely afford to work less and have more free time / travel etc

Just remember to live a little in the meantime though ( I say this as a someone who has always saved )

I get it, OP. I'm also a big fan of MMM ; also Monevator and the MSE forums.

We've done similar - a bit older than you though. Once we had £200k each in SIPPs and S&S ISAs, we quit our full time jobs at age 45.

We don't actually touch that £400k - we've left it to accumulate and grow. We consider ourselves 'semi retired' and we live off various bits of income we bring in such as:

• Use our home for film and TV filming and photo shoots
• Rent out a small holiday cottage
• I do odd bits of proofreading work
• My husband does occasional handyman work
• We sometimes take on temporary work in the summer or at Christmas, e.g. we've worked in book shops, garden centres and museums.

We also bought a run down house and spent 6 months doing it up ourselves, then sold it on. We learnt things like plastering, decorating and basic DIY as we went along.

We have a lot of free time to ourselves and everything we do to earn money is transient/ad hoc, so we don't feel like we're on that daily 9-5 Mon-Fri grind. We often have months at a time where we're not working at all. We love this way of living. If we don't earn enough one year then we just do a little extra work the next, or if we earn more one year than we need, then it gets invested into our growing pot.

We were actually massively in debt in our 30s - we owed £40k on credit cards and nearly lost our house. We started reading the debt forums on MSE and got into money saving in a big way to get out of debt. And we never really lost that mind set once we were debt free - we just transferred it to investing and saving instead.

That's really interesting MinnieandCharlie. Your life sounds varied and with that all important feeling of freedom. Sounds great!

Could I ask if you have children in the mix too? And if so, what age were they when you both quit your full-time jobs? Just asking because it's the OP's (as yet hypothetical) children who would be around the 10 year old mark when they are planning to 'retire' and I have struggled to see how you can be both: a parent of school-age children and have this financial independence/ personal freedom. To me, children have meant the opposite!

No, to be fair we don't have children - just dogs and cats - so I can't say whether we'd have been able to do the same if we'd had children. Maybe, if we hadn't wasted so much money in debt?

I believe it's still possible though - MMM and his wife left their full time jobs and had a baby at the same time, and I imagine this is where OP gets her inspiration from.

@MinnieandCharlie

With respect, you are not exactly retired! You have property rented out, (so 2 homes), do quite a lot of work, and don't have any family.

I see it's not regular work, but holiday homes can bring in a reasonable income , then there is your other sporadic work on top of that.

Most people don't have £500 in the bank (recent surveys) so you really are in a different league to most people.

Minnie I am desperate to know how you managed to get out of £40k debt and retire a decade later with enough to buy several houses! Did you win the lottery?!

QueenoftheNights I never said I was retired - I said I considered myself "semi-retired". And I'd disagree that we do "quite a lot of work": we do odd bits here and there, and as I said, we often don't work for months at a time. "A lot of work", to me anyway, is full time hours.

And saying that I'm in a different league to most people - we'll to be fair I didn't say I was the same as everyone else. I just did things differently to a lot of other people is all.

We were earning around £35k each before we gave up our jobs, but once we were debt free, we didn't increase our outgoings - we just ploughed that money into investing and saving instead. We lived fairly frugally following the tips from the 'debt-free wannabe forum on MSE and 'old style money saving' forum. We had to, or we'd have lost our home at the peak of our debt. By the time we were out of debt, money saving was so ingrained in us that we just carried on.

Oh and saying we have several houses sounds much grander than reality We have the home we live in & we bought a very small run down cheap holiday home with a mortgage while we still worked full time. We did it up ourselves cheaply and now we rent it out enough that it covers the costs and gives us a small income.

The other house we did up and sold on was also a cheap property - but we sold that one.

Minnie: No, to be fair we don't have children - just dogs and cats - so I can't say whether we'd have been able to do the same if we'd had children.

You wouldn't be able to with children. My contemporaries who are able to retire before 50 all do not have children.

The blog referred to on this thread, MMM, is written by a couple who retired aged 30 with a child. But I'll defer on that one as I don't have children myself to comment

As someone with 2 children of the age that the OP's magic-ed-up- close- in-age children will be when she retires, I stand by my statement. Dh and I will be able to retire today if we did not have children.

I guess with kids you tend to decide to take some of that "retirement" time sooner, by working a bit less between the two of you rather than a lot less later on? I know a few women with school age kids who live a little like Minnie while their DP works more traditionally.
Once you have decided that you'd rather have time than shiny things, you can do that for the sake of kids too!

MessySurfaces that is a good point and a connection I did not draw. OP is just describing some of the little jobs or very pt jobs that the SAHP or second earner does whilst the other partner continues on the more conventional track. Call it early retirement by one parent or SAHM-dom. That makes more sense than FIRE with 2 dcs.

The blog referred to on this thread, MMM, is written by a couple who retired aged 30 with a child. Yes but they had the child after reaching 'financial independence'. They already had two houses (one rented out covering housing costs on both homes) and $800,000 invested here. The OP's plan seems to be to do the saving whilst having young children. Perhaps that'll work but it'll be much harder for all of the reasons already mentioned here. It's very difficult to both work all out in high paying jobs when you have children even if you are lucky enough to have all child care covered for free by relatives (which might not work out in practice). It's also much more difficult to be radically frugal with a child. E.g. we found it quite easy not to have a car before children but much harder to rely on cycling and walking once they arrived (of course in some areas this might be fine but not where we live). It's one thing to be very restrictive of your own comfort and pleasure but much harder to decide to do that to your child when you don't have to. That's without all the uncertainty that comes with having children (will you want to reduce work, will they have additional needs that require you to do so etc).

Just as an aside, MMM, like a lot of the people blogging on this, comes from the USA, though I appreciate there are some in the UK. I wonder whether the lack of safety net in the USA makes it much more appealing there and how the relative earnings/living costs/tax regimes etc impact on how easy it is.

One child is also much less expensive than 2. And a baby (without childcare cost) is very very much cheaper than a teen.