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.

I don't plan on doing nothing in 'retirement' - there are so many things that husband and I want to do, that we feel is wasted by being in a 9-5 job. it will feel amazing to have all that FU money (pardon the term) so that I could at least have the choice of packing it in and going down a different path if I wanted to. It scares me to think that I 'have' to work until 67... Which is what got me to thinking 'surely there is a better way'?

Most people whose salaries start increasing will increase their expenditure and lifestyle creep happens.. And all of a sudden they're locked into a huge mortgage, 3 cars in the drive, expensive ski holidays, holiday homes... Eating at nicer restaurants. Getting into more debt and locking themselves into a lifestyle that they are used to and would find it hard to pare back.

If I can avoid all of this whilst husband and I move up the career ladder in the next 10 or so years and pocket the difference (whilst still budgeting for fun) then that would be the ideal. At this point in my life, I need long term goals to work to so that I don't wake up at 60 and say... Crap, I need to work again today'.

Also, would love to spend more time with the kids when they're still young, and help them with homework etc and spend more time with the people that matter to me. And hopefully squeeze a little travel in there too!

Ah, the MMM thing. It's quite inspirational, I was very into it for a while. We earned same as you, and at 45 were mortgage free with a years gross salary stashed away on top. We both now work four days a week so we have more time, having decided that was more important to us than money, and now spend about half of what we earn, so are still accumulating, but more slowly. We don't have kids though, don't think we would have been able to do it if we did.

I think you either get FIRE or you don't.

For me, some of the posts on here about needing to have fulfilling work in your life, getting bored in retirement and being "lazy" to retire early, are absolutely bonkers. I cannot comprehend it.

I honestly cannot see why someone would work unless they had to. And if saving instead of spending means you can quit work earlier, then why wouldn't you?

Some of our friends are shocked that we have retired. They are planning to work as long as possible to keep up their lifestyle. They spend so much money, just because they work; money on clothes and cleaners and boxes of easy cook meals and constant treats and trips to cheer themselves up because they are fed up and exhausted. It's no way to live.

anxious I definitely agree about lifestyle inflation and it’s something I am consciously trying to avoid. I can see it happening in some places, but I’m hoping that because it’s a conscious decision and I’m early in my career that it won’t impact too much (e.g driving a 5 year old car instead of a 20 year old car - I’ll definitely pay for the depreciation but I just wanted something reliable).

Tinkly Cost to work is pretty major I think - once I add it up, I’m astonished at how much some of my colleagues are paying in cash to save some time because they have so little time left. I’ve made a conscious decision to go part time (pro rata over the year rather than a week) because although I want to retire (or semi retire) early, I don’t want to sacrifice my life while I do it.

I think you are missing how much you can control your own life but still work @anxiousplanner.

It doesn't have to be 3 cars, skiing hols etc.

I had my kids in my early 30s. I carried on teaching part time only because my DH travelled overseas a lot. Neither of us had family to do child care and 30 years ago current childcare options did not exist where we lived.

When I got to 50 I made a choice not to go back to teaching full time (which would have been a nice 2nd income as a full time job). I changed careers to something I'd dreamed of doing all my life.

I don't earn much as it's notoriously badly paid and I am also freelance. At the same time DH turned down higher roles in his company because he didn't want to travel 24/7 and be burnt out.

Having said that we have a good standard of living and a 6- figure income between us. We just aren't in the £500K a year bracket like some of my friends.

So the moral of this is you can work less but still earn, it's not black and white where you 'retire' at 40 (which is less than half your life expectancy).

I am partly defined by my work; it's who I am and I intend to work part time for as long as possible, because I want the mental stimulation, earning my own money is important for me, and there is loads of evidence that working keeps you younger and healthier as long as it's work you enjoy.

I'd also say that at 28 you may be surprised at how your ideas evolve as you get older. I for one would not have wanted to hand over childcare to anyone else and only worked very part time when my DCs were around.

MrsRinky yeah it was pretty inspirational, I do find him a little extreme in place (I will not be cycling everywhere - no thank you)
Congrats on finding a better balance and paying off the mortgage! What do you do with your extra time together?

@ Tinkly yeah I guess it is quite a mind blowing concept for most people - they're sold on one idea, as that is what everyone else is doing, and see things in black and white. A previous poster summed up that type of thinking nicely - to paraphrase - "retiring at 40 is something only Mark Zuckerberg or footballers can do"

Honestly, I get the 'find a career you love' but, but that kind of stuff takes time, to find and to retrain, and it still really depends on the people around you and you are still forced to go into the office everyday for a (potentially lower) paycheck.

If I suck it up for the next 10 or so years, I could be 'out' quicker. And when I say 'out' what I mean isn't to sit on my bum the entire day. And alongside my husband, we could do so much more together - the list is pages and pages long. With financial freedom, anything seems possible as you have something to fall back on.

@ etymology23 I think an upgrade from a 20 year car to a 5 year isn't that bad! So long as we're conscious of our decisions, and it's something that gives us joy. It's more the stuff around the edges that we don't need and doesn't bring happiness in a worthwhile way. I got a new kitchen fitted about 6 months ago, and it was worth every penny and brings joy Everytime I walk in, makes me excited to cook!

I know some people who are mortgage free and receive a pension from their first job at 50. They work in another job now and earn good money. They cannot access their state pension until 65+. Potentially they could live another 40 -50 years. So I assume they are used to a certain standard of living, enjoy working and are saving more for retirement. I think that you should over pay your mortgage and pay into a pension. You have not taken into account life events in your plan like illness, redundancy, splitting with your husband, repairs on house, replacement cars, hobbies etc

So you’re just going to’suck it up’ for the next 10 years, when your children are small (if you have them)?

You’ll never get those years back

The best solution to retiring early I have come across is joining the Police. Friend mine joined at 19. She'll be retiring next year on a full pension after 30 years service at 49. Need a bit of forethought that one though.

What I find depressing about your posts @anxiousplanner is that you don't appear to like your work. To earn £50K at 28 I assume you are a graduate, in the SE, and in finance, possibly law, or some IT role. That's quite a high salary at 28.

It's really odd that so early on in your working life you are saying you will 'suck it up'. My Dcs are a few years older than you and working really hard. Retirement is far from their minds .

I think you ought to find work you love. It would make more sense if you were posting about how could you find work that excited you.
I'd be really upset if my DCs age 29 and 31 were talking like you so early on after studying for years and weren't happy with work.

If you are really serious about 'retiring' you and your DH ought to head off to a financial advisor for advice because at the moment you are just musing and having a bit of a fantasy! There is no reality in it.

You really need to see a financial planner to work this out.

Also your calculations assume you and DH will be on the same salary forever which it may be hard to maintain. Also, your salary is a pre-DC salary and studies have shown that women are often at their 'maximum' income before they have children and because they either have to reduce their hours or get more flexible work, their salaries often drop post-DC. It's a very grim reality but something you really need to take into consideration.

Finally kids are WAY, WAY more expensive than you think they will be and they will rob you of your last penny. You need to put far more aside for DC than you are planning to.

Ok we are withn hairs breadth of being mortgage free, and DH retires in three years.
Our net is £5,200

We have for medical reasons only have one child, he is a money pit.

He is still at school and has causal work at the rugby club, so on the weeks where there is no work, I find mysef forking out for lawn mowing, dishwasher emptying, prom suit, provisional licence, we have about £600 saved for his driving lessons, but if that runs out we will have to help him out with that. He goes to college in September and we will have bus fares of £60 a month.

We can afford this, but it would never have occurred to me to factor things like the above in to my calculations when my DS was still an intangible.

Oh and we had to wait the best part of ten years for him.

There is a saying ............... Man plans, God laughs.

You can't 'retire' at 40 if you have 2 children under 10. Not retiring in the sense anyone understands it anyway. You will have a lot of responsibility (for them) and commitments.

To me it seems nuts to be planning in this kind of detail before you've even had your children (assuming you are lucky enough to do so). Children are the biggest life changer, not retirement. Why not stop trying to pin down your plans, live your life (and save your money or whatever you want to do), have children then see what feels right?

Most people (if they take time out of career) seem to want to be there as much as possible for their children before they are school age. An adult doesn't generally plan to be at home full-time when they, the adult, hit a particular age! They plan to be at home full-time (if they wish) based around their children's ages.

Don't understand your point of wanting to be home 'to do homework' with children aged around 10 if you have had to work non-stop until they are 10. It doesn't make sense.

I haven't worked since having children (12 years ago) and have no plans to go back to work. I am financially comfortable. But I'm not retired! But then 'retiring at 40' is a fairly meaningless phrase to me if children are involved.

Good point oven. My DM reckons she went back to work for a break from the DC.

This is interesting, I didn't know there was a name for this, 'FIRE' - lots of blogs on this topic which I've been looking at and a sub reddit. I think the focus would be more on the financial independence rather than retire early. The thing about money is it gives you choices so I think you are right to be planning and thinking about this now.

I have mostly done this without realising it! Due to personal circumstance really, DH diagnosed with chronic neurological condition when our DD was only 3 and a later redundancy gave great focus on income and expenses. We overpaid our mortgage using an offset account to be mortgage free at 49. We both paid into pensions for many years and both had ISAs for savings including tracker stocks and shares ISA. It seems sensible to use different ways of saving but for me there was a psychological benefit of knowing the house was paid for.

I do still work though quite part time, free time has been used for elderly care, teenager care and a course I'm doing which may lead to different employment. I did have a job I came to really dislike though it paid well so was happy to be able to leave when mortgage was paid off. I think sucking up a bit of short term pain for long term gain did work but at the most I did the job 4-5 years when I no longer enjoyed it even then it was compressed hours over 4 days so still some time for other things.

I mainly have points related to your potential DC.

If your parents are 60 now, they are going to be absolutely exhausted from running around after just one toddler, let alone more in their mid-late 60's. I have seen many grandparents so enthusiastic to give up their jobs or go part time so they can look after the grandchildren, they have all had to come back to work because they physically cannot do it which makes them so sad. You also need to think about the possibility that they will develop health problems and be unable to help, as well as the possibility that their care of your DC may be well below your standards, as happened in my case which took me and DH by surprise.

Childcare for 5 mornings (8-1) a week for my one DC is over £800 a month in the SE. This is reduced a little by tax free childcare but there's a cut off for that. He also requires food, clothes, toys, bedding, haircuts, safety equipment, etc.

The most important point is that you may not want to leave your DC and return to work full time. I was planning on returning full time when DC was a few months. Turns out that I couldn't stand the thought of not seeing him all day (less than 9 hours including commute, I assume your commute has you out of the house for longer). I was very tearful and angry and it made me incredibly possessive of him which was really bad for him. I now work mornings so that I can be with him in the afternoons and not miss out on this time, it's absolutely fascinating and worth more than any salary to me.

Erm, there is quite a lot of thinking to do about this and it's a good thing to have as a goal.

Drop me a PM and I can send you some links/book suggestions, etc. You're not actually alone in having this as a project. :-)

Hi, you sound like people who get things done so I am sure you'll be able to cope if your plans have to change or if you do indeed find your life taking a different direction. Your ambitions are great and I also believe living your life on our own terms is essential for good health and wellbeing.
My thoughts were that why don't you pay your mortgage off asap? Anyone I know or have heard aiming to retire etc early does this. And have good insurance policies!
Also, private school may be a good idea if you find the schools near you are not what you are expecting when the time comes to choose them. We live near several outstanding and good schools but I am still not really over the moon with them. Just personal feelings really. If I could afford private, I would. But it is definitely not an essential thing and you may only be able to make the decision when the time comes. If your future children need any additional support for schooling, again that may affect your decisions.
What about seeing a financial advisor or similar to help you plan..? Sorry if you've done this already.
Good luck!

I keep mulling this over in my head, so I am back.

We should have been mortgage free when we were 33 and 41 (me being the child bride ) his mother died and left us enough to clear the small ish mortgage, just about to do so when he was offered the proverbial offer you can't refuse and moved North to South and in doing so quadrupled our mortgage. It was great move, but set us back quite a bit financially, we have now recovered, but again always expect the unexpected.

I've googled FIRE but what's MMM? Google says it's a Ponzi scheme.

I think to retire is not what you want, but it is financial independence. I have that by keeping costs low- cheap area, smaller house. I can't retire but I could leave my job and take some time off if needed. This stemmed from being made redundant so much (5 times and I'm only 35) but it's a good feeling to not feel tied to my job.

I don't really want to waste money on financial planners - I think all the available information is out there, without paying the fees.

Honestly, I'm not looking to 'lock' down any of these numbers -obviously there are loads of factors and risks to take into consideration as people have raised in this thread.

I also haven't factored in any wage increases (they're pushing management path on me right now, but undecided if I want to pursue it) but SO has had a couple of promotions in his company, they seem to value him and he could easily jump into another position with £10-15k more, but he likes his job environment right now

• doesn't assume any pension income (i have a defined benefit pension)

• assumes that my credit card £400/month continues - actually this will end in 2 years (paying 0% interest)
• Assumes DH or I never collect any inheritance
• Assumes I never adjust spending to account for economic reality like a huge recession
• assumes I never earn any more money through part-time work or self-employment projects (which I said I'm more than open to doing - but on my own terms)
• Not taking into account income from side businesses

However, this is meant to be more of an initial 'first draft' plan, which I'll have to keep revisiting and reiterating for things I need to account for.

More than anything, I think it's important to have long term plans and a goal to aim for, that is realistic rather than an airy 'someday' approach. Maybe it's the accountant in me, but I need to be able to put numbers to things (even if they are only assumptions at first) so that husband and I feel in control of our life.

Being transparent and talking about money has so far served us well, and we can make more conscious decisions.

I don't actually hate my job - the people are pretty nice and the company has given me lots of opportunities. However I want to go to work because I WANT to go to work, and not because I need their paycheck. What if I wanted to start

Aiming to 'retire' or be financially independent gives me a choice - I think that's what people are finding difficult to understand.

The 4% rule of thumb is a well known thing in the FIRE community - here's tthe robust thinking behind it:

earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/

If my kids approached me and told me they were planning on retiring early because they wanted to pursue things that made them happy, and they were financially independent... I would personally be so proud of them. I know my parents are proud of me, that I'm thinking about this stuff early on.

That being said, I'm open to my plans/ideas changing as I have kids - I appreciate there is a lot more to it, as many people have mentioned, and I'm glad i made this post as it seems to have generated a good discussion!

LeghairDontcare

MMM is Mrmoneymoustache. He pretty much one or the main inspirations behind financial independence. He and his wife retired at 30 on a seemingly middle class income.

This is one of the posts that most people aiming for FIRE will have come across.
www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

Obviously there will be lots of other factors involved, but as a Base it's pretty good starting place.

The best solution to retiring early I have come across is joining the Police. Friend mine joined at 19. She'll be retiring next year on a full pension after 30 years service at 49. Need a bit of forethought that one though.

Irrelevant for new starters. Now the normal retirement age is 60, with an option to take a reduced pension at 55.

Thanks Bombardier, I did t know that. The only police officers I know socially are my kind of ages, 40s.