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.

You seem very clear in your own mind that this is the right approach for you. I'm not sure why you posted to be honest.

@ irregularegular

I'm clear that I want to pursue Financial Independence/retiring early

What I'm not so clear on, is what life will look like when I have kids, and all the risks and money pits around that, and how best to make financial independence work whilst having kids - I thought my plans could do with a bit of challenge & refinement (which is what people have provided). If I need to factor in more costs, then I would either need to burn more rubber early on to meet goals, or extend my 'independence' so to speak. Being told 'your plan is ridiculous, you might get hit by a bus tomorrow' is not helpful, but solutions and experiences are, especially if they help me realistically move closer to meeting my goal.

I engaged with 2 financial advisors last year, just for a free session. My main issue with both was their refusal to question the status quo.

I have a defined benefit pension (great!) and the advice was to stay in that scheme for as long as possible. I'm 35, I'm 99% sure that the scheme will be closed in the next 5-10 years. Likewise, state pension. I don't think I can rely on it being available in 2052 but both financial advisors insisted on factoring it in to pension predictions.

Things I'll be factoring in to my numbers

• private school not necessary, but dependent on neighbourhood and availability
• Cost of childcare - parents might not want to do this all the time, so will factor in just in case - loads of people have given me their ball-park numbers on costs
• Fun money - budget in holidays, eating out etc
• Budget in cost of teenagers as they grow up
• Potential want to go PT whilst working - for first few years
• Maybe move my mortgage to a shorter term for stability and peace of mjnd
• Factor in costs for University

..... And try to have fun and not be a misery along the way

leghairdontcare that's interesting, I didn't realise free advice was available. I might sign up just to see what they say.

But I've not heard great things about FA's as usually they're working on commission/likely to try and sell products not needed. I'm also on defined benefit, and that's likely to close down soon.

Out of interest , you seem to have a cushy job that pays you £50K and allows you time to spend a lot of your day on a forum asking for advice on how to retire at 40.

This is all pie in the sky.

If it were so simple, don't you think millions of couples who earn what you do would be doing the same?

What's missing as I said before is any real commitment to your current work- based only on what you have said- and your lack of desire to do something that aligns with your passions NOW not post 40. Don't you see that as a bit odd?

In our mid twenties, dh and I combined income was around £96k, £20k in savings, no kids. Over 20 yrs later, our joint income is slightly higher, 3 kids, some money in university fund, some in pension fund, massive mortgage. With one at uni at two more to go, I am not expecting to retire any time soon.

Kids changed literally everything. In order for me to work, we had to use childcare. For the childcare years, there was no spare money. If it didn’t go on childcare, it went on shoes, swimming lessons, school uniforms, babysitters etc. Dh and I aren’t ‘going out’ people - and other than a week on the Isle of Wight, we have taken the kids on holiday four times (they are 18,16,14 now). Our youngest was disabled at birth due to hypoxia and has brain damage. Her early years were also spent shelling out for physio and all sorts of extras. The ££££ trike etc.

I love the idea of retiring early, and thinking about it now is a good way to cement that mindset. It just seems to waste a life that you should be living, rather than deferring, especially with kids in the mix.
With dd at uni now, I’m finding myself sad about the places we didn’t take her - the things we didn’t do with her. And we were by no means strapping ourselves down with an unrealistic budget. I just wish we had opened her eyes more to the wonders of the world - definitely more travel.
I’m finding it kinda odd at 47 that your plan is to deliberately restrict travel and experiences for your kids do you and dh can do them on your own later. It all seems a bit... sad.

We have had financial advice from 3 FAs in the last 6 months as DH will retire soon and is deciding what to do with his pension pot (and me mine.)

We have not paid a penny. Two were giving a free hour of their time, but then take a % to manage the fund if we went ahead. The third was through our bank and is as impartial as they can be and, again has not charged anything, but will take a small percentage of our investment the same as any company will if you instruct them to manage a portfolio.

We haven't gone ahead yet with that but we have had a lot of free info which is why I've been quoting you the figures about what they said was a minimum amount on which to retire, living off around £35-40K a year. We worked out all our essential outgoings on a spread sheet, and then a bit over so we can enjoy life in our 60s without watching every penny.

It's not really pie in the sky though Queen. We have done it at 53 and put 2.5 kids through uni, plus factored in another 1.5 of uni, house deposits for them etc.

Yes we have earned well but we have friends who have earned at least as much if not more, with fewer kids who feel they have to work until their late sixties. Loads of people just spend their earnings on a super flash lifestyle.

Mamarylis I honestly think kids aren't that wowed about travelling and seeing the world when they are little. We camped all over Europe with our tribe and they remember things like great playgrounds and ice cream shops that sold 20 flavours. The wonders of the great cities and landscapes were wasted on them.

But now they are young adults and have inherited our thrifty ways, they save up and travel all the time (too much maybe) and they are able to really appreciate it.

And actually, when they were small I didn't work because child care costs made it uneconomical. And later we both worked from home. Yes we have been extremely fortunate in the lives we have led. But lots of it has been down to our own choices. And other people make different choices.

queen this is quite a balanced article on the pros and cons of commuting final salary pensions. It gives the other side to the advice you have had. The Op is a well paid professional accountant and so, on paper at least, ought to be as well equipped to make these judgements as a financial adviser.

www.telegraph.co.uk/finance/personalfinance/pensions/11471566/Why-your-final-salary-pension-cash-could-be-twice-as-valuable-as-other-peoples.html

I think it’s a great goal but your numbers are far too optimistic. 7% return is not realistic long term, and your child related costs are likely to be much higher. You’re underestimating the corroding effect of inflation and have little or no contingency for major life events such as chronic illness, children with special needs, prolonged recession etc

No reason not to aim for the early retirement, that’s what we are aiming for too. However your current plans are likely to result in a short, very frugal working life, followed a long, very frugal retirement.

I am on track to retiring at 50-ish (in 40s now) however we have no mortgage, no more schools fees by then and much more invested than you are planning. My husband plans to keep on working part time as well.

You need that mortgage gone ASAP and not upgrade your home to have any chance of making this work, and even then I think you’ll struggle.

I haven't gone into all the detail of your projected figures, because I know that is all 'imagination' at this point.
When I was 28, and pre-dc, I thought very differently from how I feel now.

As so many others have said, life just isn't that black and white. You seem to have removed any emotion from your planning.
The decisions you take, the things you actually want to do, are likely to be very different when you have dc.
Of course, some people can't have dc. Some people end up with quads. Some people's dc have such complex needs it changes lives totally. Some people do have the 2 they plan and decide actually they'd like another. Some people have one and find they can't bear the idea of going back to work. Some people go back to work and actually find they'd rather be PT, or get a job with less stress, or a shorter commute, or less travel, or whatever.
You can't predict any of this.
I think you might want to 'think' about everything you are thinking about, but relax a little about the detail. Be aware all sorts of things change.
Even if you were an automaton with no emotions, things change like the level of taxes, NI, Personal allowance. Things like University Fees being introduced after our dc were born. House price. All sorts of things to do with the economy. Who knows what will change in the next 15 years.

Yes I think the main thing is reassessing how much children cost (a lot) and also what you want to give them

The vast majority of your plan hinges on your parents and his helping you; what plans do you want to do for your children. Will you want to offer than the same thing, will you want to help them through life and University (v expensive), help them with a deposit in life. Because none of that is there.

Now not all parents want to do that - but in your plans to do so yours are so vital it seems harsh that you would take from your parents and not give to yours.

A 3 bed semi seems big for 2 - will it for 4, will you want to extend or move up first

And do you realistically want to work full time through the early years and miss out on all of that.

Just to go slightly off course, where is anyone investing that is getting them a constant 7% return even with a crazy high risk?

Hodge according to bbcbusiness this morning the CoE aims for 9%, got 17% last year and 7% this year.

www.churchofengland.org/more/media-centre/news/church-commissioners-announce-return-71-investments-2017

Even lowly FTSE trackers have been in this ballpark for the past decade.

Thanks howabout. I guess it might help having a big enough pile of savings to invest in a diversified portfolio, eh? ;)

Agreed Hodge. That's why I think the Op should keep up to a year's living expenses in cash, pay off the credit card and the mortgage and then think about building an investment portfolio. That pushes out the timeframe somewhat though.

I'm 35 and also planning for FIRE. Do you have pensions as well as the ISAs? If so then you might feel able to take more than 4%. I'm thinking about aiming for a 500k pot for financial freedom/job downsizing from age 45, but we'll have pension pots too and will be able to deplete the 500k a fair bit if we choose to. Obviously the pension pots will need to be a certain size too at that point.

As others have mentioned you do need to factor in inflation, but pay rises should mitigate this.

I think you could do better than index-linked funds and bonds. Why not take more risk now and put 100% in the stock market and move into bonds later. I hold a number of unit trusts and investment funds with good track records, not all UK based. You could do your own research or take financial advice.

I'm also getting interested in social investing but that's an aside.

@Tinklylittlelaugh

Retiring at 53 is very different from 40.

We know people who retired in their early 50s but TBH most of them didn't enjoy work.

At the moment both me and DH enjoy work; it's not seen as a 'chore' and indeed DH may carry on working p/t post 65 if he's fit and healthy. In fact neither of us 'believe' in retirement as such because it's readily acknowledged that working can be really beneficial for health and mental health. The key is to enjoy work so it's more like being paid for doing your hobby, rather than seeing work as a bind or treadmill to escape from.

@Howabout Thanks for the link to the TG- I've seen it already, and we are decided now on what to do.

This article on the Mad Fientist is very interesting in terms of whether to aim for the big pot of money or try to balance with living life now.

www.madfientist.com/hierarchy-of-financial-needs/

MMM is also good on the topic of whether DC have to cost a lot of money or not.

aw yay, I've not met a FIRE-r on MN before!

our plan is 50 though.

I think the figures look fine but need adjusting for emergencies and major house repairs - the unfortunate shit.

however, you have more for the DC each month than many people so you could probably adjust that? I take it you are planning on doing without all the coffee, food deliveries, plastic goods etc?

Our calcs are partly based on moving out of London so there's less certainty for us - I think your plan looks pretty good. Also you are planning to still earn some money as well.

oh and just to say we absolutely would have retired at 40 if possible. I completely relate to wanting to do that.

something else you might want to factor in is private health - I think there's a real possibility of at least part privatisation of the NHS quite soon myself.

I didn’t have my child until I was 40 and we spent most of our savings on the Ivf to get him
I wouldn’t want to have to skimp on things for him, so we both work so we can enjoy life to the full with him and have the freedom to do what we want. We could in the next 5 years decide to scale work back a bit as we head to 50 but I want to take the child skiing I want to visit cool places with him and for that I need more income!

TinklyLittleLaugh "We camped all over Europe with our tribe and they remember things like great playgrounds and ice cream shops that sold 20 flavours"

this made me lol. Obviously every child is different but my parents were the type who wanted to go away every year, fill the weekend with activities...I hated it.

I think there's a lot to be said for waiting for a child to be old enough to be able to say "I quite fancy doing this" rather than just being taken along.