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.

OP I think your plans sound great, just sodding go for it!

My husband and I will be in a position to retire at the ages of 45 and 47 - house paid off, pensions sorted, healthy amount of savings. We're not going to wait to travel the world and pursue our dreams until retirement in our 60's, we're going to do it while we're young.

And if it all goes shit shaped then we'll just get jobs at some point in the future, but I cannot wait to escape the rat race 😊

This is really interesting - I've been lurking around the FIRE community for a few months now and am definitely bought into the general idea, however it does require compromises to be made, and quite a bit of good luck along the way.

We have a large mortgage that I've decided I don't want to be super aggressive about paying off - but if rates change, my approach might as well. London house prices will also have a major bearing on how it all pans out for us.

The challenge for us is that while I'm happy to be minimal & frugal, DP sees our large income and succumbs to lifestyle inflation so I'm constantly having to talk him out of buying that watch / new car / ridiculously generous gifts. It needs to be a team effort.

But good luck OP, I like your ambition - would be good to get updates on your progress (although Mumsnet might not quite be the place for it).

Yy tinkly - I get that cultural travel is a bit lost on tinies - but I listen to dh and his family chat about camping all over Europe and sharing their memories, and it’s very cosy - a broader outlook. Before I left home I hadn’t been overseas at all. There is a balance I think. You need a taste of what else is out there to give you the impetus to go in search of more. (I was just thinking about travel and kids this week - dd1 went to Mexico to visit her bf’s parents and I realised that in all honesty, she’s pretty green about travel. She has the mechanics and is uber sensible - but I realised that we should have been sharing the excitement of new places and cultures as a family way before now lol)

Childcare in a nursery in the SE is about £1500 a month per child full time. Your parents may very well say they are going to do it now but (a) they may be well meaning but not really remember how much hard work is involved and (b) they might change their minds. Even if they don't, what about when they go on holiday? You'll need paid care then.

You haven't allowed for inflation in your calculations.

As other posters have said, kids get more expensive as they get older and in 12-15 years' time when you have 2 teenagers, £500-£700 a month extra will be a lot less in real terms.

I can see that you have disagreed with others who have said this, but I also think a pot of £650k is extremely low to maintain the lifestyle you want over potentially 50+ years. I recently saw our pension adviser at work and was told my pension pot needed to be over £1m to generate a modest £20k p.a. Income taking into account expected interest over the years. You are talking about having £3k a month to spend, which is a lot more than £20k p.a.

Finally, a 3 bed house is fine, but I expect you will want a 4th bed if you have a boy and a girl - by the time they are a bit older (8-9) they will certainly want own rooms and as teens it would be very unfair to force them to share if you could afford to get a 4th bedroom but for your retirement plans.

I'd give it more time myself and aim to retire at 55.

Agree with PP . One thing you are forgetting is that child are doesn't stop with primary school age.
When your children ( and this is all theoretical at the moment) are teens, the amount of ferrying around needed for after school clubs, social lives etc, is often far greater than when they are tiny. You may well need to re-think your work life balance and income at this time.

Also- and this is not being negative but realistic, - 40% of marriages break down. You are incredibly young and anything could happen. You need to look after your individual financial interests too , planning for a totally different scenario.

You need to get rid of your mortgage first. We overpaid on ours for a number of years and ended the term 4 years early, which was the best we could do as we were paying rent for 2 DCs at uni at the same time!

We have always had a comfortable amount of savings- the recommendation is a year's salary ( or 6 months minimum) - which we had.

You also need to get rid of your credit card debts- even at % interest- what's the point dragging that out when you are also saving a lot each moth? Pay it off.

Thanks for your comments. Without addressing each comment, I will take all this stuff into account :)

Although my original post doesn’t explicitly say it, I have factored inflation - if the market moves 7% compounded annually, and I’m withdrawing 4%, this will be a moving amount. It also allows my capital to grow by inflation without (theoretically) touching it. But as others have mentioned, £650k might be too low as there are other costs (eg childcare) that I might need to factor in.

Just a note on the mortgage - we had actually chosen to extend our mortgage to 30 years (was previously 19 years) as we think the spread on what we can earn in the market over a long time period through cycles v cost is favourable, it diversifies our asset base and LTV is low enough to be able to get the best rates on offer anyway. Should mortgage rates change significantly, then we will rethink this, but for now we are happy holding the surplus cash that would have gone into the mortgage in stocks (over the long term).

However I get that house ownership peace of mind, getting it paid off early for stability is priceless to many, and we are open to changing our mind on this in the future.

On a different note, it’s been really nice seeing other like-minded people comment on this thread - I didn’t expect many to know about FIRE, and it’s been great hearing some of the success stories to give some hope.

Also, as PP’s have recommended, I’ve booked in a couple of free appointments with some IFA’s.

If anyone is interested in what they say, i’ll keep you posted!

I'm going to follow this thread so do keep us updated OP. I can't see how what you're planning is possible but it will be interesting to find out. I spend a ridiculous amount of time worrying about funding retirement and we earn three times what you and your DH earn so I'm clearly not doing this properly!

I think the reality of childcare for more than one child daily from 7-7 which is presumably what you need if you have ‘big’ jobs and a commute will almost certainly be unpalatable to your parents, even if they are very young. Where would be the time for them to have their own lives? My mum was a very young and healthy 60 when she started looking after my baby for 2 days a week. She was very happy to go down to just every other week once he was mobile. Small children are exhausting! I think you need to make your plans assuming you will be paying out for 2 sets of full time nursery, at c. £1300 a head in the South East. You can always be pleasantly surprised if your parents actually will do as much as you say

have you really done your homework on your investments? 7% compound is quite optimistic. Don't know if you are in high risk investments or medium but presumably you have only invested short term ( going by your age) so I'd think carefully about that return. Don't forget about tax too on all your income.

I mentioned the cost of children at uni. when we were late 50s we were paying our mortgage off, and rent for two DCs at uni ( their loans didn't cover it all) so we had the equivalent of 3 mortgages.

I worked more hours then than I had when they were younger.
Obviously we could have dipped into our savings to fund that but chose not to.

You have no idea what could happen with uni fees in 20 years' time. It's impossible to predict. Also I am old enough to remember mortgage interest rates at 15%. Sure that benefits savers but it's an example of what can change and there is Brexit now to factor in.

This has made me think, I'm going to number crunch later

Wanda but you can put your £1 million in a SIPP. If it simply keeps pace with inflation (which you can pretty safely invest it to do), then you can draw off the equivalent of £20k a year for the next 50 years. And if you need more or less in a particular year you have that flexibilty. And if there is anything left when you die , your kids get it inheritance tax free.

Obviously if you don't expect to be around for 50 years you can take a bit more. And if your investments grow by more than inflation you can take a bit more.

There are other ways to use your £1 million pension pot than using it to buy £20k a year.

I have to say that I know a couple who are retired and they live a wonderful life. When you have time, expenses do go down. They travel on holidays off peak - SO MUCH cheaper. They have time to look for deals on restaurants and days out, saving buckets. They can travel cheaply as they can either walk or take a bus as they have more time!!! You get what I mean!

A couple of things -

I would recommend reading "The 100 Year Life". It's annoyingly repetitive but makes a good case for why people your age should reject the education-work-retire-die model in favour of continual reinvestment and reappraisal.

Dont factor in an inheritance. It'll probably go on residential dementia care.

It's not mandatory to have kids- you know that, right? It's just that you sound bored about the idea before you've even started .

You come across as someone who wants to get life over with, but no-one is forcing you down that route, so if you dont want to do it, you dont have to. Jack your job, retrain, work with the homeless now

Since we have retired I go to Aldi rather than have Tesco deliver online. It takes me about an hour and a half once a week and saves me about £40 to £50 a go. Makes me weep to think how much I have spent in Tesco over the years.

"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."

This. If you don't really want kids and aren't that excited by the idea, it is fine not to have kids. Have kids if you want them, not as an item on the to-do list that is to be ticked off.

You need to assume you are paying for childcare more-or-less fulltime. Babysitting and help here and there is one thing, but having GPs provide full-time childcare (or even regular part-time childcare) is a huge ask, and it means that they are basically sacrificing their retirement to help you have an earlier one.

If your cost of living is low enough it should be workable.

Two school friends retired in their late 20s, both had decided they wanted to go back to work for their own sanity after six months. One and his wife went for jobs in the charitable sector that they felt gave something back, but both found it unrewarding and went back to their old sectors albeit part time contracting. They now seem very happy, enjoy knowing they don't have to work but something in them needs to do it. The other school friend has ended up with a two day a week business that covers all his costs of living and keeps him engaged with something.

You might find by 40 you feel able to stop, my better half and I are in a similar financial position albeit without plans for kids but do keep horses. We have been aiming to start winding down into part time work at 50.

I’m having a massive “tempting fate” feeling reading this thread. So many long (long) term plans - which are what we make and then infertility, parental death or ill health, our own ill health, marriage break downs occur - never mind global disasters, political changes or nuclear war! (Left out zombie apocalypse).
Save, invest, but keep saying “if” not “when” and remain flexible enough to accept what life throws at you.

Save, invest, but keep saying “if” not “when” and remain flexible enough to accept what life throws at you.

sums it up for me. Your plans OP seem very concrete and unlikely to get past what life throws at you. Go for broader guidelines about working hard at saving a proportion of your pay and thinking about the places where the money should go. Looking back, the one straightforward thing that I should have done was to have started earlier putting tax free money into my pension using the available allowances.

Having been through a few recessions, my view of how much money I'd need to have a comfortable retirement has increased considerably. My current view is £1M for a retirement at 50 for a couple would be OKish but would be sparse on treats (and the risk of something happening to reduce living standards would be high).

OP l'd like to be updated please, thanks!

Interesting to hear other views. My view of what we need to retire by 50 now involves less money than I thought ten years ago.

It's good to plan for the future. Is this your first house? Are you planning to stay in it until you retire?

I suspect that you may want more space/better location/garden/school catchment, etc when the DC arrives. What about moving for better career opportunities?

I'm 46 & DH is 49. We have paid off our mortgage (an offset one) in 17 yrs instead of 25 yrs along with 3 house moves crisscrossing the country (due to promotion/redundancies). We stopped chasing rates early on and it has worked out well for us.

Skiing/diving/any physical activity holiday pre DC is hugely different from that post DC especially when you're older. Cash rich, time poor with no DC - this is the prime time to make the most of it and go on those adventurous off peak exotic holidays. Off peak skiing and diving in the Maldives is expensive but doable. Peak school holiday anything is extortionate in comparison.

DH did his MBA PT in his late 20's and I did a MSc FT in my mid 20's - everything is easier before DC so if either of you want to do further studying, get on with it.

For people who have retired early or are close to it, what kind of savings rates were you achieving? I think I'd find it very motivating to hear from real people with families who are managing to put away 50% + of their net income, and find out how they're doing it...

I’m 35 and on-track to retire at 50. Now, whether I will or not will depend on a number of factors, but finances should be in order.

Very briefly, I’ve focused on property purchases now that will provide an income once I retire, in areas with traditions of very high demands. I’ve purchased investment properties which are 100% covering their own costs (mortgage, tax, maintenance).

I’m married, we both work, no children, and our salaries (combined income of £175k/year and husband is about to be promoted so will increase) fund-
Mortgage on home
All bills and living expenses, including car
Pensions (I pay 10% of my salary, my company contributes 12%, husband pays 12%, company pays 7%)
Fun money
Savings of £2k/month
Investments of £1,500/month (mainly stocks which were performing well with a 7%-10% yield but I had over invested in one particular company and they dived a year ago so I took a huge hit)

I tend not to keep more than £20,000 at a time in savings. Once I go above that, I move lump sums either into shares/EFTs or pay off mortgage lump sums.
(Or recently, had to use savings to buy a car when mine died unexpectedly)

The plan is to retire at 50, using money from rentals (all mortgages will be paid before I’m 48) as income. May acquire two further properties via inheretence- not guaranteed (but likely)- and they’ll also be rented. Will continue paying into pension pot with this income.

Hoping then to buy an overseas property with a mix of savings, cashed in investments, and maybe a mortgage serviced through rentals (or may sell one or more).

I hope to live off this income for 15 years, then I’ll have access to full pension pot at 65.

At that stage, I’ll probably sell remaining investment properties, and live my days out somewhere warm!

Blimey, JustHere, I really don’t think you fit the typical MN demographic.

Fans self at the idea of having 2k per month to save, not “to live off”