Can I retire with 4 children?

[M]

I have 4 children, ages 12, 11, 6 and 1. Throughout my relationship my spouse has never worked, and never intends to work. I work in the tech field, and when I retire it may be hard to get back in at my current salary, so when I leave I would like to minimize the odds of having to work. I'm 35 years old and live in the U.S.

The question is, can I retire? Should I retire? What would you do if you were in my shoes? Ok I guess there are multiple questions.

Here are the financials:

Financial Assets:
1.15 million invested, ~600k in taxable money. Mostly in index funds, REITS, and IBonds. The rest is in 401k/IRAs/HSAs
House worth ~200k or so, paid off.

1.35 million total networth

Debt: $0.00

Trailing Twelve Month Expenses (Annual):

Property Taxes 2200
Water/Trash/Sewer 720
Electricity 1800
Groceries 7800
Car Insurance 400
Car Gas/Depreciation 1300
House Maintenance 1800
Internet 180
Healthcare 18000
School Expenses 2370
Cell Phones 120
Misc 3000

Total 39690

I live in a medicaid expansion state - after I retire I will be on medicaid. So in theory the health insurance/healthcare expenses will go down.

-M

[Crusader]

Do you intend/plan to help your kids out with higher education?

[Lemur]

Well you're at a 3.45% withdrawal rate. ($39,690/$1.35mil).

I see 3 options here:

1.) You can retire now. Kids will have to fund their own education. As the saying goes: "Scholarships or Warships."
2.) If you intend to fully fund college for all 4 kids...you'd probably need to keep working. Direct all savings towards 529s for favorable tax treatments.
3.) Mix of 1/2. Perhaps fund enough up to community college / trade-school for all 4 kids. The kids will have to work/study to pay for additional schooling but it is their choice at this point.

[M]

@Crusador - no. I have a 2 year degree from the cheapest community college in the state, which even today costs 4k /year in tuition which I paid for myself while paying rent and all my other bills. If they want to go there for 2 years after graduation I will continue to give them free room and board. This is actually a lot more than what I was given from my own parents...

I am generally against college, unless the major is in a field with a high financial return that makes it worth it such as medicine, STEM, tech, etc. I am personally convinced that being a plumber or electrician or working in healthcare is the way to go these days.

[Crusader]

If I were you, I would really study how I would withdraw money from the portfolio:
https://www.bogleheads.org/wiki/Withdrawal_methods

Having a paid off house is great, but it's not generating money (in fact, you seem to be paying around 2% in taxes and for maintenance, which is normal, but still, it is not invested money, as you have to live somewhere). And, I would calculate the safe withdrawal rate based on an after tax portfolio value, not before.

I personally would accumulate a bit more money, as I am not at all convinced that the 4% withdrawal rate is sustainable in the future, especially if you retire as young as you are. Now, if you are OK with working again if you need to, it's a different matter entirely.

[M]

@Crusador

I don't disagree per se, but maybe you can elaborate some?

After I retire I am anticipating a decrease in expenses of around 18k, which is what I spent on healthcare last year (birth of baby). We will be on medicaid, so our expensese and withdrawal will be around 22k. This is less than the standard deduction of around 25k, which means there will be no federal taxes. At this level there is also virtually no state income taxes, and no local taxes. I will use 5 year roth ira conversions to slowly pull money out of the pretax accounts while keeping income under 25k. I assume there is a flaw in my logic somewhere?

[rube]

Can you, probably. Should you, that depends on you, what you want and willing to do. There is no right or wrong answer, just choices.

Let me ask you a question: if you would retire, what do you want to do? Do you have something specific in mind? This might determine also what is important for you, influence the decision.

And a thought, suggestion to see if you can do "both": you say might not be able to get back to your current salary. But your expenses are around 40K (only). How difficult would it be for you to make, say, 20K a year. Perhaps as a consultant, contractor, just doing some projects. Would this be an option? If yes, your withdrawal rate would be < 2 %, you can probably work part-time, have less stress and spend time with the kids, family.
If it doesn't work out, for whatever reason, you don't have a big gap in your resume and you can go back to full time. If you like it, great, just continue for a while and enjoy live.

[M]

@rube That is a good question. I am a software engineer, and make around 120k /year in a very low cost of living area. I could probably downsize this, work part of the year, do consulting, etc. I may explore this option some more.

What are my plans for retirement? I will sit in a dark room, with ear plugs in, with my eyes closed for several hours a day. I had a dream 20 years ago of being a buddhist monk and living in a monastary, but the rules seemed obsessive, so I did not pursue this traditional path. I am basically planning on being a stay at home monk but without the title and 250+ rules to follow. I enjoy the simple life and pursuing inner goals of inner peace and happiness.

[Crusader]

I don't disagree per se, but maybe you can elaborate some?

As someone said, there is no right or wrong answer, I am just telling you what I would do, and mind you, I am not any kind of expert and I am NOT retired, and I don't even live in your country. It's just that the idea of being a sole family provider with a wife and 4 kids without ever working again sounds risky to me. Yes, the medical expenses will go away, but what does Medicare include? If it's like what we get in Canada, it still doesn't mean that medical costs would not be 0. Dental work is not fully included (or at all, I don't know). As for my comment about 4% not being sustainable is just the impression I recently got while listening to some Canadian specific podcasts (Canadian Couch Potato as well as Rational Reminder... the specific episode that estimated the future returns is:
https://www.canadianportfoliomanagerblo ... tion-etfs/
)

[Crusader]

I am a software engineer, and make around 120k /year in a very low cost of living area.

Now I am curious... how did you end up in such a high paying and I imagine stressful career if you aspire to be a monk that lives a simple life?

[M]

@crusader

In the US there are several healthcare options, and they vary a lot. Medicare, for example, is generally for old people and does not cover everything 100%. Medicaid is for poor people and the coverage depends on the state you live in, but my understanding is, in my state it covers health and dental 100%. I know people who are on it who have had medical issues, and the cost is zero every time. Not all doctors or dentists accept it though, which could be an issue.

I agree with you about the 4% rule not being valid today...but my withdrawal rate would be around 2%, not 4%. 22k/1.15 million. But yes, I am extremely hesitant given my circumstances, hence the reason for the post. I'm just not sure what my number should be to retire...

[M]

@crusader I wound up in this career because I bought a programming book out of curiosity when I was a teenager...the another, and another...It never seemed that hard or stressful to me compared to many other jobs I have had.

[Crusader]

Thanks for clarifying. I think that if your true costs are closer to 2%, you definitely CAN retire. But I wouldn't take financial advice from myself. I haven't researched this topic properly as I am years from retirement.

[M]

@Crusader Thank you for the input. I listened to part of the podcast and it is very interesting. The expected real returns they list for the funds are all under 4%. It almost makes me wonder if I should just invest enough into reits in my taxable account to live off the dividends or buy a rental property or something.

[Laura Ingalls]

What does your spouse think of the plan?

I would probably be on board with the not working or working less part. We all need time to ourselves but people with four kids don’t get much of that. Sitting in the dark room with earplugs would piss me off while I kept four children of various ages feed, watered, and otherwise engaged. Also one of the things you get as a parent from work is a part of your life that it about you and not the rest of your family.

I also think the tax code really rewards some low level earned income when you have kids. It could be w-2 or 1099. You could earn it or our spouse. The child tax credit would help too. How long that is the case is still an unknown .

[Crusader]

You are welcome!

to live off the dividends

Be careful about focusing on dividends, though...
https://www.youtube.com/watch?v=f5j9v9dfinQ

[M]

@Laura Ingalls I started dating my spouse when we were both in high school. I explained this plan to her when we started dating nearly 20 years ago and she has been completely on board the whole time. This is why we are where we are today with only one person working and four kids. We are both very frugal. While it is true that she does most of the house work and child rearing, she also has never had to work a job or pay a bill and has been on board with this plan since the beginning. She told me I should have retired years ago, and constantly tells me to quit my job.

[Laura Ingalls]

@M I glad she is onboard. Your roles seem pretty traditional for folks that are probably late 30’s.

DH and I meet in our late 20’s and have had lots of work vs stay at home arrangements. The only combo we haven’t tried is me work full time and DH work part-time. We have literally had ever other combo from two full time jobs to no jobs at all.

We have a pretty egalitarian style to getting stuff done too. Although I am in charge of groceries cause he dislikes it. He is in charge of houseplants because we overwatered everything til I stopped.

[M]

@Laura lol at the house plants. I'm not even sure why that is funny but it gave me a good chuckle. My wife and I basically kept the roles we had growing up. I mow the lawn, take care of house and car maintenance issues, get the groceries, take out the trash, do the laundry, pay the bills. She cleans, does dishes, cooks. We both help kids with schoolwork etc. We basically do what we each enjoy doing the most. They are very traditional roles, which is odd in today's world, but it works for us.

We never agreed on who would water the plants so have killed many house plants over the years. We're now down to one aloe plant and a bamboo plant.

[Scott 2]

Caveat - I do not have children or know anything about raising them. I did stop working this year, after extensive analysis. My personal family situation has been hit pretty hard with medical expenses, so I am sensitive to them.


The biggest risks I see:

1. Many doctors view Medicaid patients as charity cases. Make sure you understand and are comfortable with the available standard of care available, if going that route.

2. Similar - I don't see any money in the budget for dental care, unless that's under healthcare. With 6 people, that can add up.

3. Take away work, life has space to do more. As kids age, the have capacity to consume more. Are you ok with saying no to opportunities that would expand life, but might blow out the budget? For me personally - I feel much more deprived saying "no" on my forever budget, than I even did when playing savings games to buy my freedom.

4. Remove work, your spouse will probably expect you to take on more at home. Are you up for sharing 50% of the chores and childcare? At least the computer is clean and does what you tell it.

5. Are you ok with being locked into low cost of living areas forever?


You can certainly afford to take a break, work part time or downshift into lower paying work. Your salary suggests you are pretty good at tech. It seems likely you could negotiate part time work, a sabbatical, or find a new job after a year off. Because you are asking this question (and want to hide in a dark quiet room for hours), I'd encourage making a change.

Not a criticism, btw. When my work was especially bad, anechoic chambers fascinated me:

https://en.wikipedia.org/wiki/Anechoic_chamber

I got so far as half a dozen sessions in a sensory deprivation tank. It was great. Without work, the desire is largely gone.


IMO, to stop earning money forever - the numbers are very fragile. With 6 people in the mix, I'd want to be especially conservative. Given today's valuations, at least 1.5M in the portfolio. That would allow for a SWR of 3%, with a budget of $45k/yr. If the risks I listed above do hit hard, the last thing I'd want is to start a new job at the same time.