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Author: monica3674 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5085  
Subject: Our Five Year Plan (Long) Date: 2/5/2006 5:25 PM
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When my husband and I were married in July 2000, we had a 5-year plan. I would work for five more years, during that 5th year I would get pregnant, and then I would become a SAHM. Throughout these five years, we would save, save, and save to prepare for me leaving the workforce.

We hit the five year mark this past July. I delivered our DD, Lilly, on August 28th. After taking 12 weeks of FMLA (10 weeks of it paid because I had enough days in my sick bank), I resigned from my teaching position. (I would have taken a leave, just to be on the safe side, but they weren't approving any leaves.)

We're now down to a one-income household. During our five years of marriage so far, we've done a good job of saving.

Our current investments: (approximate amounts)

DH 401k - $120,000
His company matches 60% of the full amount, so we do not want to cut his contribution at all. He contributes the max of $15k.

Ameritrade Taxable - $40,000 (no new contributions)

Vanguard Taxable (VTSMX)- $33,000
I was contributing $400/mo, but moved this down to $100/mo when I stopped being paid.

GM Demand Note Account - $16,000
I know this isn't federally insured, but they're paying 5.75%. DH paycheck gets direct deposited into this account and we write checks for the mortgage and to our checking account for bills.

Individual Roths - $42,000
My money is at Vanguard and Ameritrade. DH's money is at Ameritrade. We plan to continue to max these out each year.

2 529 plans - $16000 (About $8k each)
We plan on having two kids. I opened these accounts in March 2002 and was contributing $100 then $150/mo into each of the accounts. I already transferred one over to my DD. We are still contributing $150/mo to each of these and all of DD's monetary gifts go into hers. This, unfortunately, will be the first place we will cut if we need to.

Coverdell Account at Vanguard- $4000
We funded both 2005 and 2006 for DD. We plan to send both of the kids to Catholic grade and high schools.

We have a 10-year mortgage on our house with about seven years left to pay. We paid $169k and we owe about $78k.

When I was working, I bought five years towards retirement and Michigan takes out a % of teachers paychecks towards their pensions. I plan on working once the kids both get into school full time. I will probably work for 14 more years and retire with 25 years in (including the five I bought.)

Now our dilemma. My DH makes about $65k a year, with $15K taken out for his 401k. We want to continue to fund our Roths, the 529 plans, and the Coverdell. We have saved so well for so long, that it feels like we are just frittering away our money now (just because there's not as much of it.)

I just have to convince myself that we have saved lots of money over the last five years and that now that money will now get a chance to grow. You know that example everyone always mentions, where one person saves $2000 a year for ten years and the other person waits 10 years to start saving? I'm hoping by saving so much before having children, that it won't hurt our FIRE goal too much to have me out of the workforce for awhile.

What do you think?

Thanks,
Monica
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Author: hjg0989 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3688 of 5085
Subject: Re: Our Five Year Plan (Long) Date: 2/6/2006 5:12 AM
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Hi Monica,

Congratulations on DD !!! And also for doing so well financially. My gut tells me you two will be just fine.

Currently you have $195,000 saved for retirement. Assuming a 6% return on your investments, if you only contribute $8k more per year for the next 19 years you will end up with $867,199.83.

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

I'm guessing that you will save more than $4k per year once you go back to work. Plus, you will have a pension and social security.

The nice thing about planning for an early retirement is if you fall short of your goal you can choose to work a couple more years to make up for it.

Best of luck,

-helen



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Author: hjg0989 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3689 of 5085
Subject: Re: Our Five Year Plan (Long) Date: 2/6/2006 5:13 AM
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"I'm guessing that you will save more than $4k per year once you go back to work. Plus, you will have a pension and social security."

Sorry, that should read $8k.


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Author: ajspence One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3690 of 5085
Subject: Re: Our Five Year Plan (Long) Date: 2/6/2006 10:47 AM
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Monica,

Kudos for your planning - and execution of those plans. With nearly 170k set aside and your low mortgage to value, you are definitely on the right track. If your budget can allow DH to contnue funding his 401k, you can do this!

As you probably know, raising kid(s) presents challenges to yoiur finances (among other things...), but we raised 2 wonderful kids and also saved for FIRE. We are now 49-50 years old, with one child graduated college and one graduating in a year. We (also from Michigan)have approx 800k in IRAs, 401ks, real estate, and index funds/stocks, plus 175k or so in home equity. We started with IRAs when we were in our mid-late 20's and then 401ks and setting aside surplus income by LBYM. We also invested in some rental properties which did work out well (in hindsight). And - this was done on one income - which only recently has grown slightly above your DH's stated wage.

You are SO on the right track! Continue to LBYM and plan for the future. You and your kids will never regret not having have every latest video toy, clothing fad, SUV, or huge house. There are more important things than having stuff. They will become young adults and respect how you raised them with fiscal savvy. But sosmething tells me, you already know that. Check out the LBYM board here on the Fool. Many good people who share their insight and thoughts.

Best of luck.

-AJ

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Author: decath Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3691 of 5085
Subject: Re: Our Five Year Plan (Long) Date: 2/6/2006 11:02 AM
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I just have to convince myself that we have saved lots of money over the last five years and that now that money will now get a chance to grow. You know that example everyone always mentions, where one person saves $2000 a year for ten years and the other person waits 10 years to start saving? I'm hoping by saving so much before having children, that it won't hurt our FIRE goal too much to have me out of the workforce for awhile.

What do you think?

Thanks,
Monica


While reading your post, I was thinking the same thing as your last paragraph states. You've done so well. I don't know your ages but it sounds like your are both in your upper 20's or early 30's. Well done.

Take a few years and enjoy your children. Don't fret over it. If your husband's income stays pretty much the same, you most likely will have to cut back more on the investment contributions. Kids get more expensive with each passing year. Expect it and don't fret.

If your current assets (and they are substantial at your ages) continue to grow, you may even decide that you never need to get back into the work force.

decath

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Author: yeilBagheera Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3692 of 5085
Subject: Re: Our Five Year Plan (Long) Date: 2/11/2006 9:41 PM
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Can you work out the percentages?

I mean, when you had lots more income, you saved large amounts.
Now, you're uncertain if you're saving enough from a smaller income.

I agree it's hard to feel it, so calculate how much you were saving and see if that helps.

"$65k a year, with $15K taken out for his 401k. " NOW
so roughly 25% of income now is going to the 401k

WAS
if the combined income was $100K, then 25% of it for retirement was 25K
since it was a larger amount you could put the $15K to the 401k and put 10K to other arrangements.

You could look back and see how much you were contributing to savings in percentages, then figure the amounts those percentages calculate with the current income.



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Author: BordLyron Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3858 of 5085
Subject: Re: Our Five Year Plan (Long) Date: 7/28/2006 12:01 AM
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DH 401k - $120,000
His company matches 60% of the full amount, so we do not want to cut his contribution at all. He contributes the max of $15k.


If I'm reading this correctly, do all you can for as long as you can to get the $9K "free" money! As for all the rest, you two have done remarkably well. I only wish I had started over a decade ago, as you two seem to have done. Congrats on a well-planned, well-executed 5 year plan!

DW & I have never had children, but I seem to recall being one, & concur with other posters that you will have large expenses, but it appears to me that you've already anticipated & accounted for many of them.

Must go now, DW says CSI is on the telly...

Byron

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Author: Jubii Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4067 of 5085
Subject: Re: Our Five Year Plan (Long) Date: 4/10/2007 12:46 PM
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I think you've done so well that it crosses over from impressive to intimidating! It's just phenomenal. And the best part is that you're taking care of business and building a family. Sounds like you have your priorities straight; I'm looking forward to seeing more posts as the whole SAHM experience unfolds.

Thinking about squeezing an extra 1% into the 401(k) now . . . .

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