Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
All depends on when you want to retire. If you want to retire at 65+ with a reduced lifestyle then 6% is the way to do go. But at your age and income you could aim to retire significantly younger.
Thanks!
I guess we're just trying to maintain a balance too. We have a strong probability of earning double our income by our 40's once her parents step down from the business (of course no guarantees). At the same time, we wouldn't want to be in a position where we're not completely enjoying our home nor enjoying the fruits of labor/savings. We're really just looking for an optimal balance between savings for the future and enjoying time while we can enjoy it how we want to.
How long are you going to get free childcare? I ask because it might be smart to go ahead and pay yourself into a separate savings account monthly whatever that cost is. This will allow you to 1. Build up your cash savings 2. Budget appropriately as though you weren't getting services for free. Once you do this you can work a true budget for the family. I'd also suggest you figure out what you and your wife will need in terms of retirement resources. From there you can work backwards to figure what you need to set aside every month. Until you can hit that monthly number without problem do not fund a specific college fund, consider a Roth in you and or your wife's name.
We should be childcare free up until our daughter reaches school age. The problem I forsee is when babies 2 and 3 come along. That's when I imagine things would get pretty complicated.
Maybe I'm just ignorant to this, but is there that much value in reducing our taxable income? I don't think we'd reach a lower bracket. Again, I'm leaning more towards my ignorance on the subject as to why I'm not seeing the true value.
OMG Yes, there is A LOT of value in reducing your taxable income. The more you put in your 401K, the more it enables you to save. IE, if you save $1000 in taxes by contributing more, then you have that extra $1000 to save even more (or spend, if you must).
Saving 6% for retirement, even with the match, is not going to get you a decent retirement in your 60s. That rate needs to be more like 15%.
Here's a good article on the time it takes to reach retirement / financial independence based on savings rate:
1. 6 months of expenses in the emergency fund
2. Pay down mortgage to the point of eliminating the PMI
3. Contribute up to the level in the 401k that maximizes the match
4. Max out Roths
5. Max out the rest of 401k
Based on your comment that you could have stretched to have 20% down, I am guessing that it would take much to get to that level on step 2 described above.
I agree with this except I would max out the 401ks first before the Roths. I think Roths are overrated (and yes, I do have one, put I prioritize pre-tax).
OMG Yes, there is A LOT of value in reducing your taxable income. The more you put in your 401K, the more it enables you to save. IE, if you save $1000 in taxes by contributing more, then you have that extra $1000 to save even more (or spend, if you must).
Saving 6% for retirement, even with the match, is not going to get you a decent retirement in your 60s. That rate needs to be more like 15%.
Here's a good article on the time it takes to reach retirement / financial independence based on savings rate:
I think I know where you're going. So allocating the 2k take home savings instead to the 401k would be more beneficial. However, that money isn't to be withdrawn until 65 and that would simply leave us with the intended 3-6 months emergency cash as liquid. I guess I would need to allocate money from the 2k take home savings towards buckets like home improvement, vacation, presents, etc.
I think I know where you're going. So allocating the 2k take home savings instead to the 401k would be more beneficial. However, that money isn't to be withdrawn until 65 and that would simply leave us with the intended 3-6 months emergency cash as liquid. I guess I would need to allocate money from the 2k take home savings towards buckets like home improvement, vacation, presents, etc.
Thanks for putting that in perspective.
You need to figure out your retirement needs first before you attempt to figure out the rest. While doing this is still an estimate just moving monthly savings figures around is uneducated guessing
How long are you going to get free childcare? I ask because it might be smart to go ahead and pay yourself into a separate savings account monthly whatever that cost is (snip).
Quote:
Originally Posted by Ranredd
We should be childcare free up until our daughter reaches school age. The problem I forsee is when babies 2 and 3 come along. That's when I imagine things would get pretty complicated.
As my mother always said "Don't count your chickens before they are hatched." Just off the top of my head Ican name several couples, who I know personally, who lost their free child care rather suddenly. From a fall down the stairs, to an unexpected heart attack, to other serious health needs, to a death, either of the person providing the free babysitting, or their spouse or their parent would immediately stop the benefit of free childcare.
For example, if a great-grandparent, of the new baby, suddenly needs full time eldercare the grandparents may not be able to continue babysitting for the baby.
And, you may have to find and pay for fulltime care, possibly literally overnight. So, I always recommend that new parents plan that the "free childcare" could end at any time and they be prepared by either keeping that money liquid or adding the "real cost" in your budget or something similar.
If you don't need the money, that is absolutely great and you could add it to the child's college fund or your retirement fund (or send the grandparents on a fabulous Thank You vacation) but if you do need the money it will be a part of your budget.
I know someone who started doing full time childcare for the first of DD & SIL's three kids when they were "young", healthy, new retirees. Now only about six years later Grandpa needs to use a walker or wheelchair part of the time and Grandma is starting to show the first signs of dementia. No one would have guessed their rapid decline from only six years ago. Luckily, their DD & SIL did not count on free childcare indefinitely and could afford to start sending their kids to preschool/day care.
Last edited by germaine2626; 10-22-2016 at 05:05 PM..
I agree with this except I would max out the 401ks first before the Roths. I think Roths are overrated (and yes, I do have one, put I prioritize pre-tax).
Roths allow you to choose the investments, whereas you are stock with the funds in the 401k.
You need to figure out your retirement needs first before you attempt to figure out the rest. While doing this is still an estimate just moving monthly savings figures around is uneducated guessing
Figuring out retirement needs seems strange to me because its taking the assumption of "static" figures. How can I determine if I won't need some ridiculous health care needs? At that point, its like I'd be trying to continue a savings plan while I wouldn't be able to earn income. All of this hypothetical of course, but it just seems weird to act as if your life won't dynamically change over 20-30 yrs.
At the same time, I'm cautious of the potential lifestyle "creep" i.e. more money more purchased. However, we purchased our home with the idea that we wouldn't HAVE to move for space - so that can remain static. But what about other lifestyle adjustments? I can imagine that we'd be making more money over that time period (significantly) and obviously we'd continue to allocate more money into savings. But how can you account for savings so aggressively to not enjoy the money at 30 the same way you would at 40? I'd like to think I would snowboard in Japan at 40, but at that point its like an "opportunity" cost of health/time vs long-term comfort in retirement.
Figuring out retirement needs seems strange to me because its taking the assumption of "static" figures. How can I determine if I won't need some ridiculous health care needs? At that point, its like I'd be trying to continue a savings plan while I wouldn't be able to earn income. All of this hypothetical of course, but it just seems weird to act as if your life won't dynamically change over 20-30 yrs.
It doesn't really matter how you plan or save, if you have ridiculous health care needs your plan is going to be screwed. Still it's better to draw out a map to the best of your abilities now instead of randomly throwing some money aside monthly
Quote:
At the same time, I'm cautious of the potential lifestyle "creep" i.e. more money more purchased. However, we purchased our home with the idea that we wouldn't HAVE to move for space - so that can remain static. But what about other lifestyle adjustments? I can imagine that we'd be making more money over that time period (significantly) and obviously we'd continue to allocate more money into savings. But how can you account for savings so aggressively to not enjoy the money at 30 the same way you would at 40? I'd like to think I would snowboard in Japan at 40, but at that point its like an "opportunity" cost of health/time vs long-term comfort in retirement.
It really sounds like you are making excuses before really taking any steps at all
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Yes, there is A LOT of value in reducing your taxable income. The more you put in your 401K, the more it enables you to save. IE, if you save $1000 in taxes by contributing more, then you have that extra $1000 to save even more (or spend, if you must).
