Time to discuss the end point, the dream, the goal! When I think about what I want to be able to do – it is pretty simple. I want to be able, every morning, to sit somewhere beautiful and leisurely sip my coffee. I don’t want to throw it into a to-go mug, and gulp it down in traffic, one hand on the steering wheel, one hand trying to guide the mug to my lips, while my eyes dart back and forth between the rear-view and side mirrors, watching out for that inevitable crazy half-asleep driver texting on their phone, swerving over those endless white lines. I don’t know what city has the worst traffic, but the Houston freeways at any time are not a friendly place.
Here is where the goals stand now:
1) Pay off our “pretirement” house. We plan to move somewhere with mountains, hiking and four seasons. Being transplants to the Gulf Coast, we miss the seasons, and cool crisp air. Obviously, when we pretire we don’t want a mortgage. So we have to save enough dough to essentially buy our retirement house in cash.
2) Save enough money to not need to work again. We’ve been aggressively saving in our 401ks for well over a decade, with generous employer matching, so I am fairly confident that once we turn 60 we will be just fine. It’s getting to 60 that is the sticky part. Right now I estimate we need around $850k or so. I’m still fine tuning that number. We realize that we will probably take some part-time jobs, especially when the kids get older… I’ve always wanted to teach. But, it would be nice to not NEED to work, and only work because we want to.
3) Partially fund the kids college funds. We are thinking 30-40k each, and then those funds will have over 10 years to grow. We don’t believe in fully funding our kids’ college education.
4) Come up with an investment strategy. How much cash, bonds, equities? Currently, I think we need 2-4 years of cash on hand to survive a bear market without cutting down on our principle. Having that much in cash seems a little high, so I need to understand other safe investment vehicles (CD, TIPs). Honestly, I am not too familiar with these types of products. Since we are in accumulation mode and have secure jobs, I am mostly in equities – a much higher risk situation. If the markets drop, that is cool, we can keep working another year or three. But, once we no longer have a steady income, I have got to dial back on the risks.
5) Continue fine-tuning the budget. We play a balancing game in our household, where I try to reduce costs and see how quickly Mr. SSC reacts. For instance – cable TV. I can live without TV. Mr.SSC can not live without NFL Football. Unfortunately, besides letting him head out to the local pub to watch games multiple nights a week for months on end is not an option. And, I am pretty sure the beer tab would be higher than the cable bill. But, we are constantly trying to understand and optimize our budget. We like to live comfortably, and we have the means to… but I am sure these are some corners to be cut. As of this week, I project we will be happiest at ~$65k/ year in pretirement. But that can change. Especially, since I haven’t studied how the costs of parenting change as the kids grow older.
I think my greatest worry is the effect retiring will have on the kids. Sometimes, when I think about it, it makes me feel like an irresponsible parent. But, if my main goal in retiring from the 9 to 5 is to spend more time with the kids, and be able to give them more opportunities, and attend every recital and game… isn’t that a better life for them than having parents that can throw money at whatever guilt-gift they ask for to make up for the fact that I only see them an hour or two a day? Is teaching them the lifestyle of financial responsibility, even with its risks of some ‘lean’ years worth ending two high-income careers? I look at the past generations retirement approach, and even talking to my co-workers, and the mindset is that working to 65 is just how it is… is there something I am missing? A fallacy in my logic? I think the psychological aspect of retiring early is going to be my biggest hang-up!