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July 11, 2012

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I don't have suggestions though I am curious as to the $800 'miscellaneous' when you have other areas finely detailed. I do want to applaud your goal of increasing tithing and overall giving. Too many fail to plan that specific area of cash flow and as a result it never builds. I'm glad you are thinking along those lines.

Hi BU,

Given your occupations, are you counting on having a pension as part of your retirement planning? That should be a valid assumption however if you want to go ultra conservative you can not include this in your retirement plan... Also for how much longer to you plan to continue working? Another 20 years?

-Mike

@ Mike Hunt-

The OP states that he is assuming retirement at age 57, so he expects to work for 12 more years.

If there's no pension involved, retirement savings (both monthly and total) is a little low for 2 people at this age IMO.

Thanks for clarifying that you are paying into the pension system. Too many uninformed people simply assume that public pensions are just "given" while neglecting to understand that you have to typically pay a fair percentage of your salary into the pension, and depending on the situation, many public sector employees don't get Social Security. While still a good deal, it isn't free.

Additionally it is unfair to compare the pension amount to a 4% withdrawl rate from a nest egg because the 4% rate typically assumes you don't dip into principle and that the principle is growing at the rate of inflation. A better comparison IMHO would be an annual drawdown eventually leaving you with zero at some age of death, say 30 years past retirement. For example, assuming a 4% interest rate for 30 years you would need about $1.73M for a $100K per year withdrawl versus $2.5M, for 5% earnings over 30 years it's $1.5M. That would be a closer comparison to a pension because you're heirs don't get diddly from it once you're gone. So many folks get hung up on not touching principle they forget to realize that if you make it to 90, your kids will be in their 50's and 60's and really shouldn't be counting on your money for their well being. Also, if you die in your 70's or even 80's, then there should still be plenty for them (baring long nursing home stays).

That said, when my kids hit certain ages in their teens rates went up. Like the cell phone bill, car insurance, electricity, water, food, etc. But that's what the miscellaneous will have to cover. Best of luck.

Hi BU,

No suggestions here, you are doing quite well. I'm curious about tithing. You are currently allocating $1000 per month. That is a significant amount. When you and your wife first decided to tithe, was it difficult to commit to that amount?

Disclaimer: I tithe, but no where near the 10% net. It's a struggle for us and it is a constant discussion between me and my wife.

Thanks,
CW

My question has to do with paying for college for your kids. You say there is a tuition plan that will pay for "all tuition and fees"...which I would estimate in most states to be $10k per year in current dollars, x 2 children. Yet your college fund, I assume for both kids, is currently just $30k, growing by $3k per year. With child #1 starting college in 6 years, and the other three years later, I'm not sure the math adds up to pay for them both unless contributions and ROI increase significantly.

My only advice would be that if you live in an area that has several good community colleges as well as a state university that you can get a great education by taking many of the required classes at the community colleges and then transfer all of the credits to a nearby state university. Some parents get hung up on the need to send children to private schools and colleges which may feed their egos and cost a lot of money, including travel and housing expenses, without achieving much benefit over what's available locally.

During my career in aerospace I had colleagues that went down both routes and in the end it doesn't matter much which route you choose. What does matter is how intelligent, conscientious and hard working the person is.

At your age I would consider not putting off the graduate degree any longer.

Respondents--

I truly appreciate your interest, feedback and suggestions...that is exactly why I submitted my information!

@Bruin--Miscellaneous covers house needs, clothing, car care, eating out, gifts, and pet items. I hate it as it is a budgetary black hole...source of occational consternation with my bride.

@Mike and @JM--Yes we will receive a pension.

@Get a grip--Pensioners in our state/federal arrangement can still qualify for social security if they otherwise qualify, however, their amount is decreased in proportion to the amount of the pension received. I do not count on social security for this purpose and any $ there would be gravy. I do count of accessing Medicare/Medicaid when I hit that age.

I appreciate the math on the value of pension and my example was illustrative only. My chart shows that 4% investement return and 4% withdrawal would exhaust savings at year 39 whereas 5% return and 4% withdrawal would last indefinitely.

You are correct, heirs do not receive pension, but spouse would.

@CW--thanks for the inquiry. We started at about 6% of next and slowly worked up over about a decade. We do not adhere to the "prosperity gospel" that is out there, however, we have never suffered financially or otherwise while tithing and have continued to be successful beyond what we deserve. Will let others determine if there is a causal connection between the two! :)

@AtoZ--the college item is a state tuition reimbursement plan which froze college tuition rates starting in the 1990s. I just got both my children into the program when they were born and the state closed the program in 2002 right after I registered my second child due to tuition deregulation in our state. Of course, rates have skyrocketed since then. You are correct on the math, however, my rates are frozen at 1990s level and are guaranteed by the state through this vehicle. I do not view it as an investment but rather insurance to be honest. Quite a deal for the 150,000 or so who jumped on board.

@evilhomer-agreed and am going to knock it out in the next two years...will likely work till 60 and should realize immediate ROI with next step in next career step hopefully within 5 years.

@OldLimey-agree 10%...that is how I got my bachelors...the college experience ain't worth it or what it is cracked up to be.

Thanks for the insight...would love to hear some more constructive input to help improve.

You give away too much of your money. Make your kids education fund your favorite charity. I do.

KJ,

I have a strong urge to virtually smack you, so ... *smack*

@kj--one might argue we do not give enough...as good stewards of what we are given, perhaps our role is to judiciously give as much as we can (we do not by the way)...our biblical perspective impacts us in this area...if you do not share that believe system I am certain this approach is foreign to you and I would encourage you to explore these ideas further...a good book on the matter is "Jesus and money: a guide for times of financial crisis" by Ben Witherington. Well written and not some crazy end times treatise.

BTW...our kids will be fine...bachelors level tuition and fees covered...they will cover the rest based on their work ethic via a JOB (another foreign concept among college students these days) and / or their intellect via scholarships....notice I did not say loans

@Buddy - I respect your financial decision to donate, but in regards to education loans, not all loans are "bad". The Stafford Loan, for example, is a subsidized loan that does not capitalize interest until the student graduates. It is a loan the student takes on himself/herself, and is effectively, interest-free money that should always be taken so you (the parents) can keep your liquid cash in the bank, earning interest and at your disposal. Also, make sure your kids fill out the FAFSA. Although your income won't qualify you for Pell Grants or Perkins Loans, it will get them work study from their colleges.

You look like you're doing quite well, especially for a couple of teachers. :-) I'm assuming given the total salary amount for 1.5 equivalent positions that you are probably an administrator of some sort. Regardless, my thoughts and input:

* What is the $2k short-term debt? I'm assuming that's just sort of a running balance on the credit card that you pay every month to get rewards. If not, then pay that off immediately.

* I wouldn't be in that big of a hurry to pay off your house. 4.25% before tax works out to about 3% or so after tax. That's cheap money. I would fund your retirement more aggressively before paying down the house. You're apparently pretty far into the loan, so a good chunk of your payment is principal anyway.

* Your family budget, like mine, has a miscellaneous monster that's hard to define. I would look good and hard at that bucket to see if there are not any savings you could squeeze.

* Kudos to you on your giving. My wife and I have been slowly building up to a tithe, looks like you are pretty much there. I always say, imagine what the world would be like if all churchgoers paid a tithe.

* Seems like you're paying a lot for car insurance. I think I pay $450 every six months ($900 per year) for full coverage on two vehicles. You're paying about $1600 per year. Maybe tweak your deductibles a bit, or shop around for car insurance.

* On the flip side ... how on earth do you feed a family of four (with a 9 and 12-year-old) on $500 per month in groceries? I guess if you add in the $300 for lunches, that's $800 and probably some of the $300 entertainment is eating out. Still, that's a pretty frugal grocery bill. My family of five (kids are 8, 4, and 2) spends around $1000 on groceries per month. It was less than that before we started eating healthier - fruits and vegetables are expensive versus Pop Tarts and Doritos. My point here is, groceries are an area, in my opinion, where it doesn't pay to skimp. Americans pay less % of their income on groceries than any other nation in the world. That's good news, because it means people can afford to eat. But I also wonder if we shouldn't intentionally spend more so that our diets would be better. I don't know what your family meals/diet is like, but something to think about.

Best wishes
Brad

I hope your church spends the money wisely and charitably. Myself, sad to say, but I don't trust them.
I pick my charities cautiously.

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