I think 'Almostdid' hit the nail on the head.

- quote -

Once there is a good base of savings future efforts to save starts to
mean less compared to the compounding on what is already invested.

You need to plan for the future but you never know if the future will
end tomorrow. There needs to be a balance between present savings and
the future. Through aggressive saving so far the person who posted the
question has clearly created options for their future.

John Corey

Got it.

Diplodocus wrote:

- quote -

Back in the 80's the term "executive burn out" got thrown around a lot.
Nothing to aspire to, not anything to look forward to, not anything to
wallow in ... I think back in the 60's, it was called:

"GIMME MY VACATION!! I'VE EARNED IT!!!"

(Just a suggestion.)

You mentioned the irritation of commuting. Obviously somebody thinks
your time is valuable; chopping the commute sounds like step #1 in a
plan. Look for other irritations or impediments in your work or
otherwise. These could be functions that should be delegated, weakness
upline from you, annoying client not handled, policies not functioning
or non-existent, and so on. Stress over a period of years is no joke. A
substantial protest can build up. Look for areas of stress and fix
them, with the goal of making work an ongoing enjoyment. Along with the
disciplines of working the kinks of workflow out, a discipline
sometimes overlooked is knocking off work on schedule, and effectively
dropping it until the next day or whatever. Another is taking a
scheduled vacation. "Professional" doesn't mean never coming out of the
steambath.

(I had written a better little piece here, but the system crashed and
lost it. I think you see what I'm talking about. Keep your bridges up,
but a sabbatical is certainly not unheard of.)

On Sat, 1 Apr 2006 09:35:53 -0600, dapperdobbs <GeorgeCFL[at]hotmail.com> wrote:
- quote -

Correct.

- quote -

Maybe I will give them part of the money.

- quote -

She is making about 28% of the money.

- quote -

Right now I just want to lie on the couch and sleep a lot, I am
tired... I do not think that I truly want to retire, now or soon, but
to scale back work.

d

Diplodocus:

After reading over the many replies to your original query, it strikes
me that your question seems to have more personal / psychological /
planning aspects than it does financial constraints. There are some
contradictions - not huge and glaring - but:

1) With your existing mindset, I was surprised that you would start
your kids off in life with a debt burden, precisely when their earnings
power is lowest and their need for saving highest. A few weeks ago, a
thread dealt with some guy who had a huge student debt, and the problem
of how to pay it off and get out from under the interest.
2) Your wife makes half the household income, yet you do not mention
her preferences - are you speaking for the two of you?
3) You don't mention what you would do with your additional free time -
one of the problems faced by most retirees is "What do I do?" I
understand that you are talking about easing your work / frugality
"burden", but the question still applies.

Wow! Just think what it means to have $800,000 or so in net worth at
age 35 or so.

By increasing that net worth by only 2% per year after inflation and
SAVING NO ADDITIONAL money you would have $1,300,000 (present dollars)
in 25 yrs. Increase by 3% per year and you have $1,675,000 (present
dollars) in 25 yrs. Add only $10,000 per year of savings to your
growing equity and at the 3% after inflation figure you have 2 million
dollars.

Due to your savings up to this point in your young life you are in the
catbird seat with a number of choices at your disposal.
Congratulations!

Now if you don't have the $800,000 and you start at 35 putting away
$10,000 a year for 25 yrs and earn 3% above inflation you will have
only $375,000 in present dollars.

One word of warning, however. A Saver is a Saver and a Spender is a
Spender. VERY hard, if not almost impossible, to change from one to
the other!

Good Luck!

<BreadWithSpam[at]fractious.net> wrote
- quote -

That's nice, but FAFSA is not the only student loan program
out there. Hence my qualification above re "most, many, or
all lenders."

Student loan programs are plentiful and come under many
government and other umbrellas. For example, from the
finaid.org site:

"Education loans come in three major categories: student
loans (e.g., Stafford and Perkins loans), parent loans
(e.g., PLUS loans) and private student loans (also called
alternative student loans). A fourth type of education loan,
the consolidation loan, allows the borrower to lump all of
their loans into one loan for simplified payment."

"Elle" <honda.lioness[at]nospam.earthlink.net> writes:

- quote -

http://studentaid.ed.gov/students/at...FAFSA05-06.pdf

Read the middle of page 51 of that document. (The PDF has
some earlier pages, so in the PDF, it's page 54).

In particular, #82. 401(k)s come under "retirement plans".

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<BreadWithSpam[at]fractious.net> wrote
- quote -

I hope you noticed that your finaid.org citation conflicts
with my finaid.org citation and my other citation. Mine says
home equity is an input in some instances; yours says it is
not. Etc. People can I think google at this point.

snip
- quote -

I think we need more authoritative citations before we can
declare this as fact for most, many, or all lenders.

"Elle" <honda.lioness[at]nospam.earthlink.net> writes:

- quote -

Home equity in principal residence is absolutely counted,
but only on some subset of the private college financial
aid forms and forumulas. The FAFSA (Free Application
for Federal Student Aid) is the most widely used forms, though,
and it does exclude equity in parents primary residence.

http://finaid.org/savings/accountownership.phtml

Breaks down financial aid formula impact by asset-type
and asset-ownership form. 401(k) is not reported at
all on the FAFSA according to this, except inasmuch as
401(k) *withdrawals* count as income. 401(k) balance
doesn't affect financial aid. Same with IRAs and annuities.
Pensions and cash-value of whole life insurance is also
not reported.


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diplodocus <diplodocus[at]zoo.zoo> wrote:

- quote -

Divorce is always *bad* financially, but it's only a catastrophe when
people are being unreasonable. If differences can be settled amicably
and fairly (which does happen sometimes, even in a divorce), the only
thing lost is economy of scale (two people live cheaper together than
separately). If kids are in the picture there can be extra expenses
associated with shared custody, but they are minimal unless the parents
move far apart. With no kids, it really shouldn't be that big a deal
most of the time. It becomes a big deal because people insist on
battling over everything so hard that the lawyers end up with half the
money.


Michael

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<BreadWithSpam[at]fractious.net> wrote
- quote -

Just two resources (of many on the web) on government
student loan programs:
http://www.finaid.org/calculators/finaidestimate.phtml

http://apps.collegeboard.com/fincalc/efc_welcome.jsp

Note that the parents' home equity, liquid assets (= cash,
checking, savings), and "other investments" are listed as
inputs to determining loan amounts in some instances. I
don't see an exclusion for assets in a 401(k), which makes
some sense. According to sources on the web, many (or most)
401(k) plans have provisions for borrowing for one's
children's higher education costs.

On Thu, 30 Mar 2006 08:46:50 -0600, BreadWithSpam[at]fractious.net <BreadWithSpam[at]fractious.net> wrote:
- quote -

Which is, accidentally, my current situation. With about 700-800k in net
worth and mortgage about 12% of our gross income, we can stop being as
obsessive about compulsively saving or being too industrious.

... some number crunching skipped ...

- quote -

I think that life never follows assumptions. Specifically, number
crunching assumptions about saving for retirement assume that no
financial catastrophe occurs and that we actually live to enjoy
retirement. As we know, half of the people divorce (hardly rare and
amounts to a financial catastrophe), and a great number of them dies
relatively early.

I also question the 7% above inflation rate of growth of assets, I
think that it is excessively optimistic.

If some of the statements that I made seem contradictory, that's
because I am still making my mind about the situation and am
considering opposing viewpoints.

I appreciate your comments, as always.

I am about to make a resolution to find a next job closer to home and
to take a 2 week vacation every year, and possibly work in consulting
less than 12 months per year, if/when I lose my current job, where I
spent last 6 years.

d

diplodocus <diplodocus[at]zoo.zoo> wrote:

- quote -

You're right, but a million dollars will give you about 40K a year of
income inflation adjusted. That's only 40% of what you are currently
spending. While one can certainly live on that and be happy, that's a
pretty serious adjustment. Having 2 million, means you can draw close
to what you are currently spending.

You've said "house fully paid off" so if you're paying a mortgage now,
you can subtract that from your spending.

But unlesss you are spending a *lot* on your house, I think you'd be
stepping down in lifestyle a *lot* to live on 1million.

One thing tto consider is that the more you save, the quicker you get to
a point where you are financially independent, meaning that if your job
goes south, or you just get burned out -- taking a completely different
(and not very well paid to start) career path or just retiring early and
doing whatever floats your boat becomes an option.

- quote -

What you don't seem to realize is that you are currently living much
higher than a 1 million nest egg would allow you to in retirement.

If you were spending 40k and saving 120k, I would agree with you. You
would have already saved enough to retire at your current spending
level, so upping it would make a ton of sense.

But you aren't there yet. Could you afford to save less? Of course --
unless you are determined to retire early, you are well on track to meet
your obligations long before you need to at your current savings level.

I think it's ridiculous to live far more frugally than is necessary to
plan your life. But you aren't living especially frugally, except by
comparison with others in your income group. If retiring on 1mil is so
easy, why do you feel like you are depriving yourself now? You're
spending *twice* what 1 million would prudently support.



Michael

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"Elle" <honda.lioness[at]nospam.earthlink.net> writes:

- quote -

Note, too, that at least at present, most financial aid
formulas to *not* count assets that one has in a 401(k)
or an IRA. Nor do many count equity in one's primary
residence (though it's becoming more common for some
of the private schools to start counting that). Yet
another reason to max out that 401(k)!


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"diplodocus" <diplodocus[at]zoo.zoo> wrote
- quote -

Like Iarwain and you thought, after reading your last post
yesterday it also occurred to me that you could (should?)
consider an early retirement.

Once one identifies one's current annual household expenses,
and forecasts as well as can be done for future expenses,
one can experiment with some of the calculators at, say,
http://www.fincalc.com/ (click on "ConsumerCalcs" on the
left) about how much money one needs to retire and get some
ideas about retiring early or, if you prefer and love your
job, about how much more you could spend on vacations.

You mentioned your kids taking out student loans for
college, so as to teach them some values about money, etc. I
agree about finding meaningful ways to teach them values.
But be aware that government student loan programs will
evaluate your and your wife's assets in identifying the
terms of loans to your unemancipated children. It's not
quite as though you can insist your kids fully shoulder the
minutiae of these loans. Short of their becoming legal
independents of you, you can't.

Four other caveats:
-- Start another thread about paying off your house. It may
make a lot more financial sense to do this than stuff money
into the 401(k) (after the match).
-- Revisit the insurance (life, disability, etc.) issue.
-- Become familiar with asset allocation tools and what you
can do for yourself using internet calculators. See those
linked at http://home.earthlink.net/~elle_navorski/id4.html.
-- Given your income and assets and what you seem to know
(but you could know more), I think you should consider a few
hours with a fee-based financial advisor. Do some homework a
la what's been stated here, so you go in prepared and so
what the advisor says gives you the most bang for the buck.

diplodocus <diplodocus[at]zoo.zoo> writes:

- quote -

If that's your interest, then saving as much as possible *now*
is the probably the best answer. Once you've built a big enough
"seed" in your retirement plan, it's reasonably possible to stop
contributing as long as you've got a good subsistence income
and let that seed grow.

*Big* hypothetical following:

Suppose you're working your butt off, making $100k/yr and manage
to crank the max into your 401k (let's suppose $15k + a $3k match).

So your pre-tax take-home is $85k.

Suppose, too, that your tax burden on that is about 25%
(*not* 'marginal', but total, including state taxes).
You have a spendable income of $63.75k.

Work at that pace for 10 years, assume the 401k grows at
inflation + 7%, while salary and 401k contributions all
grow at inflation (ie. I'm going to assume inflation away
by making it affect everything equally). At the end of
10 years, you have $248,696 in that 401k.

During those 10 years, you also put $1000/mo aside into
a slightly more conservative taxable account (or, say, prepay
your mortgage principal or whatever) such that at the
end of those 10 years, you can pay off your mortgage, or
perhaps use that accumulated money (plus whatever equity
you'd built up during those 10 years) to buy a place
outright. That reduces your spendable income to $51.75k,
and that account grows, say, at inflation + 3% (approx
the current mortgage rate) - that account grows to $115k.

Okay - 10 years of busting your butt, saving for retirement
and paying off the house (or building equity plus a nice
big home-buying account). All the while, living on a
spendable $52k. Quit your job and move somewhere cheaper
where you can buy a place outright (or assume the house is
paid off). You probably have $1000/mo lower expenses now
because of no mortgage and can otherwise live your current
lifestyle, therefore, for $40k spendable a year.

Find yourself a low-stress job (or, if your profession lends
itself to it, work part time) enough to earn *half* of what
you were earning before - $50k. After taxes, you take home
about $40k, enough to spend to keep your lifestyle the same.
You stop 401k contributions but spend the next 20 years
living this low-stress lifestyle. At (inflation +) 7%/yr,
that $248,696 grows to nearly a million bucks without you
ever adding a cent. Heck, work 21 years and your 401k
grows to approx $1.03 million. Enough to throw off $40k/yr
(pretax) for a long long time.

Well, that's all just a fairy tale story. Life's never that
simple. There are issues like health insurance (will your
low-stress or part-time job provide that?). There are costs
which probably will grow faster than inflation (like your
property tax, healthcare costs, etc). There are inevitable
additional spending items - a car every once in a while.
Not to mention kids, colleges, etc. etc. I assumed away a
hell of a lot of stuff.

It's complicated.

But the point of the whole story (other than to have some
fun making up numbers) is that the best hope for a low-stress
working-less lifestyle on an extended basis while still being
able to provide for retirement later on is to save as much
as you can early on.

Folks often do it the other way around. Save very little
during the first 10 or 20 years of their working lives and
then realize later on how much it may take to save for
retirement and other goals and then scramble and have to
work even *more* later. The sooner you crank up your savings
the *less* you'll have to work later - and longer. Don't
let that happen to you. Long term compounding of investments
is some very powerful stuff - use it to your best advantage
by planting the seeds early.

A quick bit of the math upside down - we have the guy above
who saved for 10 years and then stopped adding to his savings
for 20 years during which he worked less. Now take a guy who
spent every penny for those first 10 years and then maxed out
his 401k for the next 20 (ie. he never got to relax and live
that low-stress lifestyle) - at the end of the thirty years,
this second guy's 401k is worth - guess what - only $737,918.
He spent twice as long working his butt off to save for
retirement and still ended up with only 3/4 of what the first
guy built up. I don't know about you, but I'd much rather
be that first guy.

Here ends my purely hypothetical storytelling. Remember that
I made up lots of numbers - reasonable, but made-up - and
generally assumed best-case or at least no worse than average
case situations. Enjoy.

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<<I realized that while spending more now could be warranted, the real
priority should be on working less and on having more free time>
The approach I take is - if it takes me X hours to earn Y net dollars,
then I try not to spend Y dollars on anything that will give me less
than X hours of enjoyment. It turns out that at my low income level,
there are not a lot of things I can purchase that are really worth the
cost.

John Cowart

On Wed, 29 Mar 2006 21:12:55 -0600, Andy <ineverevercheckthismailbox[at]yahoo.com> wrote:
- quote -

Good question.

After some thinking yesterday, my thoughts solidified a little bit and
I realized that while spending more now could be warranted, the real
priority should be on working less and on having more free time.

d

- quote -

If my income was over $200k I would be saving/investing most of it.
Ten years from now you might be tired of working, and with that kind of
income you can buy yourself an early retirement.

Diplodocus wrote:
- quote -

Your are using circular logic here. You want to spend more money now
because you feel that spending more money now will allow you to enjoy
life more now. To justify spending more money now you argue that you
should be able enjoy retirement without a lot of money. Well, do you
need to spend a lot to enjoy life or not? You seem to think that even
though you find frugality to be hardship now, somehow your future
retiree self will find frugal living to be much more rewarding than you
do now.

The fact is that your taste for spending money is not going to change
in retirement. The more you spend now, the more you will be used to
spending a lot, and the more money you will need to maintain your
happiness in retirement (which you won't have because you spent it when
you were young). The less money you spend now, the more you will learn
to enjoy the frugal life, and the less money you will need to enjoy
life in retirement (and you will have more than enough for your needs
because you were frugal all along).

Andy