The plan for my wife to retire was actually set in place long ago. When we met she told me that with the military, she’d be eligible for a pension and able to retire at age 43. That’s one of the main reasons why I started this blog. I didn’t want to work another 22 years after her and start living life at age 65.
That was 2006. We’ve had a great 14 years of financial planning. We’ve seen our net worth growth 4x or 5x. We should be in a great place to begin retirement.
In a lot of ways we are. I have some freelance work, dog sitting, and this blog business that brings in some money. We have some rental properties (from being an accidental landlord) that are losing money but have equity. The mortgages are done in 7 years and should bring in a good income of around $30,000/year after that.
…and yet I’m still very nervous about how to make retirement “happen.”
Now this isn’t a situation where the stay-at-home person, me, is trying to be selfish… or I don’t think I am. To understand why I think I have to explain the unique situation and obstacles.
Obstacle #1: Kids’ Private School
My wife and I treasure the education that the kids get at their private school. It may not be the very best in the country, but it would be above the 90 percentile, maybe even above 95 percentile. We wouldn’t ordinarily consider the expense of sending our kids to this school, but her military discount is exceptional and makes the math work.
However, if she retires, we expect that military discount to go away. Our expenses would go up about 35% at the same time our income drops 40%. That’s not usually a good plan to a successful retirement.
While the school is certainly something that we can eliminate, I think my wife is less willing to do that than I am. They’re in a K-8 school now, and my wife is thinking about private high school (even more expensive), while I’m thinking a combination of public high school and community college.
Do we have to cut a deal with the school? Could we cut a deal with the school? Could we look into another particular (cheaper) school that we’ve some other kids switch to?
These are all on the table. However, approaching the school with these questions takes some tact and timing. I’m often afraid of asking questions when I suspect that I’m going to get an answer that I’m not going like. We don’t know how much of a “what if” this situation even is.
Obstacle #2: Lack of Savings
I’ve always tried to make the smartest financial decision. That’s why I have this blog. In most cases it is to use index funds and retirement accounts to plan for the future. We’ve got a very good nest egg saved up… in retirement accounts that we can’t easily touch.
Many financial bloggers will use Roth IRA Conversion Ladder to get access to retirement money with limited tax consequences. It doesn’t work out as well if you have a pension and if my side hustles are performing.
One answer here may be to take out our Roth IRA contributions over the years. That would give us some savings. Obviously that comes at the risk of retirement growth, but for all the reasons I mentioned at the beginning, we look to be in very good shape down the line.
There are more obstacles, but the previous two are the big and obvious ones that I can see.
My Wife Makes the Call
My wife came up with an idea recently that makes a lot of sense. She wants to have a year of income saved up in cash. That would help cover obstacle #2.
The only problem? It’s been hard for us to save money. Between saving in retirement accounts, paying our house on a 15-year mortgage, private school, travel, restaurants, and the annual surprises, we don’t save a lot of extra cash. We’ve found that in COVID-19 world the lack of travel and restaurants allowed us to save more. My freelance work has also helped. While I still haven’t settled out the month’s bills, I think we’ll be at a quarter of a year’s income saved up.
More Plans to Be Made
On my plate is to do a more comprehensive review of our expenses. I’ve been estimating our necessary expenses for a long time. However, it’s been a while since I even ran one of those estimates. I want to be able to provide an analysis of expected income and expenses, with and without the school. In the end, I expect that will only be a guide… my income numbers fluctuate and our expenses fluctuate as well.
Sabatical or Retirement
My wife isn’t likely to go into permanent retirement. She wants to start her own consulting company using her Pharm. D. and pharmaceutical policy MBA. I don’t know anything about this field. She doesn’t know anything about the private sector. There’s a lot of potential research to be done there. It’s possible she pivots to be an even higher earner than she is now. It’s also possible that she tries to start a boy band with our kids and few of their friends.
It’s great to have those kinds of options, but it’s more uncertainty. Obviously with all this uncertainly, it’s best to plan for the worst-case scenario. There are two problems with planning for the worst-case scenario:
- Planning for the worst case of all the above scenarios could mean that there’s no retirement in sight in the short term.
- If 2020 has taught us anything, you can plan for one worst-case scenario… but there can always be another one right it.
While it seems like we’ve already taken ten thousand steps towards retirement, this feels like the first real step. It’s one thing to increase your options for the future. It’s another to try to formalize the steps and move forward with them.