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Why you might need to bake another $170k* into your retirement nest egg

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  • Why you might need to bake another $170k* into your retirement nest egg

    Somewhat of an offshoot from a blog posted elsewhere   , in which there was some discussion of the unexpected costs of raising children, this Merrill Lynch survey of retirees and pre-retirees over 50 indicated that the average paid $6800 toward expenses for their adult children in the last year. I know that this would never be a concern for the members of this forum , but it is out there for many regular folks, and I have seen a considerable amount of continued financial support of young adults in friends, colleagues, and within my family (not my kids yet as they are still teens).

    At any rate, I have linked the ML study. I think that there is some good info and perhaps a little hype, too.

    https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/ML_Finance-Study-Report_2017.pdf

    (The adult children issue is on page 19.)

    *$6800 x 25 = $170k (using the 4% rule to come up with the amount needed to prefund this expense)

  • #2
    I'm planning on my kids giving me and my wife 6500 a year each so I am subtracting rather than adding. I will give it back when I'm dead. Ymmv.

    I'm also planning on living in their basement to reduce my costs further.

    If they keep listening to me and my amazing plans they will be FIRE by college graduation!

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    • #3
      Bounce back kids happen. I think it is hard to plan for this. I suspect it is more than $6800 if it happens.

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      • #4




        Bounce back kids happen. I think it is hard to plan for this. I suspect it is more than $6800 if it happens.
        Click to expand...


        Yeah, I would think the distribution would be fairly bimodal: it will either be $0 or way more than $6800...

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        • #5
          This is something I worry quite a bit about.  My kids are way to young for me to have any specific concerns yet, I just know it's a fairly common issue and I want to be prepared if the need arises.  Also I've got healthy aging parents who aren't that well off to think about.  Those things push the number I need to retire way up.

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          • #6
            My wife and I are going to sell the house and move into a (small) condo when the last kid starts college.

            If they graduate on time and get good jobs, we might even tell the kids where we moved. 

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            • #7




              My wife and I are going to sell the house and move into a (small) condo when the last kid starts college.

              If they graduate on time and get good jobs, we might even tell the kids where we moved. ????
              Click to expand...


              I like the way you think.

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              • #8




                This is something I worry quite a bit about.  My kids are way to young for me to have any specific concerns yet, I just know it’s a fairly common issue and I want to be prepared if the need arises.  Also I’ve got healthy aging parents who aren’t that well off to think about.  Those things push the number I need to retire way up.
                Click to expand...


                me too!

                i tell my kids every day i will pick their spouse for them since i'm going to be spending much more time around the spouse than they will.   also because i have to be sure they can take care of my own diapers.  don't want anyone dainty.

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                • #9


                  Somewhat of an offshoot from a blog posted elsewhere , in which there was some discussion of the unexpected costs of raising children
                  Click to expand...


                  You mean this one, by Vagabond MD?

                  Thought so.

                  The cost of kids (and "adult kids") is probably the second biggest unknown expense after healthcare costs for most of us aspiring early retirees. Overshooting the 25x FI target with an extra year or three is probably a good idea unless you can't stand your job.

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                  • #10


                    The cost of kids (and “adult kids”) is probably the second biggest unknown expense after healthcare costs for most of us aspiring early retirees. Overshooting the 25x FI target with an extra year or three is probably a good idea unless you can’t stand your job.
                    Click to expand...


                    I feel like there's a point where when you keep adding on the potential for unexpected costs, unless your FI date is at PoF levels (a small small minority), you're just going to work until you're 65 anyway to be able to cover the "unexpected" costs.
                    An alt-brown look at medicine, money, faith, & family
                    www.RogueDadMD.com

                    Comment


                    • #11





                      The cost of kids (and “adult kids”) is probably the second biggest unknown expense after healthcare costs for most of us aspiring early retirees. Overshooting the 25x FI target with an extra year or three is probably a good idea unless you can’t stand your job. 
                      Click to expand…


                      I feel like there’s a point where when you keep adding on the potential for unexpected costs, unless your FI date is at PoF levels (a small small minority), you’re just going to work until you’re 65 anyway to be able to cover the “unexpected” costs.
                      Click to expand...


                      Maybe that's why lots of folks work until 65 (or beyond). Between the surprises and the unknowns, it's never safe to not work. It's gonna take a mighty strong finger to pull the FIRE trigger.

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                      • #12
                        Talking with my father yesterday, he offered to buy me a riding lawn mower that i never asked for and likely don't need. Plus the expenses for a new couch as a gift.  This in addition to some other nice things over the past year, most of which have been voluntary.  He does this for all his children just out of generosity and not necessarily need.  I guess that's step 6 and then some.

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                        • #13
                          This is the main reason I don't think I'll ever completely feel comfortable pulling the trigger on the RI component. I have three girls (so far) and in my religion (Mormon) most women are stay-at-homes so their financial future is significantly and often solely determined by their random spouses..

                          I'm not here to support them in their adult lives but I want to be their emergency fund and make sure they have vacations, pay for grandkids schooling, etc..

                          It's hard hitting the number I'm hitting now but in my specialty I could cake walk to 3-400k so I don't think I'll be able to walk away from that earning power (obviously that can change too).

                          But we'll see. The beauty of this site has taught me the importance of FI where I'll hopefully be able to have options when that time comes- but this is definitely something that factors into my future planning

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                          • #14
                            One of the best ways to help kids grow up is to allow them to struggle.  When you love someone very much, giving them too much is often the easier path.  It takes strength, wisdom and a deeper form of love to do the right thing and watch them struggle.  The life lessons they learn can be a far greater gift than the easy way out, giving them money.

                            If you give a man a fish, he will eat for a day.  If you teach a man to fish, he may eat for a lifetime....

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                            • #15
                              It is much harder to teach fiscal restraint and investing skills than to just give bailout funds.

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