College, Retirement

My Plans For Retirement And Education Savings

My daughter is 7, my son is 3, and my wife and I, we are both 32. So, in the next 25 years, I need to be ready to fund two college educations and two retirements, while paying cash for all purchases, including major purchases like automobiles, furniture, appliances, and even a home! So, here’s my “current” plan to meet the future, with confidence, and without fear.

Education:

Daughter: My Daughter’s ESA currently has a balance of $4,742. I plan to contribute (at least) $2000 to her ESA for the next 12 years. At 6% APR, she’ll have almost $46,000 for college. At 8%, she’ll have almost %54,000. At 10%, she’ll have $65,000. Of course, once she begins college, there will be ongoing expenses. I’ll write more about that, below.

Son: I have just opened an ESA for my son, so his balance is $0. I plan to contribute (at least) $2000 to his ESA for the next 16 years. At 6%, he’ll have almost $68,000 for college. At 8%, he’ll have almost $84,500. At 10%, he’ll have $106,500. Again, once he begins college, he will have ongoing expenses.

Retirement:

My wife: My wife contributes 5% of her pretax income to her pension plan. She can retire in about 21 more years. Her pension plan will provide 60% of her final year’s annual salary. We also plan to fully-fund her Roth IRA every year for the next 25plus years.

Me: I contribute $12,000 annually to my 403b. I also plan to fully-fund my Roth IRA every year for the next 25plus years.

Major Purchases

Currently, we plan to save a minimum of $10,000, per year, in a non-retirement investment account. I realize that I will have to pay some taxes on the gains in this account, but living without borrowing money requires a pretty substantial amount of non-retirement savings.

Additionally, we plan to buy a house, at some time in the distant future. (Currently my employer provides a house for my family, as part of my compensation package.) I have yet to decide which type of account we should use to save for our future home purchase. Our next major purchases will be two “newer” automobiles which we plan to purchase in 2009-2010. After making those purchases I’ll reevaluate our situation and our plans.

So, NCN, why in the world would you go to the time to write about all of these different plans? How do you know how much interest you will earn? What if you have another child? What happens if one your automobiles “dies” and you have to replace your automobile sooner than you had planned?

Frankly, I mention these plans so that you can see how much I am thinking about the future. I realize that my plans may have to change, shift, and be modified over time, but I am THINKING about these things. How many people do you know who are just “floating” through life without THINKING about the future? I refuse to live without a plan and without a purpose!

Resource:

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6 thoughts on “My Plans For Retirement And Education Savings

  1. @Hazzard, When my husband first started teaching, he taught at a boarding school. The school provided most of the teachers with an apartment. However, just so you know, the pay at private schools is usually substantially lower than teaching in a public school.

  2. Hazzard, the military doesn’t allow for 403(b)s – they have their own Thrift Savings Plan.
    NCN, good job thinking about the future. Don’t forget to factor inflation into your plans. By the time your daughter and son are college-aged, $46,000 might only pay for one year.

  3. You have shared some really great information about your family’s choice to make tackling debt a priority. While many people choose to be indifferent about their personal debt situation your acknowledgement of how to formulate a plan that works is awesome. I live in the Conyers area and recently formed an investment club with some friends from college who also live in the metro Atlanta area. We are in the very early stages, but since we all turn 30 this year we’ve decided to also formulate a plan for a strong financial future and retire our debts. Would you mind contacting me via email, I’d like to bounce some ideas off you and get some feedback (if you don’t mind). Again, thanks for sharing something that I am sure relates to a lot of people…Best wishes for you and your family!!!

  4. Those are great plans on the ESAs, keep in mind the current legislation that allows up to $2000/year is set to expire in 2010, so you may need to adjust your calculations using the go to $500 maximum annual contributions.

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