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.
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.
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.
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!
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