Having a child and saving for retirement. Advice from parents & non parents alike?

We are 25 years older than you and your wife, and were in roughly your position at roughly your age. We have one Son (now 25) and we really struggled when he was little. We had no nearby relatives and at 35, no contemporaries with babies I could split responsibilities with. I returned to work when he was three months old (end of paid maternity leave) and put him into nursery. I paid most of my salary until he started school, paying for nursery and baby-sitters and my husband paid the bills and living expenses. I also felt self-conscious, inadequate and inept around babies but they are quite robust and it didn't matter.

After he started school it was better - swaps with other parents and holiday play schemes, coupled with time at Grandma's or Grandma coming to stay helped hugely, together with the occasional single parent holiday (we took our leave at different times to minimise costs and cover the holidays) and staggered working days to cover drop-off and pick ups.

Now I am looking towards retirement and the fact i kept paying into my pension has stood us in good stead. My husband changed career in his forties and so his pension position is multi-faceted. He pays into a teacher's pension now but had a private pension that we set up after we met.

It has worked for us. Paying bills, economising where we can (and others have described) doesn't make your life less rich, just different. We have also overspent at times and had to manage debt down. I don't regret having our Son. He enriches our lives and we would not change our decision. Financially we are better off now, and our earnings make our life a comfortable balance.

Like I say, I would not change our decision.

Not_Me_Officer wrote: »

As said earlier - we're actually a little boring, so we wouldn't be giving up a social life. We're actually socially awkward so it can't impact on a life you have with friends if you don't have friends - but we're both fine with all of that.

Having children can often be one of the best ways of making friends as you end up meeting loads of people who by definition have a major part of their life in common - from NCT ante natal groups through to play dates, the school gate. PTA, etc, etc. If you're lucky your kids themselves will become your good friends too. Kids fundamentally change your social life, but by no means do they end it.
The finances are an issue, but there are many different ways that people cope. You almost certainly won't be able to retire as early if you have kids than if you didn't, but most people who have kids will tell you that the compensations are more than worth it.

justme111 wrote: »

Another Joe, he was questioning retirement, not how they would cope now. So sughestion of living on one wage has nothing to do with the original query. If one would want to see how they would cope now which is a different topic then the reasonable start would be to see what their income and expenditure with a child would be , not try wild guesses that the wife will never work again. By the numbers op provides the whole of one salary goes on bills. How suggesting they try to live on it makes sense?

I think i said it, but if i didn't, I'll say it now, his income in retirement would be roughly equal to his income with one salary, if he doesn't fancy that lifestyle, with a child it may well arrive a LOT sooner than retirement.

There were two main things beyond prudence that struck me about your question: her age and your incomes.

You wrote about a one year time window so you're probably aware of the risks to the health of both child and mother from delay, as well as the decreasing chance of conception. So no need to write more about this than agreeing that you do have a time limit.

Incomes offer more possibilities. It seems likely that you will end up receiving working tax credit if she isn't working and there's a child. One interesting feature of WTC is that pension contributions increase the WTC payments because the contributions are deducted from the income used in the calculation.

So a strategy to consider is to make pension contributions at a high enough level that your household qualifies for the maximum possible amount of WTC now. That's a tougher test than one income, which better reflects the financial strain of relying on them with a child as well. This can also eliminate your income tax bill by taking your incomes down to within the personal allowance.

The WTC is on top of the pension tax relief so draw a bit on her savings to get maximum WTC if that's what it takes. It's more free money and you deserve the extra help.

If you had more time I'd suggest a strategy of max WTC for a year or three then none but maximum savings to accumulate a reserve of savings to draw on, then repeat. It's an approach that can produce a major boost to eventual income for those with low incomes in only a few years if it's done early enough for compounding investment growth to work its magic.

Your wife having £7500 in an ISA may be a problem because of savings limits for some benefits. Something to check to see whether you might get reduced council tax, say.

Each ten thousand Pounds of lump sum invested for 33 years at a growth rate of 4.5% after inflation would produce a pot of 44 thousand at say age 68. Allowing for the usual preference for income when young and declining spending as people age about six percent of that rather than the usual four percent might be taken as income. So £2640 a year. Pretty good result from about one year's effort. You might be able to manage twice that or a bit more. Not at all bad as a top up to about eight thousand each in state pensions.

So far as the workplace pensions go, try to always do the maximum that gets employer matching. Might be the minimum the law forces the employer to do. By 2018 the legal requirement for employee, employer and tax relief will be eight percent of the relevant band of pay unless the employee opts out. I'll assume that the band is fourteen thousand and that's a regular monthly contribution of 93. Over the same 33 years that produces a pot of 84 thousand. Well worth having.

Since children don't appear instantly you might be able to do the max WTC thing for two or even three years, depending on when conception ends up happening. An excellent boost.

The median average pensioner household income is around 23 thousand a year. You appear to have the potential to get to that level with a bit of initial determination and fairly modest ongoing cost, helped by means tested benefits. Given what appears to be possible I don't think that concerns about eventual retirement income should be a barrier provided you're willing to make the initial substantial commitment and ongoing smaller one.