Early Retirement.... with Young Children. Does this feel reasonable?

ams25

I read lots here about people waiting until the children have finished university before they feel its safe to retire/stop full time work. My situation is different.

I had children relatively late (early/mid 40s) and I have stopped working (at 52) - with 2 primary school age children (6+10). I might be getting the SP just as my youngest is finishing uni (if he goes)!. The upside of this (unplanned) approach is that i was able to save more when younger (no kids) and those savings have had the benefit of the magic of compounding... plus I now get to enjoy more time with the kids while relatively young.

While I think I have the financial cover to maintain our current standard of living including the cost of the children, I have to admit its an area where I may not have everything fully covered - so would value the view of the board on this in case I am missing some major cost factor.

My tracking of expenses over the past couple of years is that the children (both) are adding around £13k pa to our budget, which seems consistent with some of the "costs of raising a child" articles you see. We spend more on the kids than we do on ourselves and given some folk are looking to retire on this or not much more, it feels like a decent amount. We have no childcare costs - as i am around for that and not looking at private schools, so this covers clothes, toys/gifts, school and after school activities, food, holidays, eating/going out, kids parties etc. We live in London so everything is expensive
My expectation is that this will increase as they get older, but unsure how much. c.15% is my expectation but I am guessing as have not had older kids! (some things should be cheaper too... less on toys.. more on food, going out?)

When it comes to university, if they want to go, good chance the situation will have changed 8-10 years from now, but I have assumed I would need c.£40-50k each in todays money to support tuition fees and living costs for 3 years. I know the Martin Lewis advice is not to pay the tuition fees upfront, but provide support with the repayments if required later, but would aim to be covered either way. Help with house deposits etc might potentially come from downsizing our current home when the kids are older so not worrying about that for now.

My question is do you think I have realistic expectations of the ongoing costs for the children or am I missing something.

Thanks.

[Deleted User]

As far as uni goes you should not budget to pay tuition fees let them borrow the money for that, they have just announced that they are increasing the repayment threshold from 21k to 25k a year earnings, and are looking at both the interest rates on that and also taking another look at the student loans system my bet is they will bring back some maintenance grants. Also when they reach 16 you should encourage them to find part time jobs so they can pay for their own entertainment, from experience kids do get cheaper to run as they get older BUT they rarely stop costing you something even in their 20's and beyond !

ams25

venison wrote: »

As far as uni goes you should not budget to pay tuition fees let them borrow the money for that, they have just announced that they are increasing the repayment threshold from 21k to 25k a year earnings, and are looking at both the interest rates on that and also taking another look at the student loans system my bet is they will bring back some maintenance grants. Also when they reach 16 you should encourage them to find part time jobs so they can pay for their own entertainment, from experience kids do get cheaper to run as they get older BUT they rarely stop costing you something even in their 20's and beyond !

Thanks. I agree on the current basis does not make sense to pay up front... will have to see what it all looks like in 8 years. And if Jezza is in power it will all be free anyway!! :eek: (just have to worry about the taxes and high inflation)

I had a paper-round from about 12, good for the early work ethic, so will be pushing the kids to get some part time work. Not sure how much demand there is for paper boys/girls these days, let alone a few years hence. I used to wash cars, caddy at the local golf course and worked in a local shop. What do kids do these days?

OldMusicGuy

Regarding uni, my son has just finished. We made him take out a loan for tuition fees for two reasons. First, it would give him some "skin" in the game as he would be spending his "own" money to be at uni. Second, the repayments are not onerous, especially if he didn't get a well paid job.

We did subsidize his rent and living costs which came to around £9K per annum.

ams25 wrote: »

I used to wash cars, caddy at the local golf course and worked in a local shop. What do kids do these days?

My son from age 18 on has done freelance SEO content creation. Not a massive earner but a good way of earning topup cash and it fits well with studying.

stoozie1

I understand why some of the previous posters are warning about overcontributing to children's Uni costs, but I'd advise you run your income through the calculator to see how much possible loan would be reduced by because of your earnings, as you'll have to top them up by that much, even if they sef-fund the rest.

atush

I know the Martin Lewis advice is not to pay the tuition fees upfront, but provide support with the repayments if required later,

Not sure if Martin's opinion still flies- now that interest rates for new loans are 6% or more. Nor letting them borrow at that rate which is higher than a SVR mtg.

University is expensive, and we had to delay our retirment because we had kids late.

ams25

stoozie1 wrote: »

I understand why some of the previous posters are warning about overcontributing to children's Uni costs, but I'd advise you run your income through the calculator to see how much possible loan would be reduced by because of your earnings, as you'll have to top them up by that much, even if they sef-fund the rest.

Thanks. Unless I go back to work, I don't expect to have any earnings - my income will be a combination of DB pension, SIPP drawdown and ISA savings (interesting how you declare that). If I understand it right, my children could get a maintenance loan as well as tuition fees loan, but all repayable in the same way. Even if my taxable earnings were low, would my children be entitled to anything other than a larger loan?

ams25

atush wrote: »

Not sure if Martin's opinion still flies- now that interest rates for new loans are 6% or more. Nor letting them borrow at that rate which is higher than a SVR mtg.

University is expensive, and we had to delay our retirment because we had kids late.

Thanks. So - with the current tuition fees approach - is around £55k (each) in todays money looking about right. ie £9k each for tuition fees and living costs (if you avoid the loan) so c.£18k pa. (x3)

stoozie1

ams25 wrote: »

Thanks. Unless I go back to work, I don't expect to have any earnings - my income will be a combination of DB pension, SIPP drawdown and ISA savings (interesting how you declare that). If I understand it right, my children could get a maintenance loan as well as tuition fees loan, but all repayable in the same way. Even if my taxable earnings were low, would my children be entitled to anything other than a larger loan?

So it's only the ISA income that wouldn't be counted, but it sounds like you think you're below the threshold (£25k)where the loan amount would be reduced.

For anything other than a larger loan, I only know of bursaries in teaching and medicine/nursing.

Northamptonblue

Our younger son is currently at Uni. We had saved a decent sum to subsidise his living expenses and expect him to take out loans for tuition fees and the small amount he is allowed to borrow. We were keen that he only borrowed from Student Loans due to the repayment terms. He chose medicine and got into Oxford on a six year degree. The cost of living is high, however, and even though he is frugal, we estimate a £50,000 contribution from us will be the final tally. Obviously, other degrees and locations will be less expensive but you are right to factor in a large cost.

Wouldn't have it any other way though and can't think of a better way to spend our savings.

atush

ams25 wrote: »

Thanks. So - with the current tuition fees approach - is around £55k (each) in todays money looking about right. ie £9k each for tuition fees and living costs (if you avoid the loan) so c.£18k pa. (x3)

All depends on where they go. Some places like London are more expensive than others re living costs.

But I found (as I was used to feeding them anyway) that I could pay most if not all living costs from income at the time they went. With savings paying the big upfront costs. Was a little harder with the twins as there were 2 at once.

But you cant do this if retired, so that is why I suggest working longer, or taking PT work a the time they are at Uni.

But if you do put away that amount for each child you have a fighting chance as it will continue to be invested while they are there so the pots might grow?