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

Not_Me_Officer · 12 July 2017 at 9:36PM

As you can probably tell, I've been having the discussion with my wife about the idea of a child. I'll stress early in this post that if we have one it'll be only one (unless it's twins or something from the start). I know 'they all say that' but let's go with there being one for the purpose of this.

I also know there's no bigger hit on retirement planning but i'm not talking of putting aside the absolute maximum in life, doing without for 30-40 years just so i can have a rich retirement.

Hopefully my aim is clear but it's about finding the balance.

We are seriously considering having a child. I am here in this thread to discuss with people i don't know because people we do know i think are giving terrible advice. Especially my wife's workmates. "you think too much about it, if you want it just do it". Yes and deal with the consequences later when it's too late? Our view is better to be informed first. We don't like the "i want so i will have" attitude & instead we're more like - "i want but can i actually have....".

So on to the topic of retirement....

One of the main points, perhaps even THE main point for having us so unsure is the impact it'll have on our retirement.

* I'm 34, my wife is 35.
* I currently have about £9000 in a SIPP with Cavendish plus £1500 in a workplace pension which has minimum contributions paid in. My wife has £7500 in a S&S ISA with less than £1000 in a workplace pension as she joined later (also minimal contributions).
* I earn about £20.5k gross per year, my wife about £19k. My wife takes home £1300-£1400 in her pocket each month whereas i'm around the £1400-£1500 in the pocket per month before bills
* I think our bills total around £1300 per month. I worked it out a few months ago and it was around that figure. If i remember right then i also broke down car insurance and tax into monthly payments to include in that figure.

A great concern of ours is that we'll have very little money aside in retirement so that our quality of life after work would be poor. We're not big spenders by any means. If anything we're actually quite boring but it works fine for us.

My wife's parents are now in their 50s and have zero set aside for retirement. They struggled all their lives. There's often times where there's just not a spare £10 in the month ... they had 3 kids. The younger 2 being born after my wife was 11-14.

My parents i remember also struggling. I remember my mother having 2 jobs when i was quite young. My sister was born as i was 7 and my brother as i was 9. In time we seemed to struggle less but that's just how it seemed to me. This didn't coincide with my dad moving to a super paid job or a huge raise or anything. He would've been paid in his later years similar to what i'm getting now (just for 5 day weeks instead of 6 like me). My mother has zero set aside for retirement. My dad always paid in to his pension and by the end he was able to take a monthly pension that they could live off comfortably enough

So i guess it can be done, right? He's just not around for me to ask more detailed questions and my mother left all the money side to him.

My wife would be off work for [unknown time period] so the £1300 off my wage leaves not a lot left. I understand that the child gets older obviously and costs change, wife can [at some point] go back to full time work which at that point [whenever that may be] would help ease things.

So yeah really with the kind of income we have, with our ages and what we have set aside already (not much) i don't know if it's possible to set aside a reasonable amount for retirement. I'm not expecting to be able to draw on £30k per year obviously.

So is it? Those who may have made it this far and are on similar income - are you/was you able to do it?

I know of others who have just had kids who either get paid the same as we do or less who are still able to buy things, but it makes me wonder if they only live for the present and not the future and what sort of existence they're in line for come retirement.

Of course ...... i could get to that retirement day & then drop dead the very next day which would make all this concern about retirement pretty pointless. Shame i don't have a crystal ball.

Sorry for waffling on so much but i'm struggling to type out what's going through my head at the moment. We know what we want, we just want to be able to afford it .... without the cliche of "you just manage" like some magic trick occurs at the end.

AnotherJoe · 12 July 2017 at 10:38PM

So every month you have a net income of c £2700 and expenditure of c £1300.

Whats happening to the £1400 difference ? Its obviously not going into pensions or savings.

Anyway, I would say, if you aren't that fussed and getting a decent retirement is your top priority, forget about having a child. Indeed the mere fact you have to ask, says you shouldn't.

Not_Me_Officer · 12 July 2017 at 11:18PM

AnotherJoe wrote: »

So every month you have a net income of c £2700 and expenditure of c £1300.

Whats happening to the £1400 difference ? Its obviously not going into pensions or savings.

Anyway, I would say, if you aren't that fussed and getting a decent retirement is your top priority, forget about having a child. Indeed the mere fact you have to ask, says you shouldn't.

We started putting aside for retirement when we were 28 & 29 although only a very small amount (£100pm) because we were saving for our first house at the same time but we at least wanted to start putting aside.

When we got the house we ran in to problems that story short took a couple of years and a lot of money to sort out. All in all we probably spent about £10k putting problems right which could've gone elsewhere. That had us totally spent up to the point where we went minus, only by £500 or so but we went minus (we're in the plus now though). Workplace pensions began and all in all i was probably putting 15-20% into my plan (workplace pension and S&S ISA at the time).

Then through a lack of understanding on what really would be best we delayed a bit further before last month i bought some books & then had more confidence to take out a SIPP and manage it myself without paying an IFA to do it for me. Contributions were increased for both of us.

That is why it "obviously isn't going into pension" as it was going into the house for a couple of years.

Now we have money going into our retirement plan (pension for me, S&S ISA for wife), money going to build a 3 month emergency pot (which we're just about at) and just general savings.

Though at nowhere did i say we're "not that fussed" like someone asking if i want to go see a movie this weekend. We'd like kids yeah of course. Is it a great burning desire where nothing else matters in the world? No, but then can all parents say that's the way it was for them? No. Though trust me it is more than just an "i had this idea that i think might be worth a try some day..."

A good retirement is not my 'top' priority either. I'd like to achieve a balance if that is possible at this stage in life. I'm not sure if it is or not, that is why i'm here to chat with those who will surely have done it (or to a degree) before me.

To be perfectly honest with you, and it's going to sound very pessimistic but i don't believe i will have a long retirement. I question whether i'll make it there anyway and if i do how long i'll be alive for. Having done the family tree i found that everyone seems to die fairly early in my family. My dad was one of the oldest when he died at 68. From branching out on the tree some did make it beyond that but really not many at all. Others were 40-60 & a lot of it chest/heart issues. My dad only had 3 years of retirement. All that money paid in over the many years ....... but only 3 years of poor health in retirement.

Some would say well if i'm going to think like that then what's the point in paying in a penny? Well you have to assume you actually are going to make it don't you? And that's the thing - about getting the balance. Enjoying the present while putting in work for the future because you never know.

TBH i think it's better doing what i'm doing (looking to see whether we can afford a child) than what so many others do (i want therefore i'll have!)
For example - a family member wanted a child so they had one. Struggled like crazy for money & threw strops to get handouts yet grumbled when those family members were getting involved with the child. Happy to take the money but wanted the family member to not have much/anything to do with the child.
So what did they do after all this struggling? Yup ... had another because they wanted to. More struggling but they had one because they wanted one. More talk of can't afford leading to more handouts but more complaining about the one doing the handing out.
And what have they done again? Yes you guessed it.

So i think at least taking the time to look in to whether we can afford to have one is actually a pretty responsible thing to do to be honest. I don't agree that simply asking the question means we shouldn't have one.

cloud_dog · 13 July 2017 at 12:24AM

I understand what you are thinking but to some degree you are over analysing. We went through a similar process where we actually made additional savings because we both agreed that my wife would not go back to work after the birth of our child.

I'm not commenting directly on you or your situation, after all we are all our own people but, regarding whether you are bothered or not bothered about a child is probably due to an element of 'of course we'll have a child', it's natural everyone has them.

Regarding the implications of having a child both financially and 'life' wise you will make choices and sacrifices. As a great orator once said... you adapt, you improvise, you overcome.

Speaking personally, we went through a lot of pain and heartbreak. Knowing what I know now, would I go back and do it all over again, absolutely without a seconds hesitation.

Financially, you need to try to keep doing what you can (regarding pensions and savings) but you may have to adjust your priorities or time scales.

Not_Me_Officer · 13 July 2017 at 7:05AM

I've no doubt the vast majority would do it all over again. Also with so much money that would over the years HAVE to get out the child's way then it's a no brainer that something would have to give somewhere (vs not having a child). That may be retirement, it may be holidays, it may be [many things] or could likely be multiple things. I'm well aware of that fact.

I read recently about a female couple who retired at 40 due to hard saving. Once reading the article I saw they got at least a combined £70k pa. I was less impressed when I saw that. My point is if we had that money coming in for example (one of them was £40k 'base') then we'd go ahead and wouldn't even ask. But we're not on that, we're on £20.5k & £19k and that's what we have to deal with.

We're currently aiming at 65 for example. If having a child shifts that to 67-68 (just an example) that's one thing but if it shifts that to 75 (example) then that's totally different.

And what I'm struggling with is gauging how much that figure will change. Again it's back to balance. We're fine with having to increase it, we accept that, but how far is the question really.

im sure we would (classic cliche time...) 'just manage' throughout the life of the child, but it's afterwards that I'm struggling to work out right now.

k6chris · 13 July 2017 at 7:37AM

Having a child is both the biggest commitment on time and money you will have and, for me at least, the only thing I ever really wanted to do (we have 3 grown up now). You are very wise to ask about the financial cost. The cost is not in clothes, prams etc, which you often source cheaply second hand and then resell once they have grown out of them etc, or indeed borrow from other parents with slightly older children. The cost partly comes in that you need a house with one more room, a car with a bigger boot, one more place on holiday, a few more tins of food each week and some more presents at Christmas. The main 'early' cost however is the cost of childcare, be that in lost earnings or paying for a nursary place. Tax credits might help, grand parents could help too? It is estimated the cost of a child to 21 is about £10,000 a year - my gut feel is you could sensibly do it for half of that, but I don't have the 'math' to back that up.

http://www.thisismoney.co.uk/money/news/article-3448120/Cost-raising-child-spirals-230-000.html

For me the decision was not really a decision, it was part of my DNA and I was lucky enough to have what turned out to be a good and stable job. Many couples sensibly decide not to have children, either because they want more time, money, or simply don't want kids. If you are both just 'thinking' about it, then perhaps the hard wiring is not there, so I would invoke the rule of my Yorkshire friend 'if in doubt, do nowt'...you have a few years yet.

A wise thought process, they have a huge finacial impact and I would not for one second change the fact I had (and have) 3 amazing children that still cost me money. Good luck your decision making process.

AnotherJoe · 13 July 2017 at 8:04AM

Not_Me_Officer wrote: »

So i think at least taking the time to look in to whether we can afford to have one is actually a pretty responsible thing to do to be honest.

I agree, its very resonsible, but even so, if you need to even ask if you can afford it that still means (at least to me) that the burning desire isnt there. Otherwise you'd simply accept it meant a lower standard of living both now, and in a later retirement and get on with it anyway.

Not_Me_Officer wrote: »

I don't agree that simply asking the question means we shouldn't have one.

I think given what else you say, it does.

If you really wanted them, you wouldn't ask, and even if you were just "very keen" (which doesn't come across from your post which is all i can go on) i think your question would have been, "how do i make it work", not "should i make it work".

You can of course retire later on a lower income, many do but it doesn't sound as if you want to and on your incomes i dont blame you, you will be able to get by but unless you can, say, double your income thats all it would be.

Perhaps this is the test, if you push back against posts like mine and still go ahead, then you know you "really" want to. But i agree with your financial analysis, it would mean a poorer later retirement and to me that comes across as your reason why you would choose not to go ahead. Not me, you. Maybe I'm reading you wrong though?

Why not see just how much you can save for the next year or so, by only living on your income, no cheating, put 100% of your wifes income away, and see how that goes. If at the end of a year -18months, thats too hard / unacceptable for the next 10 or so years, and then in retirement, then you know the answer.

Kynthia · 13 July 2017 at 8:13AM

Yes it's sensible to look at your finances befire having a child but it's also an emotional decision. The fact is there's a time limit to your decision so at some point you need to take the plunge or it's no longer an option for you. It is also true that people make it work, they become very frugle, they work hard to increase their future prospects, etc. Most people decide that they'd rather be a little poorer than never have a child.

First thing is to not view your workplace pensions as optional. If you do you'll forever be opting out as times will seem too hard with house expenses, maternity leave, childcare costs, etc. Unless you are going at risk of eviction you keep yiur workplace pension deductions. Then know that there's now 30 hours of free childcare for 2 working parents. So if you need to you can both work from not long after the child's 3rd birthday with the costs of doing so being low.

So people often earn more as they get older and put more into their pensions once their children are grown. Especially as mortgage payments have usually become a much smaller percentage of their take-home pay.

It is likely you'll both have full state pensions at spa and you'll be paying no NI or pension contributions on this income and I'm guessing you intend to have paid off your mortgage by then. So have you seen how much this will give you? Plus you'll have whatever pension you've saved.

Not_Me_Officer · 13 July 2017 at 8:19AM

Just briefly, since I'm now at work so I'll catch up with the responses since my last post later-

I sort of have to come and discuss with people who don't really know me at all as I've already tried it with those who do know me.
The problem there is when I talk about retirement every single one of them says "pensions? What a waste of time" and that is the general attitude across an age range which starts early 20s up to late 40s/early 50s. They all say pensions are a waste of time.

It's not an opinion I share.

So I see these people as living for the moment. Sure they can afford (now) but will they be able to afford later? Maybe some will but some for sure won't.

The one person I do know who is putting aside for retirement and yes there's only one ... never ever wanted kids and had the snip in his late 20s so he isn't much to go off either.

Which is why I'm here asking you guys.

Not_Me_Officer · 13 July 2017 at 8:22AM

Oh and some of these people have plenty of kids. The most is 9. There's a 7 & some 5s in there and then on to the usual 3s, 2s & some 1s.
Many have a household income similar to mine, some more and some less but many similar.

And they can all afford which as I say makes me sure I will be able to afford ... in the present.

It's just afterwards I question.

Spreadsheetman · 13 July 2017 at 8:39AM

Not_Me_Officer wrote: »

.....
The problem there is when I talk about retirement every single one of them says "pensions? What a waste of time" and that is the general attitude across an age range which starts early 20s up to late 40s/early 50s. They all say pensions are a waste of time.

It's not an opinion I share.

Well, it's a simple question they need to ask themselves - are they 100% sure that they can remain employed until they receive their state pension at 67-70 and then live off £160/week for the rest of their life after that?

If the answer is "no" then they have to think about pensions (and savings).

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

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