Episode 14 - Retirement Roadmap: Parent Edition

Unlock the secrets of blending family life with financial freedom as we journey through the ever-changing realms of retirement and financial independence.  Explore the personalized paths that lead to a life where work is a choice, not a necessity, and freedom is the ultimate retirement plan.

In this episode, I’ll show financial planning isn't just a numbers game— it's about designing a life rich with choices to pursue what truly matters. We've got enlightening tales from couples who mixed early retirement with freelance work and those who've struck an excellent balance between enjoying today and securing tomorrow. These stories are more than just inspiration; they're a roadmap to navigating the complexities of achieving financial independence while raising a family.

Step inside the world of savvy savers and strategic planners, where we dissect the delicate art of securing a future unshackled by the traditional confines of work. Every family's journey to financial independence is as unique as a fingerprint, marked by the individual challenges and joys that come with parenting.

Episode Highlights

(02:20 - 03:18) The Changing Landscape of Retirement

(07:14 - 07:58) Homeownership and Interest Rates

(10:22 - 12:42) Eternal Significance of Secular Work

(19:06 - 21:40) Financial Independence for Early Retirement

Full transcript

Hello and welcome to the Beyond Budgets® podcast, where we help parents transform their relationship with money. I'm your host Deb Meyer, a Certified Financial PlannerTM, award-winning author of Redefining Family Wealth, and founder of WorthyNest®.

When you hear the word retirement, do you picture yourself sipping pina coladas on the beach every day? I think this is a lot of what we imagine retirement will be like, but for a lot of people, that's just not the reality. And I want to talk about this concept of retirement, what it really means, and what the financial side of that equation looks like, but also think more about the qualitative side and why the term retirement might not be appropriate.

There's an alternative that I want to explore and I hope you can learn a lot from this conversation. Whether you're in your 30s and retirement is far away or if you're right on the brink of retirement, perhaps recently retired and maybe still doing a part -time job, no matter where you're at on that spectrum, I think you'll get a lot of value from this episode.

So first off with retirement, it implies a full stop. For a lot of people, they think, okay, I retire, I'm done working, I've worked hard my whole career, I'm ready to just put my boots up and relax, right? Golf every day, if that's your passion. But really, you need to stop and think before that retirement date, what you're retiring to, what's gonna be the next step, how are you gonna fill the days outside of doctor appointments?

The main difference between retirement and financial independence, which I think is a more appropriate and fitting term for it, means that you no longer have to work for pay in financial independence. You're not tied to working in the same traditional role you've been doing for the last 30 or 40 years. You have the financial flexibility and freedom to think about other career opportunities.

And that might be career opportunities that involve pay, or it might be switching to a lower paying profession, or just getting out of the paid profession entirely and doing volunteer work, or just spending more time with family, traveling, things like that.

When you think about full retirement age and the concept of retirement, Social Security has done a little bit of a disservice to us where we're not properly funded in the Social Security system. The legal Social Security retirement age just keeps getting pushed further and further out. For people born in 1958, for example, it's now 66 and eight months for full retirement age. If we think about just maybe 10 years ago, the full retirement age was 65 for nearly everyone.

Now it's getting to be more and more later as we realize that the social security system that a lot of us in the US thought we could rely upon isn't all that reliable. So the beauty of financial independence is that it's not tied to a particular age like social security or Medicare eligibility, which is age 65. With financial independence, you could retire at any age if you have the financial resources to do it.

And if we think about the financial independence retire early movement or FIRE, there are a lot of people who got famous, I would say in the late 2000s, early 2010s or 2010 to 2012, that really set a different pathway for retirement that is an enlightening one. And I think we can learn a lot from them.

One of the people that comes to mind would be Mr. Money Mustache. That's his trade name, so to speak, but his legal name is Peter Adaney. Anyway, at the time he started the Mr. Money Mustache blog and started talking about this idea of Financial Independence, Retire Early, I think he was single. He was dating or maybe married, but no kids at that moment, when he started blogging.

And for a lot of people listening to this podcast, I designed it specifically for parents. So it's hard to compare ourselves to people with no kids, even if you're married or single, marital status doesn't matter quite as much. But with kids versus no kids, the expenses can be quite different. It’s just hard to find someone in that FIRE community where you're really seeing them with multiple children … two, three, four kids, and how they make that work. For a lot of people, if they're truly no kids and either single or married, they can have the capacity to potentially save quite a bit more, saving 40, 50 % of their salary with relative ease. But as your family size grows, it becomes more and more difficult to do. So...

Again, we can learn a lot of ideas from the FIRE movement, from the people that have set out to retire at a very early age, like age 40 is an example. But their extremism with saving 50 % or 40%, 60%, any of those numbers of their after tax income, it's a pretty big financial commitment and it's just out of reach for a lot of parents, at least parents of multiple children.

So, you know, one of the alternatives I think about proposing would be just understanding that there's no one-size-fits-all all formula when you're trying to come up with that financial independence number. Your magic number is going to be different from another family's magic number. And things that could be factors in your number would be your marital status. Are you single, married?

How many kids do you have? What are the ages? Are the kids pretty young and still very reliant on you or are they adults on their own and already pretty financially independent themselves?

What about the physical location? Are you along the East or the West Coast where the cost of living tends to be pretty high or are you based somewhere in the Midwest or in a more affordable area where the cost of living is relatively reasonable? I know the last couple of years housing prices and rents have gone up across the country. It doesn't matter where you're at.

But proportionately, if you're on the coast, it tends to be quite a bit more expensive to live there just in general, barring any of the last few years of activity.

And then do you own a home or do you rent a home? If you own a home, you have extra costs that can creep up, home maintenance costs, repairing or replacing expensive HVAC systems or getting a new roof.

All of those things that come with home ownership do end up costing more money. Now you have the potential to have some appreciation in the house, but when you think about a house as an investment, I wouldn't consider it a great long-term investment if it's your primary residence that you're owning and living in, unless you happen to be doing it for some kind of business purpose and able to rent a portion of your house to someone else, make some profit off of it.

And then if you're renting you don't have as many of those surprise costs that could come up with homeownership.

The other thing to be thinking about is when you actually purchased your home, if you are a homeowner. Did you purchase before the interest rates rose drastically? And if you did, are you locked in at a pretty low interest rate with a pretty affordable mortgage? As long as you plan to stay there long-term, that's a great financial position to be in.

But if you bought shortly after the pandemic hit and prices were getting crazy and interest rates were starting to go up, you might be locked into a much higher mortgage payment and you're just playing a waiting game right now. You’re hoping that rates will start to come down, which at least as of the date of this taping, they're not down quite yet. But maybe over the next 18 months to 24 months, we'll start to see some interest rate cuts. Then the other thing to be thinking about in the context of what your magic number might look like for financial independence is your health, both your current health and then kind of thinking over your family history. Do you tend to have a lot of people that live longer in your family or do a lot of them pass away fairly early in life?

I know from a life expectancy perspective, usually, women tend to outlive men, but that's not always the case. Every circumstance is different. And sometimes things can, you know, appear out of nowhere. Case in point, when my mom got sick at age 65, she had been very healthy up until that point, and then things just deteriorated pretty quickly. So it really depends, and you can't necessarily anticipate what those future medical expenses may or may not look like.

Deb Meyer (09:30.414)

But at least if you have an idea, if there's a certain disease or illness that affects a large portion of your family members, you can kind of make some plans based on that and also use that to inform the lifestyle choices you're making today. And then if you think about financial independence and what opportunities you have available, again, it just creates an opportunity and space for you to explore career options that you may still want to do, they just weren't necessarily going to pay the bills for the family that you have today.

And you need to be able to draw on some of the investment accounts in addition to having supplemental income. So, you know, a lot of, and I'm going to share some examples towards the end of the episode, but a lot of families at least try to think of it in terms of a marathon, not a sprint, when it comes to financial independence and maybe thinking of many retirements over the course of their lifetime instead of full-fledged, “Hey, I'm never going to work another day for pay.”

And assuming that it has to be at age 65 is a fallacy. I mean, there's a lot of people that make very big bold career changes in their 40s and 50s and there's never a time to think about what your future career might look like or what your God-given purpose is. There's no better time than the present.

So let's talk a little bit about work that matters because I know a lot of people out there are dissatisfied in their jobs right now and it can feel like a grind, especially as you do it year after year over time. So I've been reading the book by Jordan Raynor, The Sacredness of Secular Work: Four Ways Your Job Matters for Eternity. And what I love about this book is that it kind of turns the idea on the head that, especially in Christian circles, I think there's a lot of people assuming that you have to be in nonprofit work or direct to ministry in order to have any kind of eternal significance through your work.

Again, his book does flip that script and say every position if you feel called to it and you can serve others through the ministry or not through the ministry but through the work that you're doing it is an opportunity to be a man or woman for others and you can still get paid for it. When we think about the Great Commission and how we're supposed to go out and pursue relationships of making disciples of everyone, I do it in more discreet ways when I'm having conversations with clients that I might know don't necessarily have a big faith dimension currently.

We may have conversations around, some of the faith-based funds, for example, faith-based investments that are doing well from a performance standpoint and can actually have some significance in bettering the social justice causes that people care about from a Christian standpoint. But again, non-Christians or people who are really questioning their faith, they can still be investing in some of these companies and positions and feeling better about the impact that they can be making.

So again, just to wrap up Jordan Raynor's book and what I've learned from some of that so far is that your work really does matter for eternity and it doesn't matter if you're a artist or a teacher or a computer science person. There is value in the work that you're doing and whatever you feel called, especially if you're Christian and you feel called by God in a particular direction, I'd encourage you to continue pursuing that.

And if it's not the current career you're in, think about preparing yourself financially to make a transition. One more point I'll add is that you're not too old or too young to live in alignment with your purpose. I have some great examples here. So Michelangelo, he was age 72 when he designed the dome of St. Peter's Basilica in Rome.

Deb Meyer (14:17.934)

Pretty amazing, right? And then Sister Madonna Buder of Roman Catholic Nun, she completed the Iron Man at age 76. I just think about 76 and I'm like, gosh, that's a few years past my dad at this time. I can't imagine doing an Iron Man in your 70s. I just can't. Frank Lloyd Wright, he finished his work on the Guggenheim Museum at age 91. 91, can you believe that?

And then on the opposite side, if you think about young people doing amazing things, Mozart wrote his first symphony at age eight. Joan of Arc, who's the patron saint of France, turned the Hundred Years War around at age 17. So again, age doesn't really matter in the context of making a significant contribution to the world.

And especially if you're having enough of a financial cushion and you've built up enough reserves and investments, you have the possibility of choosing a different career, choosing a different pathway that's going to bring joy and happiness not only to yourself but to those around you because you're living out your mission and purpose.

Okay, let's take a brief break. I want to talk about the Raising Generational Wealth Summit that's happening real soon here. It's actually starting today. It's May 2nd to May 4th and there are a lot of great speakers over 20 of us presenting on different topics related to raising financially smart children Being better with your money so that you can pass those lessons down to your kids I'm speaking on estate planning for parents, but I know there's a lot of other fabulous speakers and

I'm tuning in, I'm excited to learn from some of the other speakers as well. So I hope you join us. It's www.raisinggenerationalwealth.com.

All right, let's look at some examples of financial independence.

Deb Meyer (16:29.358)

And I'm going to use some client examples but change their names so I don't give any, personally-identifying info about them. First, we'll start with Matthew and Maureen. Both are age 60, married with two adult kids. And in Matthew's case, he had a very long time career at a utility company, nearly 40 years. And he was the sole breadwinner for their family for many of those years.

So Matthew did end up retiring back in 2022 at age 58. And it was a really great transition point for him because he really didn't want to be working in a second career. He just wanted to finally say, “hey, after all of these years of service, I'm ready to retire a little bit early.”

And in his case, Maureen, his wife, she has a background as a landscape architect. So she's continuing to bring in some income on the side as a freelance landscape architect. And the beauty about their position is they're able to go travel, do some of the things they want to while they're young and healthy. And she's in a role that gives her flexibility. So if she wants to be gone, you know, one week, two weeks out of a given month, she can go do that and then just be more selective about which projects she takes on and the timing of when those projects happen.

So from a retirement planning perspective, you know, they are starting to withdraw out of their investment portfolio, but they're withdrawing at a pace that's, you know, a good pace. And then when his pension kicks in from the utility company at a later date, they'll have to adjust that withdrawal rate lower or not have to, but they'll be blessed to adjust that withdrawal rate lower.

They're going to be in a position where she might not have the freelance income, but the pension will more than make up for that. And then they can take out a lower amount from their investment accounts. So again, just creative ways of making sure that even though he's fully retiring and he doesn't have any desire to do paid work after this point, she's still eager to do a little bit of work and use her background as a landscape architect.

Deb Meyer (18:47.95)

Then I have another example, John and Rhonda. There's an eight-year age difference. So John is now 63 and Rhonda is 55. John is a long-time tech employee who retired in September of 2022. And Rhonda is working full-time, but she's also in a flexible role. So...

She doesn't have to go into the office every single day. She has a couple of days in the office and a couple of days working from home. So there's some flexibility there. They have a second home at a lake house that's not too far away from their primary residence, but they're able to go away a lot of Fridays and make it a long weekend. And she just works from the lake house on those days they choose to go to that lake house.

But again, it gives them some flexibility where they can enjoy each other's company. He did retire early, retiring at age 61, but in their particular case, they wanted to make sure they had the freedom to travel together while he was still pretty young and able-bodied instead of trying to wait until she was...

full retirement age and then start doing some exciting activities together. And in their particular case, because Rhonda is working full time, they're able to budget wisely and live just on Rhonda's salary alone for all of their normal living expenses. Rhonda plans to work another four years or so, and their youngest daughter is, well, they have two daughters, but the younger daughter is going to be finishing college soon.

Again, she's starting to become financially independent. Their older daughter is already financially independent. They're in a position where it's just the expenses for the two of them. And it's a great position to be in. So we've planned again for this idea of early retirement for him, early retirement for her, but we're doing it at a gradual pace.

Deb Meyer (21:02.382)

I hope this gives you encouragement as you think about your situation that it's always possible, especially in a married position where maybe both of you have the desire and ability to work outside the home, that you could be staggering some of those working hours and find more flexible positions.

And lastly, Dave and Cindy. Dave was a partner at a big four public accounting firm. He worked some very long hours, very stressful position. Cindy was staying at home with their four kids and they were ages three to 12 at the time. And again, for Dave, he had just turned 40. He was eligible for a really nice pension benefit if he stayed on six more years.

So really in that six year time span, they were saying, hey, we really want to make sure we're investing and saving as much as we can within our means, understanding that yes, kids are expensive and some of the goals they were trying to accomplish with their kids around private schooling and college education funding, those kinds of goals are going to take additional financial resources. But they were saving about a third of Dave's gross salary in their investment accounts, which is a great position to be in because they were budgeting very wisely, even though he was making a nice salary.

And then in Cindy's case, she is college educated. And even though she was staying at home with the kids at the time, she was willing to definitely work outside the home, especially if Dave was able to take a step back. For them, they were prioritizing family, they were prioritizing togetherness and just trying to figure out what that balance looked like between the two of them. And, you know, for him, it's really just a matter of finding more time to have that work-life balance and being able to volunteer at the kids' schools, things like that.

He doesn't want to miss out on the kid's childhood because of the long strenuous hours, but he also recognizes that he's compensated well and needs to be able to take advantage of that during those prime earnings years when he has that capability.

These are all just different examples and scenarios of clients that have made things work from a financial independence perspective. They've all sought earlier retirement dates than the traditional age 65. And I think they've all been in a position where they're set up for success. We've run through a lot of different scenarios in the planning software and it's worked out very well in their particular cases.

So I'd encourage you as you're thinking about your retirement goals, maybe it needs to be different than age 65. Maybe it needs to be more geared towards financial independence instead of retirement. I hope you find this helpful and please feel free to send me any questions to podcast@worthynest.com. Thanks!


Deb MeyerWorthyNest LLCfamily finance, beyond budgets, financial planning, retirement, financial independence, family life, choices, liberty, inspiration, navigating complexity, achieving, savvy savrs, strategic planners, securing, future, work, personal goals, flexibility, Social Security, FIRE movement, challenges, multiple children, unique, marital status, location, housing situation, security, strategies, couples, early retirement, freelance work, work-life balance, aggressive saving, creative management, comfortable lifeComment