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Our oldest child is age 55, – three children ages 14 and 12 (twins),
our second is age 54 – three children ages 14, 13 and 10,
our third age 51 – three children 18,17 and 13,
and our fourth age 50 – two children ages 20 and 17
All ages are rounded.
Look at these ages and what comes to mind, college, retirement? Pretty sure not retirement any time soon. This is what I ponder when I read about FIRE or even early retirement before age 60. Our children will be near or over age 60 when our grandchildren finish college. I look at these ages and wonder how they will ever retire.
Needless to say none of our children has a pension and two don’t have a 401k, two are working two jobs.
All this is why we fund 529 plans and help our children occasionally and why I am keen to leave the largest legacy we can. Once again I find my thinking out of the norm. An article on MarketWatch says boomers intend to spend their money and leaving an inheritance is not a priority.
This example is similar to the reality for many families. The trend of people having children at older ages is well-documented in the United States. However, according to the Census Bureau the average family size in 2022 was 3.13, but even one or two children with these age scenarios may have a significant impact on finances, especially retirement.
I was 45 when our oldest child entered college and they were all finished ten years later. I suspect there are people who don’t see their children’s college as an obligatory expense. That is a choice.
In any case, saving for retirement should be the priority, but it’s still a tough road for people who start families later in life.
I’m not sure I agree that those who start families later necessarily have more of a problem saving for retirement. “Older parents” have the opportunity to save more during their 20s and 30s and, therefore, reap the benefit of compounding. Also, by their 50s, they should be better able to afford college expenses.
Our kids were born when my husband and I were in our 20s. Those years weren’t easy financially. And in our 40s, we fully paid for Ivy League educations with no family help. Paying those tuitions really stretched our finances— in fact, I remember being proud we could save $100 a month! In our 50s, we helped with medical school and law school, not easy, but by then our salaries were higher.
Many families in the U.S. find themselves significantly squeezed between the rising costs of college and the need to save for retirement. This is a common financial challenge. Heck, data show many Americans can’t or aren’t saving adequately for their retirement let alone with college costs.
Very few couples can pay for any college let alone Ivy League in their 40s although the net costs for Ivy League can sometimes be lower. Two of our grandchildren are going to a private liberal arts school in PA and the annual all in cost is a bit more than $80,000 each.
You seem to be modifying your argument from parents in their fifties to all parents having difficulty paying for college and saving for retirement. I agree if you’re making the case for all parents.
in our 40s, we gave little thought to retirement. (Definitely not HD types!!). At one point we even re-financed a car with over 100,000 miles to meet a tuition bill. The kids all lived in dorms, didn’t have cars, and worked summer jobs. It was absolutely paycheck to paycheck for us.
Is the $80,000 price you quoted the “sticker” price of the college or what your grandchildren are actually paying? These days the difference in those costs can be quite large.
It’s the sticker price for everything. Only modestly less with some assistance.
It wasn’t that parents were in their fifties which they are, but trying to save for both retirement and college up to the 50s is difficult and if college costs continue to early 60s even more difficult as opposed to someone like me where children we out of college when I was 55.
There are many people with a goal of retirement by 55. Just saying with children still in college that’s difficult I think.
We sacrificed a lot to give our kids Ivy League educations. Back then, I believe it was worth it. Today, I wouldn’t do it. The atmosphere at those schools has become too crazy. And the payback VERY uncertain. Today, I definitely would favor a state school over private. A solid education can be obtained for well under $80,000 a year. I think many parents have come to that realization.
Who says they are paying that $80k pa for their kids in college? There are such things as state schools and in state tuition. Heck you can study maths undergrad at Cambridge University as an international student for around $40k pa + living expenses if you are smart enough for admission. And that’s almost certainly a more “valuable” qualification than most US undergrad degrees.
It seems both you and your family live pretty high rolling lives. I think it is dangerous for you to make assumptions about how anyone else lives their life based on that.
I was thinking the same thing. In my area you could spend a couple of years at a good community college and then transfer for two years at a state university. Looks like max tuition (12 credit hours) per semester at UNC for NC residents is $3,509.50 plus fees and living costs. Tuition and fees for a full year at NC State are $9,208. Several other options in the area.
And doesn’t that UK bachelors degree require three years instead of four?
Unless it’s medical then it’s 4
And no need for a four year pre-med degree, right?
According to many FIRE bloggers, children are more or less as expensive as you choose to make them. Big factors are private vs. public schools (elementary all the way up to college), vacation choices, lifestyle choices around things like expensive activities for children, and then there’s smaller stuff like toys, clothes, food. Feeling obligated to buy oversized houses and bloated trucks because you can’t fit a baby in anything smaller than an Cadillac Escalade. Choices, choices, tut tut.
(Looking again at your post, I am not trying to attack your children or their life choices 🙅 I only mean to offer a general criticism aimed at the broader American population.)
No criticism in this post. And no criticism about striving for FI either.
I just wanted to be sure, since you mentioned your family, that you know I was not trying to say anything about them or you 👍 thanks for the post!
My mom and Spouse’s parents are both still alive. We never expected an inheritance from them. My parents gave us a modest amount of money when we bought our first home. One of Spouse’s parents started giving a modest cash gift at Christmas when they turned 80. Both sets of parents helped us through college. We have tried to do some of these strategic things also for our kids. But we also believe as some of the younger retirees like Winston mentioned earlier that #1 for now is we don’t want to be a financial burden to our kids. We hope to be in a position to do the Christmas gifts as we get older.
I think it is great that you are able to do the 529s for your grandkids, every bit helps. Times have changed, I agree with you. Chris
Had my kids later in life … Reality is that enabled me to fully fund college which in turn allowed them to amass down payments on their homes and start their lives. Can’t say that that money would drastically change my retirement outlook
Surely it’s a tough road for anyone who chooses to have large families particularly if they are not prepared to be clear from the off as to how much education they will support and what they expect their kids to bear (where ultimately loan repayments can be looked on as a sort of graduate tax on enhanced earning potential)/
Grandparents helping to fund grandkids through college seems a practical legacy.
But it’s nice to see you recognise that the world of work /life has fundamentally changed from your generation. There is absolutely no reason a 55 year old shouldn’t have a retirement plan for execution in the next 10 years – surprisingly even people with high school age kids do manage to retire. But it’s certainly in the 50s that all sorts of life decisions start to show more clearly for good and bad.
Here’s my attempt at an analogy; hope it works.
I think Rick Connor once analyzed traditional vs Roth IRAs. If you paid the taxes and invested the amount left over in the Roth IRA, you end up with the same amount of money as you would, after you paid the tax on distributions from a traditional IRA.
As David writes below, waiting longer to have kids worked out well for them, because they had more time to accumulate the funds to pay for school.
Someone making babies at a younger age, may be unable to establish savings as soon due to the costs of raising the kids sooner.
Will both couples end up in the same place come time to retire?
Dan, thanks for the mention. I found a Yahoo Finance article that demonstrates the way taxes work for Traditional and Roth IRAs and how someone would benefit if their personal marginal tax rates remain the same, go up, or go down. It clearly shows that if tax rates are the same when investing as when withdrawing the money, you end up with the same amount.
We had our two sons within the first 3 years of marriage. The youngest graduated college when I turned 50. The next decade was both our highest earning years, and we took advantage of our companies 401k accounts, and company match, by maxing out our contributions, as well as maxing out HSA accounts. We had always saved enough to get at least the company match, and more. We were also lucky in two significant ways – my company maintained a traditional defined benefit pension for most of my career (it was frozen the last 4 years) and the period of time where we maxed out our retirement savings coincided with the period of 2007 to 2017, when stock prices were low.
Neither of my children, not their spouses, will have pensions. Luckily they and their spouses have successful careers and are good savers and investors. Most importantly, they are great parents.
Life tends to have a way of interfering with “optimal” choices – defer having kids too long for financial footing and you run the risk of fertility issues and cost of IVF/deep disappointment.
Not unlike take on college debt to pursue academic qualifications to in theory earn big bucks vs learn a trade, earn from 18, buy a home earlier etc.
This is exactly what our kids did. Chris
We’ll be 62 and 63 when our daughter finishes college. One good thing about it coming later in life is that we have the money to both pay for college and keep up our 35% (of gross) savings rate.
We may work for one more year after she graduates, depending on how the numbers look.
That being the case you are in an enviable and somewhat unique position.
It comes down to choices. Now that my daughter is 20, she understands how lucky she is to be in college with no loans, but she also said “Now I see why we didn’t go on spring break trips and fancy vacations like a lot of my classmates did. You have money now, and they have loans.”
Nice – that’s the real lightbulb moment. When kids realise that their parents haven’t just been mean but actually set a precedent for them to have a financially stable life.
Mind you I feel like I’ve spent the latter part of my adult life trying to encourage my mother to be a bit meaner – don’t just take the first quote for a tradesman, comparison shop for insurance, let me order that for you online rather than store price. She’ll make it – so I’m trying to relax a bit on all that.
Hopefully I’ll manage to relax a bit on my own cost control similarly as I survive the early zone of retirement.
I’m not sure what you’re asking here?
I don’t think there’s right and wrong answers.
Not asking anything. Merely pointing out some of the challenges the next generation faces and suggesting focusing on retirement should come first.
When has it ever been easy!
I just figure you plug away doing your best.
They are very fortunate to have grandpa funding the 529s. Our kids also received substantial college seed money from my in-laws so they won’t have to pay for college. I’m grateful for that. Also, leaving a legacy is a huge priority for me, but it could be because all of my wealth is self-earned.
Unfortunately what we are able to fund for 11 will likely cover one year of college, but it’s something.
Not being a burden is our #1 priority.
Leaving a Legacy to our children is our #2 priority.
For the most part goal #1 supports goal #2.
We KNOW we were both lucky being born in the mid 1950’s. We are trying to do our best to support our Children in raising our Grandkiddies.
This is what we think. Chris
Us too.
Winston, you said it well. We agree with your prioritization. We’ve seen firsthand the high cost of elder care.
Yes, I fully agree with #1
Leaving a legacy is not a priority for us. We assisted in paying for their college and they received about a half years salary from us via my inheritance from my parents that we shared with them years ago. That being said as I have written we are in the process of converting my wife’s traditional IRA to a Roth (about a 40% of or retirement accounts value, invested 100% in Vanguard Total World, the balance of our portfolio allocation, majority bonds, in my IRA) before she turns 70 and claims SS.
This is being done primarily so we will only have to deal with RMDs from my (mostly) traditional IRA which will most likely never completely emptied. If that is the case then our children will inherit the Roth account balance, on death, tax free. They have been told that even better is the fact if that if they leave the entire amount in the Roth account for the following 10 years, when tax law requires they must withdraw, all the cumulative returns during those 10 years will also be tax free as well.
The legacy thing is highly personal and variable.
My philosophy is simply that none of our children will have the advantages I did and after assuring Connie and I are okay and Connie is fully protected as a survivor, there is no better use for our good fortune than helping family.