Situation: Couple at 40 with two young children wants a sabbatical soon, then retirement at 55
Solution: High savings rate plus a solid track record in stocks fund education savings and retirement
A couple we’ll call Vince and Linda, both 40, make their home in Ontario with their two children ages 3 and 6. A financial systems manager and a civil servant, respectively, they bring home $12,730 per month. They have a home with a $900,000 price tag and about $1.56 million in financial assets. Their debts are a mortgage and a car loan that add up to $158,000. Their net worth, an impressive $2.3 million, is exceptional for their stage in life. Vince, an accomplished investor, has provided the family with substantial financial security. Yet they are prepared to risk it with a plan to retire in as little as a decade and a half.
“Could we retire in our early or mid-50s with an after-tax income of $80,000 a year to do non-profit work?” Vince asks.
Quitting their jobs well before 60 year would stress their retirement. Their issue, therefore, is whether another 15 years of work backed up by diligent investing can support what might be four decades of retirement.
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Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Vince and Linda. “The family has an impressive ability to save, invest and pay off debt, but quitting so early will take a lot of careful planning. They can’t afford to make big mistakes with such a long-range plan.”