While I may go on and on about my impostor syndrome at work, what I’m most afraid of is the cost of life. I’m still utterly confused how much money and savings I need to live a happy, simple life in Silicon Valley with a family of ideally 2-3 children and a sane retirement where neither I or my (future) husband do not end up in a government-owned facility.
I need some sort of calculator that can tell me how far off I am to this goal, and a way to understand what that magical number is. At the moment real estate calculators say I can afford a $500,000 home (which is not even possibly in The Bay Area.) And this is with a $110k salary, which I consider to be rather high and unsustainable.
The average cost to raise one kid is $240,000. And that doesn’t even include the cost of college. That is my entire life savings at 30. Just thinking about spending $500k-$600k on having a family of two makes me not want to have children. Even though I’ve finally decided that I do want to have kids. Is it fiscally wise?
I met with a colleague of mine recently who is a senior executive. She discussed a bit how, as the breadwinner of her family, many of her career choices were made based on making sure that she could afford her life with her husband and kids. I’m not sure exactly what the arrangement is (or exactly how much he contributes) but I know I am looking at a life where I will be the primary breadwinner in my family. My boyfriend is likely going to become a high school teacher, with a starting salary of $50k – $60k, if he can find a job. While that’s much better than nothing, and better than a single income, I will have to work – and obtain higher six-figure salaries going forward – to afford my life (or leave Silicon Valley.)
I’m concerned about potential conflicts later in life if/when I have children with my s/o. While I grew up going to art classes and dance lessons (and other school activities which cost additional fees.) I went to sleep-away camp once I entered middle school. My bf, on the other hand, didn’t grow up with any of these luxuries. He participated in some school activities, but nothing that cost additional money. And he didn’t go to summer camp. He didn’t even have his own room. I’m pretty sure when we have kids and I’m sad that we can’t afford to give them piano lessons, he’ll roll his eyes at me.
Obviously kids don’t have to have lives like this to be successful. But these are things that I’ve just always expected my potential one-day hypothetical children to have. And they are expensive. And they cut into other important budget items like retirement savings and healthcare.
I’m terrified of ending up broke and alone when I’m older. My grandmother gambled away her life savings and is barely affording one step above a government-sponsored home. I want to have options when I’m older. And how much do I really need to retire?
“As you begin thinking about how much you’ll need for a comfortable retirement, you may be startled to learn the impact of inflation. At an average annual inflation rate of 3%, your cost of living would double every 24 years.* Your annual income will need to increase each year, even during retirement, in order to keep up with the gradual rise in prices of everyday goods.” — AXA Equitable
Based on the retirement needs worksheet, to figure out how much I need in retirement I have to. This assumes 3% inflation and 5% ROI:
1. Estimate last year’s working salary. Multiply your current salary by the inflation factor from the retirement table below, based on the number of years until retirement.
| Years to Retirement |
Inflation Factor |
Growth Factor |
Multiplier |
| 5 |
1.16 |
1.28 |
5.80 |
| 10 |
1.34 |
1.63 |
13.21 |
| 15 |
1.56 |
2.08 |
22.66 |
| 20 |
1.81 |
2.65 |
34.72 |
| 25 |
2.10 |
3.39 |
50.11 |
| 30 |
2.43 |
4.32 |
69.76 |
| 35 |
2.81 |
5.52 |
94.84 |
So let’s say that I have 35 years until retirement…
My salary last year with bonus was $120,000. So it’s $120,000 * 2.81 = $337,200
2. Estimate 80% of your last working year’s salary… $96000 $269760
3. Estimate the amount that you’ll need from your savings and investments by multiplying line 2 by 12.591…. $1,208,736 $3,396,548.16
4. Enter the amount of your current savings and investments and multiply it by the growth factor from the table to see what the savings would be worth at retirement. So I’ll go with $240,000 * 5.52… $1,324,800
So… if I don’t touch the $240,000 then I have enough????
I’m confused as that $240,000 will need to be used for a house. Does that count as part of retirement savings, or does the total needed for retirement expect this to be outside of your living situation / home?
A commenter explained that I did the math wrong here – well, I misunderstood the directions… I used last year’s salary (2012) versus my expected last year salary, as in the year before I retire, oops. So I actually need to make up a gap of $2M. Which is frightening, but sounds more legit.
According to this calculator, if I want to retire at age 65, and assume $0 for SS income (because SS will be bankrupt by the time I am retired), and I want to live on $80,000 per year, if I put in $20,000 per year to retirement for the next 35 years my retirement savings will last until I am 88. Well, I plan to live to 110, so I’m screwed. Or, I need to put in $30k per year for the next 30 years for my retirement income to last until 101.
This all seems possible without kids. With kids, I really don’t know how I’m ever going to be able to afford retirement. I don’t mind the idea of working until old age if I physically can, but what if I can’t? Or I change my mind later?
And I’m considerably more fortunate that most people in the US with $240k+ in savings and a job paying $110k. Life just seems way too expensive to live.
