@saskia My FIL and MIL had high paying government jobs working for the CIA when his father passed away, they both quit to move home to steel country PA, taking about a 50% pay cut so they could be close to family. Took probably a 50% pay cut and had to work 2-3 jobs including nights. He’s finally built his tax prep business up but he’s never going to really be able to retire - when he lets me take over the business in 10-15 years he and wife will still be minority owners and will use owners draws to essentially fund their retirement
If you need $120K+/yr to live and only have $200K saved and it's sitting in cash then you are screwed when you get back at 50 unless you can make a really large income at that time.
You can do the following to help yourself:
Invest the $200K into the stock market so it grows for you.
Figure out a way to save some money during your overseas stint. Some combination of earn more and spend less.
Lots of people retire on less than $120K/yr. Every dollar you can take out of your retirement budget really reduces how much you need saved and invested to support you.
@seoninja Yeah, I'd redo the calculations. Forecasting retirement, you need to focus on spending more than income.
If you are making $130k per year, let's say you're paying $30k in taxes and saving $15k between 401k and other savings. So you're actual spending today might already be around $80k / yr
Need to consider:
a) everyone situation different and you need to figure out those numbers for yourself
b) definitely consider what your taxes will be in retirement - depending on how you're saving (401k vs brokerage vs Roth) your tax burden will be quite different in retirement
c) healthcare - again every situation is different and retirement age is a big factor. But plan ahead because most people in US don't think about this cost while working because it never comes out of their bank account.
@star440 Depends on what the family reasons are that op referenced. If it’s for taking care of a sick parent, for example, that could be worth more than retirement altogether.
@ari3l654 I did this as I went back to school at 40. Wasn’t able to save for 6 (did bachelors and masters) and then took another two years to get back on my feet. Now 48, making a lot more money but having to double down on retirement. Not sorry I did it though. As soon as we get both kids through college, I will really be able to funnel more money to retirement.
Long story short- you live once. If this is important to you- do it! However, don’t think it doesn’t change the future. You will have to make alterations later in your saving or lifestyle.
@james3927 I think a key to your story is that your savings gap was spent doing something that would greatly increase you income. Overall that was a good financial move for you. OP’s situation doesn’t sound similar.
@ari3l654 You’re choosing to sacrifice a lot of comfort and/or time in your retirement for this 7 year adventure now. If this is important enough to you, then it’s worth it, but you’re really hurting yourself l in retirement by doing it. You’re already behind where I would want to be at your age, and putting that long of a pause on saving will only exacerbate the problem.
@ari3l654 Focus on saving now. Even 100-200$ weekly counts - look what you can go down because if you don't go down with this now, you will have to go down more in the future -retirement ages. Most important, focus on reducing the spending for retirement and review that plan. That 120k /year retirement plan it is quite high, if you have issues on saving now when you are 40, it will go worse once you are 50-60 years old.
@ari3l654 It won’t matter a lot for social security. It will be pretty devastating for your retirement funds, as age 40-50 are prime earning and funding years. You can still fund an IRA or Roth IRA and an HSA. You should do your best to earn and dedicate money for that. It may not be accurate to label 7-9 years as “temporary.” That much time will change a life. You may well become grounded in your new life / culture and not return. Just something to consider.
@ari3l654 Simple compound interest calculator will show you how bad you'll miss out. Assuming you are otherwise able to save $1k/mo if you don't take the break, and you'll save the same amount monthly once you return, and you're only taking a break for 7 years. With 8% annualized returns over the whole time period, your 7 year break will end up costing you about 500k in retirement savings.
starting at 47 years old, working until you're 65, is another 18 years of saving and growth before retirement. assuming 8% annualized returns again for that 18 year period, and $1k/mo contributions for that entire 18 year period, if you take the 7 year break from adding to your investments, you'll end up with about $1.9M. If you don't take the 7 year break, you'll end up with about $2.38M.
EDIT: if it's a 10 year break, same setup, you'll lose out on about $750k. Again assuming your current savings is invested the whole time.
@ari3l654 You’re not retiring with $120k/yr outside of inheritance/marrying rich or dying young giving your current finances at 40 + 10 more years of no contributions. You need to make peace with the fact that you’ve determined what you’ll be doing these next 10 years to be more important.
