Before you posted more, I was thinking your friend was older and no children. But with a teenage DD, she wants to make sure she is properly ‘launched’. College savings account is fine, but depending on how much it takes for the DD to get a degree and gets herself properly settled with job/housing/etc. Then if there are wedding expenses or if DD has a child but not a good situation financially (and maybe also becomes a single mother) - making sure about that all being taken care of. With this lady sending money home to her parents - yes, that shows she will want to be sure about DD and any grandchildren being properly settled.
I also know the athletic scholarship thinking - often the student wants to go to a school which isn’t a match for ability level, or the student progresses on a degree that is kind of light weight. Some schools do provide great tutoring assistance during the height of the competition times - which nephew had a good match on getting a business degree while also playing wide receiver on football. Sometimes partial athletic scholarship, so need to pay room and board and half of tuition or a part of tuition expenses.
Glad you are helping her with a projected budget.
At 43, “would love to retire early”. I do think she needs enough of a nest egg to generate a lot more so that by the time she is 65, she has a healthy nest egg. What is healthy? I think $1 M is too low – but there are some indicators that factor in one’s age and how not to outlive one’s money. So too young at 43, and too young probably into her 50’s unless a really significant nest egg. In one’s 60’s, it depends on a lot of things.
Does she think she can be a ‘good saver’ and retire at a certain age?
Maybe as self employed, she can think of other things she might want to do w/o working until 65 with her current situation. I cannot see Medicare age changing.
DH and I are not ‘wealthy’, but feel comfortable. Our net worth is about $2.5 M, and we are 66. We are in a lower tax state, with low property taxes but even lower with age 65 discount (1/2 rate plus $50 on house we live in each year). DH and I am concerned about DDs and grandchildren - and want to leave an inheritance; I had some inheritance and my dad did very well considering he died at 64, and the estate did not shrink (mom died at 77). I have 4 siblings, and each got the same healthy inheritance.
You also said she was a saver.
Does she want a ‘goal’ to motivate her?
The low interest rates maybe makes me think she got the mortgages with a less than 30 year payoff. At those low interest rates, until she is really close to retirement, I would not payoff early. We almost had a 10 year 2.5% interest rate paid off on our home, and I found another 10 year 2.5% interest rate (locked it in a day before it was going to go up) – we could have borrowed more than we did but I was comfortable with the monthly payments.
I agree with your comments about her naïve thinking about one paid off house providing her the income plus SS being sufficient living in the other paid off house.
Unless she works for the government or a school system (and you said she was self employed), or an employer that she can have insurance coverage at a reasonable price before she is 65. That could happen or change if she changes jobs, but it sounds like she is stable in her career plans.
Also, at 65 (DH and I are both 66) we have a fair amount of expenses with Medicare, Supplement, Drug Supplement, additional medication costs. One can go with a less expensive route than we are doing, but we want coverage when we travel and also want to have what we would consider medically necessities which an Advantage Plan my not reliably pay for.
One also has to prepare for the unexpected. With the recent winds/tornadoes, a big tree from next door got on this lady’s roof. IDK why she doesn’t have insurance that will cover, but it may be that the neighbor is not liable with her insurance to cover. This incident may have a state by state interpretation, IDK. But stuff happens, and one does not want to be so thin in retirement money that money (or lack of money) becomes a stress factor for a highly unusual event. A major accident, disability. Lots of unknowns and too much time before 65.
DH’s younger brother wanted to retire younger (his wife is older and retired for years) - but he possibly has cancer and would need to stay on his company’s health insurance – so that is interrupting his plan. This brother just turned 63. His plan was to retire the end of May, and having enough to pay the COBRA or on his wife’s retired teacher insurance plan until he was Medicare eligible in 2 years. He is a bit lean on his retirement funds (another brother, DH and I all agree), but he can also live on rice and beans (for anyone not in the South, may not have heard this term, but essentially living on a shoestring budget).
@Blueberriesforsal made some great comments today.
