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Ask Paul: We had kids in our 40s, how can we retire?

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Q. My husband and I had our children in our early forties, so we will be raising them into our 60s.

I'm 43 and the kids are three and one. We have a combined gross income of $150,000, an offset account with $35,000, a personal loan of $11,000 and combined super of $295,000.

(I make a pre-tax contribution of $300 a month). I also hold $3500 in Wesfarmers shares, buying more occasionally.

ask paul we had kids in our 40s

We have four investment properties, total value $1,765,000 with combined mortgages of $1,364,000. All are close to cost neutral.

We live in a government house through my husband's work (police). However, it concerns me that we are not paying off a primary residence as we must move every few years.

How can we achieve a decent education for our kids, maintain a reasonable lifestyle and still have a comfortable retirement? Worrying about it keeps me awake at night!

A. OK Kylie, let's try to get you a good night's sleep!

First, let's not worry about the age thing. I would have also lost sleep at night if we were back 100 years. Your husband's life expectancy would have been around 56 and yours 59. But life extension is incredible. In your early 40s you have, on average, another 40 years in front of you. Given we are living about three months longer for every year we survive, at least one of you is a great chance to be at your youngest child's 50th.

Longer life also means the "retire at 60 or 65" is nonsense. We are healthier with plenty of healthy jobs; most do not require manual labour, so we can often work longer. When your youngest is 21 you will be a youngster yourself at slightly under 65 and, I am sure, still working at least part time.

It also means you have a least two decades to build wealth. Your four properties will be location dependent but I would think they are doing nicely. They are close to cost neutral and you have $400,000 in equity and $295000 in super. As I have also said to Rebecca (Ask Paul, page??) ), with $1.36 million in debt you have plenty of leverage and I would prefer not to see you build more debt.

My advice would be to pay off the personal loan and then keep building your offset account or continuing to buy some shares. I like the $300 a month topping up super. You could increase that, my only reservation being that you can't access it until you retire.

I am not worried about the kids' education costs. With just the one personal loan and money in your offset account it is clear to me that you use a budget and save on a regular basis.

These savings will allow you to educate the kids as you choose. When it comes to lifestyle, I would not lose sleep over spending on a meal out, a holiday or other treats. Just build them into your budget.

My observation is that you are losing sleep at night worrying about being an "old" parent. My argument is that you are not. Sure, if you to retire at 50 it will be stressful. You could not afford any lifestyle at all - it would be all work and no play.

But with your provided accommodation and an excellent combined income, along with the four properties and super, you are (pardon the pun) in a super position. So don't fret about the short term.

Focus out some 20 years. Your super will grow and grow, your properties will keep pace with inflation and population growth. Your loans will reduce as you save, and don't forget that every year inflation reduces the real value of your loans while over time values and rent go up.

Why don't you do a 20-year plan? I think it will be the perfect natural sleeping pill.

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Paul Clitheroe AM is a respected financial adviser and Money's founder and editorial adviser. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
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