How am I doing? - Help yourself and everyone else series.

[d.o.g.]

So, please feel free to give your personal views and your are definitely not accountable for the decisions I make on my planning.

Here goes.

Assuming you have only 1 child, you will need the money when the child turns 18 (if a girl). So in 16 years' time you will need $200k for her.

You want to retire in 20 years' time at 60, to support retirement spending of $3,500 per month ($42k/yr) in today's dollars. Assuming inflation of 3%, this means annual spending of $76k in future dollars. Assuming you die at 90, the money has to last 30 years. If you earn zero real return from retirement onwards, then you will need $1.49m at age 60. Each year, the money increases by 3% (you match inflation) and you spend $76k adjusted for inflation. At age 90, you run out of money. Hopefully you are dead before then.

You save $6k per month or $72k per year. In 20 years you can save $1.44m before inflation. If you can invest this at 3% per year you will be able to get $1.44m in future dollars. That's pretty close to the retirement target. You already have about $350k of investments. If that matches inflation at 3% per year, in 20 years it will be $630k. Your total assets would be over $2m in future dollars, enough for the house, retirement and the kid(s).

So as long as you can maintain the savings rate, and invest at 3% a year or better, you are very likely to reach your goal.

Strictly speaking we should subtract $1k per month for the house, leaving you $5k/mth or $60k per year. That gives you $1.2m pre-inflation in 20 years. If you can invest at 3% per year you will get $1.2m in future dollars. Let your investments grow for 16 years, from $350k to $562k, take out $200k for the kid(s), leaving you $362k to grow for 4 years to $407k. At age 60 you will have $1.6m total in future dollars, enough for retirement, as long as you can still match inflation, and you die before age 90.

Note: if longevity (age 85+) runs in either spouse's family, it would be prudent to project to age 95 or even 100 for retirement. It's OK to die with some extra money. Not OK to run out of money while still alive.

Insurance
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Ensure that both parents are already adequately insured for death, disability, hospital/surgical coverage etc. All the savings plans will be for nought if one dies early and the income cannot be replaced. Term life insurance is cheap.

For the child's needs, buy a 16-year term plan (since you will already have the money anyway after 16 years). $200k coverage is enough since you only need to pay for the child's education. Buy policies on both parents (NOT the child!).

Also, consider retirement needs if one parent is dead/incapacitated. The survivor may not be able to save enough for retirement, in which case it may be a good idea to buy additional 20-year term policies to replace the income the other spouse would have contributed - $1m for the main breadwinner, $500k for the spouse.

Hospital/surgical insurance (like MediShield) is a must. Buy the most expensive available (pay from Medisave).

Will
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Ensure that a will is drawn up so that if both parents are dead/incapacitated, a trusted person can bring up the child. Safeguards must be put in place so that the caregiver cannot spend all the money for himself/herself e.g. create a trust that is drawn down each month to pay school fees, living expenses etc.

Consider setting up the trust even if only one parent is dead/incapacitated. The survivor could develop bad habits and gamble the insurance proceeds away, or fall victim to a con man and lose the money.

As usual, YMMV.