Millionaires in the Making: The Cicottes

I haven’t written about one of these in a while, but the latest Millionaires in the Making from CNN Money looks interesting. It’s interesting to note that CNN changed the format of the series into a blog, allowing comments (if you’re willing to leave your city and state along with your name). Now, about the couple.

The Cicotte family is a one-income household, but that one income is a healthy $175,000 per annum. They have seven children to put through college. Even with these massive child-rearing expenses, reduced a little by the children who will work to help pay their own expenses, they have managed to save more than $275,000.

The Cicottes plan on drawing $200,000 per year from their retirement funds starting in 2027 when George turns 60. They want to increase it to 5 percent per year after that.

A $200,000 withdrawal in the first year of retirement requires a nest egg of $4,000,000 based on a 4% safe withdrawal rate. The article provides some expert tips for the Cicottes:

Cicotte currently invests the bulk of his retirement savings in a target mutual fund designed for people retiring in 2045. He chose the fund because its allocation is more aggressive than one designed for people leaving the workforce in 2035. But Boucher said that, at George’s age, the family would be better served by a slightly more conservative fund. “If he really wants to put his investments on cruise control, he should go with a 2035 fund–it’s going to be less volatile,” said Boucher.

The article doesn’t say which fund company’s 2045 fund. If it is the Vanguard Target Retirement 2045 Fund (VTIVX), it looks like a fund I would like holding, with 10% in bonds and 90% in stocks. The bonds-to-stocks ratio of the Vanguard Target Retirement 2035 Fund (VTTHX) is the same, but the mix of stocks is a little different. I don’t think one has a significant advantage over the other.

One thing that has allowed the Cicottes to get to their current position and to have strong dreams for the future, other than the healthy salary in what I assume is an area of the country where that salary can go far, is their attitude against debt.

Coming out of college and graduate school, the couple was saddled with big student loan debt. George says they owed $13,000 from their undergraduate education and $30,000 from his law school, all of which they’ve paid off. Their mortgage is their only other debt, and they expect to pay off the $100,000 balance in seven years. The Cicottes say their Mormon faith has been instrumental in keeping them disciplined financially–the tenets of the religion encourage the minimizing of debt.

While $43,000 in student loan debt is nothing to sneeze at, I wouldn’t call it “big.” $30,000 for law school is quite reasonable when compared to other freshly minted JDs. According to FinAid, the average debt for a new law school graduate is $70,933. Add the average undergraduate debt for a total of $80,754.

The CNN financial expert also recommends increasing the family’s emergency fund from $15,000 to $50,000 as a form of insurance against the family’s income. At first, this seems excessive to me, but considering Mr. Cicotte is self-employed which adds quite a bit of risk to his income, and the family’s aversion to debt, having a healthy cash cache is good advice.

I can’t imagine having seven children. I feel I’ll struggle enough raising one or two children when that time comes.