Advice when moving to single income

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Topic Author
sunnyside6849
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Joined: Sun Feb 14, 2021 7:45 am

Advice when moving to single income

Post by sunnyside6849 »

My wife is ready to resign from her high stress job and we want to see if we can make it work on a single income. She is burned out and would like to spend more time with our two young kids. We agreed that she should take 6-12 months to figure stuff out before we decide if she wants to stay home or go back to the workforce (likely at a lower paying/less stressful job). Also worth mentioning that I fully support this decision. She has done so much for our family and this current job/employer is making her miserable.

The details...

Age: 37/35
Kids: Two under age 3
His Salary: $180k
Her Salary: $150k
Total Income: $330K

Debt: $360k, 29 years left on 30 yr at 2.75% (Recently refinanced and house is worth $650-$700)
Own two cars

Assets
Savings/EF: $60k
Taxable (90/10): $370k
His retirement (401k+IRA): $330k
Her retirement (401k+IRA+Company Stock*): $725k
*Her company stock is 50% of this will rover to an IRA at termination

Retirement contributions
His 401k+match: $27k
His Roth401k: $8k
Her 401k+match: $18k

~$52k annual contribution

Monthly budget/expenses
$2,202 mortgage
$3,100 daycare
$1,300 food/dining, baby/household items
$500 utilities (internet/tv, gas, electric, water, cell phone, gas)
$500 529 contribution
$325 taxable acc. contribution
$125 auto insurance

~8k a month in expenses

His take home a month: $6,600
Her take home a month: $6,300


Questions:
1. At current expenses we will obviously be over budget but I would like to keep the kids in daycare fulltime for at least 6 months (ideally rest of this school year) so my wife has time to decompress. Would it be better to tap into our savings/EF during this time or just reduce the 529 and taxable contributions? After the 6 months, if she decides to stay home we would likely still send the kids to daycare but on a part time basis (2-3 days a week) which would reduce the cost by ~$700 /m.

2. Has anyone who moved to a single income noticed reduced expenses in any specific areas? I imagine our food expense will go down significantly since we order out 2-3 times a week right now. Mostly because we are unprepared for dinner with two working parents, long work hours/meetings.

3. We are a bit concerned that if she stops working permanently this would greatly impact our ability to retire comfortably and we would need to make up for it in some way. Based on our current assets and my contribution amount ($27k /yr) do we need to be worried or save more? I will likely get a promotion in the next 12 months which should push the salary over $200k and work in an in demand industry so job is stable.

4. Anything else we should be considering?
DSInvestor
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Re: Advice when moving to single income

Post by DSInvestor »

Is your wife on health insurance provided by her employer? What about the kids? If so, what is the additional cost to add her and the kids to the plan offered by your employer? Any difference in coverage?

You did not mention any IRA contributions. I suggest directing the 529 contributions to IRA instead. Use the Backdoor into Roth IRA if necessary. Watch out if your wife does a rollover of her 401k assets to an IRA as having IRA assets may trigger IRA basis proration on partial conversions. If wife's 401k is low cost, it may be OK to keep the assets there.
Last edited by DSInvestor on Thu Sep 16, 2021 1:01 pm, edited 1 time in total.
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Topic Author
sunnyside6849
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Re: Advice when moving to single income

Post by sunnyside6849 »

DSInvestor wrote: Thu Sep 16, 2021 12:58 pm Is your wife on health insurance provided by her employer? What about the kids? If so, what is the additional cost to add her and the kids to the plan offered by your employer? Any difference in coverage?
Entire family (wife + kids) is on my employers health insurance. Believe it or not it was actually less expensive to do that then to break it apart.
BogleHead1008
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Re: Advice when moving to single income

Post by BogleHead1008 »

My suggestion: Daycare expenses should be minimized with wife staying home.. may be eliminated until you got a firm grasp on income/expenses after she leaves the job.
apranger
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Re: Advice when moving to single income

Post by apranger »

6 months to decompress seems like a big commitment to make up front. Maybe consider less? I think making income sacrifices to spend time with young kids is completely reasonable, but if someone wants to take time off to spend with the kids, shouldn't they spend time with them? Day care for a single earning family is either a luxury for the wealthy or a necessity for single parents. It doesn't sound like you are really in either category.

To your question, I would tap the EF to offset short term costs to keep the savings habits going. But I would also be pushing my partner to consider the trade off - are you getting $3k a month in happiness (and is it enough to be in debt in a monthly basis?).

Long term I would ask her to take job that gives her the satisfaction, stress level reduction, and chance to stay as close to the kids as she wants (part time professional work, maybe)? Ideally something that still allows her to commit enough to offset day care and then fill up a retirement account. Even if no other money hits the family cash flow, the yearly 401k space will make it much easier to hit your retirement savings goals.
niceguy7376
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Re: Advice when moving to single income

Post by niceguy7376 »

How are you able to contribute 27K (that includes match) and further 8k into Roth 401k?

It is all about mindset. You would definitely be able to adapt and make adjustments and live comfortably.
runninginvestor
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Re: Advice when moving to single income

Post by runninginvestor »

BogleHead1008 wrote: Thu Sep 16, 2021 1:07 pm My suggestion: Daycare expenses should be minimized with wife staying home.. may be eliminated until you got a firm grasp on income/expenses after she leaves the job.
Ditto this. I'd ask my spouse what they are feeling after about 2 weeks of being home. Decompression will happen, but it could quickly descend into a personality crisis of "what am I doing with my life". Being there and taking care of your kids as demanding work, but the people I know that have done it say it's really fulfilling. It may be a way to decompress as well over the next 6 months. Being able to spend time without stressing about work could help the relationships. It's also a big chunk of change that would cut the income loss from your spouse by half too.
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Watty
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Re: Advice when moving to single income

Post by Watty »

apranger wrote: Thu Sep 16, 2021 1:19 pm I think making income sacrifices to spend time with young kids is completely reasonable, but if someone wants to take time off to spend with the kids, shouldn't they spend time with them? Day care for a single earning family is either a luxury for the wealthy or a necessity for single parents. It doesn't sound like you are really in either category.
+1000

You are also dealing with two kids who are under three during a pandemic so if it is not absolutely necessary then I would try to minimize the use of daycare.

For older preschoolers they might be some more benefits of daycare with things like socialization but at their age even good daycare is problematic when you think about what they will do all day and how much(or little) interaction they will have with the daycare provider.
BogleHead1008
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Re: Advice when moving to single income

Post by BogleHead1008 »

Watty wrote: Thu Sep 16, 2021 1:44 pm
apranger wrote: Thu Sep 16, 2021 1:19 pm I think making income sacrifices to spend time with young kids is completely reasonable, but if someone wants to take time off to spend with the kids, shouldn't they spend time with them? Day care for a single earning family is either a luxury for the wealthy or a necessity for single parents. It doesn't sound like you are really in either category.
+1000

You are also dealing with two kids who are under three during a pandemic so if it is not absolutely necessary then I would try to minimize the use of daycare.

For older preschoolers they might be some more benefits of daycare with things like socialization but at their age even good daycare is problematic when you think about what they will do all day and how much(or little) interaction they will have with the daycare provider.
Agree.. single income family here and our kids were raised at home until they were 4 to go to daycare to get used to other kids and environment... not everyone can afford to do daycare 12 months/year... its a luxury not a necessity in my opinion.
flyfishers83
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Re: Advice when moving to single income

Post by flyfishers83 »

I would want to be really clear on budget. By your numbers, it appears like you should have a 4K surplus every month. Is that what you’re actually seeing?

I also wouldn’t want to plan on running a deficit every month. Either cut spending or decrease 401k contributions.
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luminous
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Re: Advice when moving to single income

Post by luminous »

I fully support your family's plan to make space for your wife to decompress. Absolutely keep the daycare, taking care of two kids under 3 is not a good way to decompress. Of course you will re-evaluate as time goes on, I think she'll need more than two weeks though. That kind of time and space for her will let her decide what is next with an open and clear mind.

Personally I'd pause the 529 and taxable savings, and definitely see if you can reduce food costs by cooking at home more.
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Onlineid3089
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Re: Advice when moving to single income

Post by Onlineid3089 »

I'd say that you two have already done the heavy lifting in terms of savings by having an incredible nest egg at your age. You can easily make this move and be just fine.

I'd stop the taxable and 529 savings and take a closer look at your budget to see where you could trim to put you at a break even each month with still maxing your 401k. You can make additional adjustments a few months down the road when she decides what she wants to do.

Edited to add that I would probably want to make sure that she has at least 10 years of credits in Social Security before she stops.
Topic Author
sunnyside6849
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Re: Advice when moving to single income

Post by sunnyside6849 »

Lots of great perspectives on here. Thank you!
Some replies to your messages below...
apranger wrote: Thu Sep 16, 2021 1:19 pm 6 months to decompress seems like a big commitment to make up front. Maybe consider less? I think making income sacrifices to spend time with young kids is completely reasonable, but if someone wants to take time off to spend with the kids, shouldn't they spend time with them? Day care for a single earning family is either a luxury for the wealthy or a necessity for single parents. It doesn't sound like you are really in either category.

To your question, I would tap the EF to offset short term costs to keep the savings habits going. But I would also be pushing my partner to consider the trade off - are you getting $3k a month in happiness (and is it enough to be in debt in a monthly basis?).

Long term I would ask her to take job that gives her the satisfaction, stress level reduction, and chance to stay as close to the kids as she wants (part time professional work, maybe)? Ideally something that still allows her to commit enough to offset day care and then fill up a retirement account. Even if no other money hits the family cash flow, the yearly 401k space will make it much easier to hit your retirement savings goals.
I agree, we will consider shortening it. I know people may feel differently about daycare but our kids thrive there and absolutely love it. So in some ways we don't want to fully lose that experience for them but understand that yes, it really is a luxury in some ways.

Totally agree about your long term recommendation. Will share this word for word with her!
niceguy7376 wrote: Thu Sep 16, 2021 1:31 pm How are you able to contribute 27K (that includes match) and further 8k into Roth 401k?

It is all about mindset. You would definitely be able to adapt and make adjustments and live comfortably.
This is the total of 401k + 401k match + Roth
flyfishers83 wrote: Thu Sep 16, 2021 1:55 pm I would want to be really clear on budget. By your numbers, it appears like you should have a 4K surplus every month. Is that what you’re actually seeing?

I also wouldn’t want to plan on running a deficit every month. Either cut spending or decrease 401k contributions.
Yes give or take. When our EF gets too large I move the excess to our taxable. (usually every 3 months)
luminous wrote: Thu Sep 16, 2021 1:58 pm I fully support your family's plan to make space for your wife to decompress. Absolutely keep the daycare, taking care of two kids under 3 is not a good way to decompress. Of course you will re-evaluate as time goes on, I think she'll need more than two weeks though. That kind of time and space for her will let her decide what is next with an open and clear mind.

Personally I'd pause the 529 and taxable savings, and definitely see if you can reduce food costs by cooking at home more.
I appreciate you saying that. Maybe we don't put a date on it and just re-evaluate as things go on.
Onlineid3089 wrote: Thu Sep 16, 2021 2:40 pm I'd say that you two have already done the heavy lifting in terms of savings by having an incredible nest egg at your age. You can easily make this move and be just fine.

I'd stop the taxable and 529 savings and take a closer look at your budget to see where you could trim to put you at a break even each month with still maxing your 401k. You can make additional adjustments a few months down the road when she decides what she wants to do.

Edited to add that I would probably want to make sure that she has at least 10 years of credits in Social Security before she stops.
Good advice on stopping taxable and 529. Seems to be a pretty common theme.
Golf maniac
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Re: Advice when moving to single income

Post by Golf maniac »

It has been a while for us since we decided to go on one income almost 30 years ago. What we did was simple, we lived on my income only for 6 months before my wife quit after having our first son. You just say this is how much we have each month and you decide where to spend it. If preschool is that important to you then you have to cut in other areas such as eating out, vacations, etc. Even when I was making a lot of money I still brought my lunch to work to save for other things. We lived in a very modest house and drove cars until they stopped working. We prioritized two areas: charitable giving and retirement. Everything else was a luxury only after we satisfied those two areas. By having this mind set I was able to retire very comfortably at 56. We all make choices on what we want and two areas that get people are houses and cars, those are killers to retirement for the average person.
MarkRoulo
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Re: Advice when moving to single income

Post by MarkRoulo »

sunnyside6849 wrote: Thu Sep 16, 2021 12:52 pm ...

Age: 37/35
Kids: Two under age 3
His Salary: $180k
Her Salary: $150k
Total Income: $330K

...

~8k a month in expenses

His take home a month: $6,600
Her take home a month: $6,300
This might be wrong. Maybe

The *second* income pays a higher marginal tax rate than the *first* income.

You seem to be doing this:
  • $330K/year total income, ...
  • is $12,900/month income, ...
  • So "his" $180K/year leads to $6,600/month, and
  • "her" $150K/year leads to $6,300/month
I say might be because you clearly haven't just apportioned the $12,900 between the two of you at 63:66, but I would expect that the marginal taxes in the dollars from $180K - $330K would be higher enough than the taxes on $0 - $180K that the take-home/month ratios would be more skewed than you show.

If you run the numbers for $0-$180K ad $0-$330K is your take home really $6,600 and $12,900?
Big Heart
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Re: Advice when moving to single income

Post by Big Heart »

If she does choose to go back to work, her salary need not fund childcare for the children. I think it would be inappropriate to divide it out that way (i.e. she must make over 3k/month otherwise work isn't 'worth it').

Time in the workforce is important for many women's trajectory in ways that go beyond salary. More importantly, childcare is a shared expense drawn from both parent's contributions to family resources.
vinhodoporto
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Re: Advice when moving to single income

Post by vinhodoporto »

1. Dropping daycare is where you’re going to get the biggest savings. That was the first thing to go for us. If your spouse needs down time there are likely part day or even a couple day a week preschool options that are significantly cheaper. For example in my HCOL area you can find lots of good quality 1/2 day pre schools for $4-500/mo per kid.

2a. Reduced expenses won’t necessarily happen automatically. You should see a reduction in commuting and wardrobe for your spouse although if they’ve been WFH during COVID you’ve probably already captured those savings.

2b. You can definitely make changes that will save you $ if you plan for It. Food is definitely one area as you’ve highlighted. Look at expenses where you’re paying for convenience now. When my spouse was home we saved a lot because they did a lot more things around the house that we pay someone else for with both of us working. They also had time to find deals and sales vs just going with what’s most convenient.

2c. I’d reduce contributions rather than take $ out of savings.

3. If your expenses go down and your income goes up I think you’ll be able to ramp yourself savings back up and will be fine in the long run. I’d consider starting a spousal IRA which you can contribute to even if she doesn’t have earned income. Also, it’s unlikely your wife is leaving the workforce permanently. My spouse took 10 years off when our kids were younger which seemed like forever at the time but in reality will probably be less than 25% of her working years. She did change careers when she went back to full time work.

4. The other thing to consider is a big life change and can be very tough for your spouse. What is your wife going to do during the day while the kids are at day care? What will she tell people when they ask “what do you do?” She will see her work friends less and will have less or different intellectual challenges. She may get lonely / bored. The stay at home mom crowd can be great or it can be a total mean girls / high school popularity contest environment. Or both.
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JoeRetire
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Re: Advice when moving to single income

Post by JoeRetire »

sunnyside6849 wrote: Thu Sep 16, 2021 12:52 pm My wife is ready to resign from her high stress job and we want to see if we can make it work on a single income.

~8k a month in expenses

His take home a month: $6,600
Seems like you have some work to do on the expenses before she resigns.
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winterfan
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Re: Advice when moving to single income

Post by winterfan »

Has she looked for other work? How is the job market for her field? If she is planning to go back to the same career, make sure she isn't off for too long. I'm a SAHM and have been for a decade, so I have no qualms about a parent staying home. Personally, I think it's easier to manage the kids' routines when someone is always available. If she takes five years off, be realistic about the prospects for a woman over forty jumping right back in where she left off. It might be possible to look for a new job and try to negotiate a later start date to allow for some decompression.

When I left my job, my husband made much less than you. I noticed that we were suddenly eligible for all sorts of things. We received the savers tax credit, property tax refunds, etc. We had no mortgage, so it was easier to live on a low income. I didn't notice our food bill going down drastically, but we never did much takeout. I did spend less on gas because I had a very long commute, but I only saved about 150/mo or so.
Zeno
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Re: Advice when moving to single income

Post by Zeno »

sunnyside6849 wrote: Thu Sep 16, 2021 12:52 pm My wife is ready to resign from her high stress job and we want to see if we can make it work on a single income. She is burned out and would like to spend more time with our two young kids. We agreed that she should take 6-12 months to figure stuff out before we decide if she wants to stay home or go back to the workforce (likely at a lower paying/less stressful job). Also worth mentioning that I fully support this decision. She has done so much for our family and this current job/employer is making her miserable...


Questions:
1. At current expenses we will obviously be over budget but I would like to keep the kids in daycare fulltime for at least 6 months (ideally rest of this school year) so my wife has time to decompress. Would it be better to tap into our savings/EF during this time or just reduce the 529 and taxable contributions? After the 6 months, if she decides to stay home we would likely still send the kids to daycare but on a part time basis (2-3 days a week) which would reduce the cost by ~$700 /m.

2. Has anyone who moved to a single income noticed reduced expenses in any specific areas? I imagine our food expense will go down significantly since we order out 2-3 times a week right now. Mostly because we are unprepared for dinner with two working parents, long work hours/meetings.

3. We are a bit concerned that if she stops working permanently this would greatly impact our ability to retire comfortably and we would need to make up for it in some way. Based on our current assets and my contribution amount ($27k /yr) do we need to be worried or save more? I will likely get a promotion in the next 12 months which should push the salary over $200k and work in an in demand industry so job is stable.

4. Anything else we should be considering?
We did something similar precisely 20 years ago, when DW left compensated employment. I say "compensated" because DW has always worked harder than I on all fronts, even when she was at home. The stay at home parenting role is exceedingly hard, challenging, uncompensated and largely unappreciated, in my humble view.

When we made this decision, our children were a few years older than yours. We made the decision solely because of the children. We did not want them to be latch-key, for example. The older one was on the cusp of middle school, with all the challenges those years bring. DW's enjoyment or lack thereof of work wasn't a factor, nor was a potential impact on future retirement. At that point in my life, I hadn't really contemplated FIRE and related topics.

Against that background and in answer to your first question: It isn't clear to me that you have a precise handle on your expenses based upon the budget you presented in that some categories seem to be missing. Additionally and as noted by others, keeping the children in daycare when one spouse leaves the workforce is puzzling to me. If your DW does this, she needs to understand that her life is likely to get harder, not easier, and that the expectation of her role going forward is apt to focused on children-related matters. It isn't clear to me that that is her understanding. Indeed, by keeping your children in daycare for 6 months, she will be shielded from stay-at-home activities for that period, so won't really appreciate what her life is apt to be like a year or more down the road.

In answer to your second question, I don't have records going back 20 years nor is my memory very good. I think the short answer for us is "no" for three reasons. First, I always made substantially more than DW, and my salary alone could comfortably cover our expenses. Second, our children were a bit older, so the pre-kindergarten childcare expenses were in the rear view mirror. And third, we have always been pretty extreme on the LBYM scale.

In answer to your third question, our decision 20 years ago absolutely, and in retrospect, changed our financial trajectory. I estimate that our NW would likely be circa $2M higher today had DW stayed in the workforce. And over those past 20 years, I came to understand the financial aspects of retirement, including FIRE. So I also came to appreciate that her departure from the workforce meant that I couldn't retire by, say, age 55, or maybe even earlier. So at age 57, I am still working. You can expect the same, I would imagine, unless your income were to dramatically increase in the years ahead or you really tightened up your expenditures.

There is a related relationship aspect to the impact of these matters on retirement, too. Twenty years ago, DW made a huge sacrifice for the family and our children. That sacrifice has continued over the decades, with various impacts -- the inability to return to a salaried position, for example. To honor that sacrifice, I have kept working, even past a date when I likely could have retired. She is sacrificing, so I will as well.

Looking back on that day 20 years ago from my current perch, we would absolutely do it again. Our children are successfully launched and financially independent. Was it worth it to us to go from two salaries to one? Absolutely "yes." Did it impact when I could leave the workforce? Absolutely "yes” — for both financial and relationship reasons.

Best of luck to you.
anna.day
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Re: Advice when moving to single income

Post by anna.day »

I would personally think less long term about this.

Your wife is burned out from working a stressful, full-time job with two little kids during a pandemic. Completely reasonable. She needs time to rest and recover. The answer is obvious: you keep the kids in daycare and she goes on a leave of absence or quits her job until she has recovered. Six months sounds like a reasonable time frame, but it may be a little more or a little less.

Then, after she's recovered, you can consider more long-term questions like: do the kids stay in daycare? Will she get a part-time job? Etc. But that can all wait six months.

I'd think of it more like: if she had a bad fall and broke some bones, and needed six months off to fully heal, you guys would do that in a hot second. You have the money. What would be the point of trying to make her take care of little kids at home while she's recovering from broken bones, when you can easily afford daycare?

Think of this situation more like that. Your wife has had a run in with some bad life circumstances: little kids, pandemic, full time job. Make the space for her to get better. Then figure out the rest when she is well.
fortunefavored
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Re: Advice when moving to single income

Post by fortunefavored »

Just a reminder - megacorps are desperate to maintain their diversity numbers and will be incredibly accommodating to women who want to take extended time off. Especially if she is mid-senior or in leadership.

When I left my (middle-leadership) role earlier this year, I either had in my reporting chain or knew of several women who hadn't done any significant work in over a year just to keep them on the books. I think the record may have been 3.5 years (a couple of maternity leaves mixed in there.)

If she asks for a 6 month leave of absence, she very likely get it. Then she can decide after 6 months if she wants to return.

No megacorp wants "new mom with 2 kids quits job because of stress" on their diversity report card.
professor_americus
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Re: Advice when moving to single income

Post by professor_americus »

My wife and I are in a similar life stage (38/38 with 3.5 and 1.5 year olds) and similar financial status. Slight difference is that my wife stopped compensated employment when our first daughter was born.

Lots of great advice in this thread. Agree on dialing back 529 and taxable. Big picture -- you are on a great financial trajectory and can afford to reduce/divert/spend down some savings during this transition period before you settle in on a "new normal". I'll add a few other things for consideration.

The change from compensated employment to stay-at-home will be major. I think keeping the daycare "status quo" is a good idea near term. But if stay-at-home sticks, definitely explore half-day preschool and "toddler group" options.

The change could have reverberations on your relationship, mental health, etc. Consider engaging a family counselor as a resource to guide you and your wife through this transition. Even if everything is fine, the counseling session creates a dedicated and defined space to talk about how things are going and place to bring up any issues, emotions, etc.

Does your wife have a particular "passion project" or aspect of her job she enjoys most? Can she carve out a part-time role focusing only on those favorite aspects of the job? This could give best of both worlds if kids stay at daycare.

Depending on your goals/purpose for taxable and 529 balance status... But a period of lower income may be an opportunity to shift a chunk of taxable (at lower capital gains rates) to super-fund or front-load the 529s. You may find that you can stop 529 contributions after front-loading.

All the best to you and your family!
Ron Ronnerson
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Re: Advice when moving to single income

Post by Ron Ronnerson »

sunnyside6849 wrote: Thu Sep 16, 2021 12:52 pm
Questions:
1. At current expenses we will obviously be over budget but I would like to keep the kids in daycare fulltime for at least 6 months (ideally rest of this school year) so my wife has time to decompress. Would it be better to tap into our savings/EF during this time or just reduce the 529 and taxable contributions? After the 6 months, if she decides to stay home we would likely still send the kids to daycare but on a part time basis (2-3 days a week) which would reduce the cost by ~$700 /m.

2. Has anyone who moved to a single income noticed reduced expenses in any specific areas? I imagine our food expense will go down significantly since we order out 2-3 times a week right now. Mostly because we are unprepared for dinner with two working parents, long work hours/meetings.

3. We are a bit concerned that if she stops working permanently this would greatly impact our ability to retire comfortably and we would need to make up for it in some way. Based on our current assets and my contribution amount ($27k /yr) do we need to be worried or save more? I will likely get a promotion in the next 12 months which should push the salary over $200k and work in an in demand industry so job is stable.

4. Anything else we should be considering?
1) You won’t necessarily be over-budget. If you’re spending $96k per year and have an income of $180k (and expected to increase to above $200k in a stable job), you have half your salary remaining to cover savings goals and taxes. This is while keeping pre-school costs as they are, which will go away once your kids get just a little older. I would not use the emergency fund but instead reduce 529 and the taxable contributions.

2) My wife became a stay-at-home parent 3 years ago (when our daughter was age 3). The reduction in taxes, commuting costs (auto depreciation, gas, maintenance, and insurance), and reduction in child care costs (we switched from full-day preschool to half-day at that time and now have no such costs as our daughter is in elementary school but doesn't require after-school care) mitigated the loss in income to a substantial degree. We were already eating at home prior to my wife leaving her job so we didn’t save much on food. If you're eating out several times a week, the savings there could definitely add up. Also, there could be health benefits to eating at home.

The stress reduction for my wife and the time we have gained as a family has just been monumental. We had a kindergartner doing distance learning all last year and it was hard enough with my wife being right there and with only one child. I don’t know how families with two working parents and multiple young kids pulled that off. My hat is off to them. Another example: I had a flat tire earlier this week. I borrowed my wife’s car to go to work and she got the tire repaired. Stuff like that was a real pain before but is now a minor inconvenience. Anyway, you get the idea.

3) You need to stop worrying so much. Your net worth is approaching $2M in your mid-30s. If you didn't save a penny more (not that this is what I’m suggesting you do), you’d end up with about $4m in 25 years at a rate of 4% growth. If you continue to save $27k per year as is your plan, it becomes $5m. This is excluding your home. What you have saved up to this point gives you options because compounding should take care of most of the heavy lifting from here on out. Good job, by the way!

4) Make sure you have enough life insurance and a substantial emergency fund in place if you go down to one income.
Ependytis
Posts: 617
Joined: Mon Oct 17, 2016 11:10 am

Re: Advice when moving to single income

Post by Ependytis »

The one question you didn’t ask is how are you how do you feel about being the sole breadwinner? Would you feel greater pressure? Are you going to have your own burn out in the future? I would make sure you have a clear understanding of how long the hiatus is going to be. If you’re OK for it to be six months then so be it, however, I would want to make it real clear with my spouse that we are on the same page. If you're both not, this can lead to all sorts of conflict. You mentioned retirement, what happens if she decides to stay home permanently, are you OK with that? How will the budget change if she does decide to stay home permanently?

I hate to be the one to bring up tales of woe, however, I had a friend whose spouse did the same thing. My friend was OK with their spouse staying home until the kids were in junior high. After the kids were in junior high, the expectation was the spouse was going back to work. The spouse decided they didn’t want to go to work and a couple years later decided that things were not working out. It turned out my friend not only had be the sole breadwinner the entire time but ended up paying alimony forever. The stay at home spouse’s lawyer told them they could get more alimony if they did not go back to work. Needless to say, the stay at home spouse followed the advice of their attorney. The only thing I think they could’ve done to circumvent this situation is to have everything agreed to in writing.
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AnnetteLouisan
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Location: New York, NY

Re: Advice when moving to single income

Post by AnnetteLouisan »

sunnyside6849 wrote: Thu Sep 16, 2021 12:52 pm My wife is ready to resign from her high stress job and we want to see if we can make it work on a single income. She is burned out and would like to spend more time with our two young kids. We agreed that she should take 6-12 months to figure stuff out before we decide if she wants to stay home or go back to the workforce (likely at a lower paying/less stressful job). Also worth mentioning that I fully support this decision. She has done so much for our family and this current job/employer is making her miserable.

The details...

Age: 37/35
Kids: Two under age 3
His Salary: $180k
Her Salary: $150k
Total Income: $330K

Debt: $360k, 29 years left on 30 yr at 2.75% (Recently refinanced and house is worth $650-$700)
Own two cars

Assets
Savings/EF: $60k
Taxable (90/10): $370k
His retirement (401k+IRA): $330k
Her retirement (401k+IRA+Company Stock*): $725k
*Her company stock is 50% of this will rover to an IRA at termination

Retirement contributions
His 401k+match: $27k
His Roth401k: $8k
Her 401k+match: $18k

~$52k annual contribution

Monthly budget/expenses
$2,202 mortgage
$3,100 daycare
$1,300 food/dining, baby/household items
$500 utilities (internet/tv, gas, electric, water, cell phone, gas)
$500 529 contribution
$325 taxable acc. contribution
$125 auto insurance

~8k a month in expenses

His take home a month: $6,600
Her take home a month: $6,300


Questions:
1. At current expenses we will obviously be over budget but I would like to keep the kids in daycare fulltime for at least 6 months (ideally rest of this school year) so my wife has time to decompress. Would it be better to tap into our savings/EF during this time or just reduce the 529 and taxable contributions? After the 6 months, if she decides to stay home we would likely still send the kids to daycare but on a part time basis (2-3 days a week) which would reduce the cost by ~$700 /m.

2. Has anyone who moved to a single income noticed reduced expenses in any specific areas? I imagine our food expense will go down significantly since we order out 2-3 times a week right now. Mostly because we are unprepared for dinner with two working parents, long work hours/meetings.

3. We are a bit concerned that if she stops working permanently this would greatly impact our ability to retire comfortably and we would need to make up for it in some way. Based on our current assets and my contribution amount ($27k /yr) do we need to be worried or save more? I will likely get a promotion in the next 12 months which should push the salary over $200k and work in an in demand industry so job is stable.

4. Anything else we should be considering?
If you can hold off a little bit first and read Leslie Bennetts’ book, The Feminine Mistake, about exactly this topic, or watch her youtube discussions of her book. Not saying she is right (and full disclosure I don’t even have kids so I’d never purport to know what’s best for them or tell parents what to do!) but it’s very useful to be familiar with the facts she presents so you go into it with your eyes wide open.
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sunnyside6849
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Joined: Sun Feb 14, 2021 7:45 am

Re: Advice when moving to single income

Post by sunnyside6849 »

I just wanted to say THANK YOU to everyone who took the time to give your advice on this topic. It has reaffirmed my beliefs in some areas but also opened my eyes to things that I had not been considering as well. I also feel generally more prepared and have a better understanding of all the considerations that we will need to work through as a family. So THANK YOU, THANK YOU, THANK YOU.

Maybe in 20 years I can be the one answering this question to someone from my kids generation :)
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