Can we go 4-5 years with no retirement saving to accelerate student loan payoff?

[Dr. Mom]

Dru and Mrs. Dru-  In case your wife reads the responses I want to encourage her to keep working.  The comments about having her stay at home annoyed me, and I hope she takes them in stride. Glad the site was down for awhile today or I would've been much more fiesty in my response.  Good luck with whatever path you choose!  Keep educating yourselves.  I'd highly recommend turning finance into a hobby and learning to DIY.

[Hank]

There are no rollover minutes for qualified funds.  If you don't make your full contribution in 2017, you don't get to play catch-up in 2019.

Given the asset protection benefits of a 401(k), I'd be loathe to pass up the opportunity to shove money into qualified funds.  Likewise, if one of you should pass away, the student loans may be forgiven and the money in the investments still belongs to the surviving spouse.

Certainly get any employer match and take full advantage of the backdoor Roth.  Personally, I'd fully fund all remaining qualified space each year vs. throwing more money at debt that is no higher than 4.5%.

I like the suggestions for moonlighting, telemedicine, or some other side gig to make additional payments against the student loan debt.  If the in-laws are willing to have you, then that's another $22.5K you can throw at debt each year.  You could pay their utilities and insurance, stock the fridge, and still have all come out ahead if they are happy to have you under their roof.  If not, $1870 could buy a lot of peace and quiet in your own place.

Overall, you guys are pretty well positioned.  You're taking a bit of a hit with the high cost of living area and the high price of daycare. That said, it sounds like the right choice for your wife's career and for the ability to be close to family.  If you don't bring in any additional income, you still should be able to fund the retirement saving every year.  It just will take you a few more years to retire the student loan debt.

[StarTrekDoc]

OP - Happy DW = Happy home.  That's the trouble of hitting that 'pause' button.  Careers can be up ended before one even blinks.   You look like you have the right program already set.  It's splitting hairs on where the money goes on debt repay vs retirement -- you're doing the right moves.   Do the ones that allows you to sleep better at night for the following years.

Hang in there.  The little ones grow up way too fast.  Have a 14 and 16 yo now and felt just yesterday was in your shoes.  Maintaining work/life balance is key for your longevity.

BTW, Do make sure you have sufficient Term life and disability.

[jfoxcpacfp]

Hank wrote:

There are no rollover minutes for qualified funds.  If you don’t make your full contribution in 2017, you don’t get to play catch-up in 2019.

 

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I have struggled with a pithy comment to make that point. You've come up with the perfect example, which I think I'll borrow - thanks!

[Craigy]

If you're committed to using those funds to pay down loans, yeah that's what I'd do.

Only concern is that once the loans are paid off, or getting close to paid off, will you then put that money back into retirement or will you/your wife find ways/excuses to spend it, and then get used to spending it?

The scenario plays out pretty predictably... You:  Honey, we're almost finished paying the student loans!  That's $5,000 a month!  Her: Great!  Now we can afford that new house/ car lease/ vacation/ club membership/ better school for the kids/ tennis lessons from Andre Agassi.

And suddenly you can't afford to start making retirement contributions again, but you will soon of course, in a couple more years of course.

 

[Dru]

Craigy wrote:

Only concern is that once the loans are paid off, or getting close to paid off, will you then put that money back into retirement or will you/your wife find ways/excuses to spend it, and then get used to spending it?

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Exactly. In our current plan, I feel like the loan payment money, once paid off, is free for those things we are not yet doing, especially saving for a downpayment and finally funding the 529s for the kids. In this plan, We would need to turn around and put a lot of that back into retirement savings (and point well taken from above posters that tax deferred space, once not used, is gone), and this extra retirement savings would mostly be after-tax, taking up a big chunk of that 5k/year.

 

 

[jhwkr542]

If you're playing the long game and want the most amount of money at retirement in several years, then you most likely should max out tax advantaged space first. The growth plus difference in tax brackets is probably more than the interest on those loans.

[wideopenspaces]

I agree with other posters that you're in pretty good shape financially-or at least you're on a path that will get you there. I personally like the idea of saving for retirement and loan repayment at the same time. Maybe 10% of salary to retirement, the rest to loans? In 3 years, you're going to get a major raise with the kids in school and you can throw that extra money into retirement or loan repayment or both. I also think that people are too quick to tell women to stop working and just stay at home. That's great if that's what the woman wants, but being at home is not for everyone, and working isn't just about money.

[RogueDadMD]

wideopenspaces wrote:

I also think that people are too quick to tell women to stop working and just stay at home

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I think people's recommendations regarding this are being interpreted the wrong way (it wasn't a rec I made, though I did mention evaluating her job satisfaction and desire to work vs. the marginal income provided).

He asked a financial question and provided extreme detail on the finances.  People provided responses based on the numbers.  The numbers indicate that it may not be a good financial decision for her to work in the short term if their goal is to cut costs dramatically and find alternate ways to get income.  That's impacted by things such as her ability to go back to work, and separate from whether she wants to work, which obviously is a fairly big component to changing things.  Plenty of couples with one person making low income and high childcare costs choose to have one person stay at home and keep the kids at home.  Because of society that's more often the guy, but that's not universal.

Had this been a woman posting and saying her husband was in the much lower paying job, on this forum I am quite sure people would have asked whether the husband would consider being a stay at home dad.

Frankly we're in almost the same situation as the OP with my wife's income/work status/daycare costs, and my wife gave strong consideration to leaving  the work force for a few years.  However the difficulty in getting back to work (large supply of people and very few ideal job setups) when she was ready and losing the retirement savings and a few other things definitely impacted the decision to go from full time to part time instead of just quitting.

While I can understand it is a sensitive issue because assigned gender roles often get mixed into the equation, I really don't think that's the tenor of the conversation here.

I acknowledge that as a guy my opinion may not not have as much personal weight behind it since I'm really never on the bad end of gender discrimination, but it's something our family has dealt with quite recently (my wife went part-time this week).

[RogueDadMD]

Rogue Dad, M.D. wrote:

Because of society that’s more often the guy, but that’s not universal.

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That's clearly a poorly written sentence -- more often the guy that works is what I'm trying to say

[Dr. Mom]

As I see it, financially the marginal utility of Mrs. Dru's income is very high, perhaps the highest it will ever be for them.  Dru makes a pediatrician's salary, not a orthopedic surgeon's. Right now she is contributing about 20% of their combined income. Her opportunities for income growth are likely higher than his as a pediatrician.  Let's remember she is not even full time.  Also, with a very negative net worth, her income is far more valuable than if their net worth were 5M. Marginal utility of income and wealth requires both income and wealth.  It can change over time.

[Hatton]

Mrs. dru is a masters level health professional who loves her job. If she was burned out and felt that she was missing out on her children's milestones then it would be reasonable to have her stay at home. I think it would be unfair to pressure her to quit. This couple will be fine.  I think they should continue to fund retirement and pay down loans as they are doing.

[RogueDadMD]

Dr. Mom -- unless Mrs Dru's work status changing as an option was asked and answered (maybe it was and I missed it), it's still a math question to decide if it's even worth considering. It sounds like she has reason to stay working that aren't related to short term finances. I have female colleagues from my peds residency who finished training and almost immediately became stay at home moms. That's fine -- every situation is different.

The marginal utility goes the the other way too. If she's working 30 hours a week to contribute nothing to disposable income (though the retirement savings are significant), having one person at home instead can change the math dramatically by reducing costs beyond daycare and opening up ways for Dr Dru to make more money on an hourly basis elsewhere. That lifestyle may be more or less preferable depending on the viewpoint.

As I said we JUST went through this and my wife stayed at work (and I encouraged her to stay at work). She also is a Masters level healthcare professional, and staying at home was almost the choice for lifestyle reasons. I think making this a gender debate is off base. Had she quit I could've made that money back doing an extra shift a week (maybe less), but the lifestyle as a whole would've been worse since I would be gone a lot more. I think that's where the marginal utility comes in -- balance.

My original advice was just to snowball the debt and have Dr Dru work extra and throw all the cash at the loans since they really want to kill them off, as I didn't think slashing retirement savings was a good idea. I'll stick with that and bow out before I get censored again.

[Miss Bonnie MD]

I'm in a somewhat similar situation. Finished residency at age 38. I had just over $200k in debt. Making low end for Derm. By combined we make a good amount but he isn't paying my loans off.

I maxed out retirement pretty much from the very beginning- I have 403b,457b, tiny pension plan that's employer funded and Roth IRA. I max out all those and still siphon a good amount towards loans. Perhaps forgo your 457b but I'd max the 403b and Roth IRA on both sides if possible and throw the rest at loans.

[Zaphod]

I would strongly argue against putting off retirement money. Its just bad math and not in the long term view at all. I know its super approved here, but it really is poor long term. Time value of money, simple vs. compound interest, etc...I mean even the tax differential initially makes this a poor overall move. Let the powers of time, interest, tax deferral, inflation, etc....do the work.

As far as working, mom likes it so that is a whole other issue along with her retirement, social security, etc....However, if you do the math you might see you are paying to work which is pretty terrible with the added stress it brings everywhere else in your life. Its definitely less at their income level than a higher paying specialty but still worth considering so they can see the value and maybe restructure their life to better maximize value according to whats important to them.