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

[Dr. Mom]

Rogue Dad, M.D. wrote:

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.

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Rogue-  Purposefully stayed away from lifestyle debate in my comments.  I didn't even recall that you were one of the posters who mentioned Mrs. Dru staying at home.  There were several.  It was the volume of the suggestion that caused my first response.  As to the marginal utility question which is where I am trying to stay to keep this financial, I see it as high marginal utility in their situation.   I am not extrapolating it beyond the example of this post.  I wanted to voice a different opinion on how I view the financial benefit to them of her working.  To me, the math favors her working given their negative net worth and the income level of a general pediatrician.

For me, the years I was in residency cost us money if you assigned all daycare costs and home upkeep costs to me.  But, it was an investment in my future earnings.   It also allowed us a pretty awesome lifestyle of us both working part time as opposed to one doing all the financial lifting.  Different strokes for different folks.

[RogueDadMD]

Dr. Mom wrote:

It also allowed us a pretty awesome lifestyle of us both working part time as opposed to one doing all the financial lifting.

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Yes, I think that's a big reason to do it as well.

The investment in future career is part of it for everyone -- that's what the student loans represent as well!

[wideopenspaces]

Rogue Dad, M.D. wrote:

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).

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My comment was meant to be a more general statement as I run into this advice on a pretty regular basis in my day to day life (both in real life and online). And while I get that it's not meant to be a gendered comment, the fact is that with the wage gap and with the social/cultural expectations, women make less and work less than their partners a majority of the time, thus are usually the ones being told their work/salary isn't worth it from a financial point of view. So that can be a discouraging message to hear over and over. And I know that on a financial forum in particular, that is going to be the main focus, so I see why it was suggested. I personally think that working is important for people for many reasons besides the money that is paid for the work so that should not be the sole reason to stop working. Which is basically what OP and his wife took into consideration when making this decision for themselves, which is great. There are usually many different ways to go about solving a financial problem and some of those ways will work for some people and not others. I like to hear what problems people are running in to and how they choose to solve those problems in the context of their lives. I also like it that so many people are willing to chime in with ideas, even the ones I'm not particularly fond of, or that I would not consider myself (like living with parents-yikes!)

[GXA]

If I were in your shoes, I would continue to max out the retirement accounts.  The debt was an investment in your future, it has already been assumed and is really a sunk cost.  Continue to pay it off as soon as you are able, but not at the expense of your tax deferred retirement accounts.

I understand the psychological boost, but the debt should not be viewed as entirely negative.  Your debt was necessary to achieve your personal goals.

Congratulations on your ability to think this stuff through and outline the issues at hand.  That is more than half the battle!

[Hank]

Just a thought or two on the question of whether the lower earning spouse should work or not:

I think it can be useful to have your spouse work if only to have more space for tax deferred investments.  Getting an extra $18K into qualified funds, getting a good match from the employer, picking the better of two healthcare plans or other fringe benefits all can be advantageous.  If the lower earning spouse can top out a 401(K) or other plan while working half time or quarter time, then that might not be a bad plan.

Even a modest teacher's pension or government pension can be worth quite a bit because of inflation protection and access to free or highly subsidized healthcare while working or in retirement.  Guard or reserve military time can be good deal too if you work for the government or for a stereotypical big business.  Deployments can be a killer as a single parent or as a business owner who is expected to make payroll for employees and pay for rent and a practice acquisition loan.

[Live Free MD]

My take:

1. You're motivated and knowledgeable, so whatever you do, you will be financially successful.

2. You like your job.  This is huge.  There's no need to go completely crazy and try to retire in 10 years, so give yourself some leeway.

That being said, if you want to accelerate things, here is what I recommend:

1. Reduce your expenses.  Yes, I know you said you were already at a spartan level of spending.  If you want it bad enough, you will find ways to reduce spending.

2. Take advantage of other ways to increase your income (urgent care shifts, telemedicine, online chart review). Again, potentially difficult with a family and a full time primary job, but if you want it bad enough it might be worth it to you.

3. Continue to contribute to 401k, 403b and backdoor Roths.  Use it or lose it!

4. Target a gross savings rate of around 40% (I would say 50% but that probably isn't possible with 2 children and daycare in a HCOL area).  Assuming a 300K gross income, this would be a savings of around 120K per year.  Approximately 80K would go to taxes (very rough estimate), so that would leave around 100K for living expenses.  Of the 120K saved, 18k would go to your 401k, 18k to your wife's 403b, and 11k to 2 backdoor Roths.  That leaves 73k per year to loans, which would be loan payoff in around 5 years, an aggressive but potentially very satisfying goal.  How bad do you want it again?

Best wishes on your financial journey!

 

[Dru]

OP here - NOT A BUMP,  just a chance to say thank you to all who gave input. We are thinking about this in a whole new light. This has created the most fruitful discussion Mrs Dru and I have had around finances in a long time. We're making no immediate changes to retirement contributions, but adjusting budgeting and expense tracking. I'll update in a couple years (net worth should be >$0 by then!)

Dr Dru