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Hign income MD; spouse return to work?

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  • Hign income MD; spouse return to work?

    I'm a physician in a highly compensated sub specialty and my wife stays home with our two young children (3yr and 9mo).  With my income alone, my AGI is right about at the line where every extra penny we make is taxed at the full marginal rate of 39.6%.  My wife likely wont make more than 40k if she returns to work as a social worker.  My concern is that on a post-tax basis, it would amount to only about 25k--most if not all of which would then go to child care expenses.  So its almost that her going back to work would bring more headaches for her and our family without any financial rewards (I know its not all about financial rewards, obviously her professional satisfaction would be greatly improved)

    Anyone else navigate this problem before and how?

  • #2
    While not in the exact same situation myself, I just can't see a scenario where it would make sense for her to go back to work.  The take-home pay after taxes and childcare would eat up so much of it that the benefits of working full-time to not be home with the kids doesn't seem worth it.  Maybe if she maxes out her 401k and she gets a good company match and other benefits.  Otherwise, I imagine both of you would be happier if she stayed at home.

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    • #3
      It sounds like you've already answered the question, and correctly in my estimation.

      There are many benefits to your wife being at home with the kids.  For her, for the kids, and for you.  Unless she has a burning desire to go back to social work, and is willing to make the sacrifices, it makes a lot of sense for her to be home.  As you mention, the financial benefit of her working is nil.  The intangible benefits of her being home are huge.

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      • #4
        I assume the only reason this is coming up is that your wife actually wants to return to work?

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        • #5
          Just not worth it. My wife is a nurse and not only do taxes come out at your marginal rate, but you have to add back in child care, eating out more, transportation, wear and tear, and of course loss of the extreme luxury of having your spouse always around and able to do things with the fam in the instant you have time.

          Only upside to me is if its about 18-20k a year and she can put it all away tax deferred in a 401k/IRA with excellent set up.

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          • #6
            My wife and I have been talking about this as well.  We have a 5 year old and 3 year old.  My wife is a nurse and I am in the highest tax bracket.  My wife wants to be able to drop the kids off and pick them up from school but might want to work from home doing chart reviews or as a school nurse.  I thought the best thing about it is that she can put away 18,000 in a retirement plan plus any match and that is a pretty good retirement boost.  I think it wouldn't be that good if our kids had to go to preschool or daycare but once they go to public school I think she will feel like she has a purpose doing a job other than a housewife.

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            • #7
              WCI wrote an article on this

              https://www.whitecoatinvestor.com/the-hidden-costs-of-a-dual-income-household/

              I'm the same way - highest tax bracket.  She would be earning peanuts, we'd eat out more and not shop the sales and I'd be doing more laundry and cleaning...and someone else raising my kids.

               

              Forget the BMW or Tesla - true wealth is being able to afford a SAHM

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              • #8
                Similar situation here although my wife makes 125K

                We are fortunate that child care is handled by our parents

                In the end, we decided on part time work 2-3 days/week (plus she works at home which is a bonus)

                That way, she can max out her 401K, still get the employer match, and we can utilize her company's benefits which are better than the ones my hospital offers me

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                • #9
                  My situation differs from OP, but I bet applies to many 2-doc families. I make >4x my spouse's PCP salary. She almost retired a few years out, given the enormous cost of nanny/daycare x4 kids vs top marginal tax rate applied to her income.

                  BUT, when we considered the extra 50k+ we could put away in her 401k + match + 403b and the dramatically lower health care costs with her company vs my private practice, and finally the CME $ that could be combined with our family vacations, the numbers changed quite a bit, so she continues to work part time.

                  This will also maximize her SS benefit, and not to mention avoids the guilt of "wasting" all those years of education!

                  Maybe this will sway others whose spouse's salary appears on the surface to be break even with childcare.

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                  • #10
                    What does your wife want?

                    My wife probably could not stand to be a SAHM.  She likes to work.  Perhaps part-time would be a good compromise?  Do not minimize the importance of working for some people.  We both work but have a good support and childcare system.  Whatever you choose it won't be about the money!

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                    • #11
                      Short term sure it doesn't make financial sense but I would argue that you make more than enough money that it's really not an issue either way. If she wants to work she should work. As a woman and with the divorce rate as high as it is I personally can't imagine not working at all.

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                      • #12
                        I'm an average income MD. DW decided to work part time after our kids were born. Her gross pay about covers childcare, so it's a loss after taxes. We do use her low cost 403b and she has a pension. We can also use her full dependent care fsa (I'm limited to 1k/yr in my group). She also has access to a public university 457 that I'm hoping to use once med school is paid off.

                        That aside, she wants to use her education. The numbers don't always add up, but I like that she's balancing home and career. Somewhere on WCI once he said that not all financial decisions are about money.

                        In terms of OPs spouse, I frequently rely on good social workers, so the more in the pool the better!

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                        • #13
                          I think it is all about life satisfaction.  I am making enough income to pay both my med school loans and the wife's and support a reasonable lifestyle.  She is finally nearing the end of fellowship training, we have a 2 year old daughter that she barely gets to spend any time with and the next year will probably see her working full time 7 on 7 off.  It may seem like a lot of work but will actually double the number of days she is around home compared to right now.  I can't imagine my wife suddenly staying home 24/7.  I think she'd go crazy (or I would).  She does get the benefit however of picking a job because she wants it/likes it and isn't pressured into anything because of purely financial reasons.

                          If the OPs spouse wants to go to work, why not give it a try?  Worst case scenario is that it is horrible and she returns to stay at home mom status.  Daycare may also be good on the social side for the kids...maybe not so good on the fever side though...

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                          • #14
                            Been struggling with the same decision of late.  Even at a salary of 100k as a P.A. I still don't think the numbers add up to make it worth her working.  After doing my taxes this year just added 100k to my salary to see what it would amount to and was just under 55% going right to the government at that point.  Would love to have the retirement account but will figure it out.  Helps to hear the comments above regarding the intangible benefits to having someone stay at home.  Its hard for me to put a value on that or conceptualize just how much it would make life easier but I know it will.

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                            • #15
                              Thanks to all who responded--this is really helpful!

                              many of you asked if my wife wants to return to work (or even assumed that she does and that's why I'm asking): right now it hasn't even entered the conversation but I think it might in the next 6 months and I wanted to be prepared.  She proudly earned her master's degree and loved her job working with troubled teens.  Before we had kids she was adamant that she'd be back to work within 1 year.  Now 3 years and 2 kids later its a different story.  She's found incredible joy in being a mother (shes a natural, I always knew she would be a great mom).  She has noted the irony in paying someone else to watch our kids while she is at work counseling other people kids.  I often think she has the more difficult job!

                              In the end, I think when she decides to return to the workforce, I will take the advice of some posters here and advise her to find a job with large entity (perhaps the school district or government) more for benefits than money.  After all, she didn't go into SW for the money...but we can all agree its silly to "work" and have no take home pay/benefits.

                               

                               

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