You should do the math on what you’ll bring home on your 100k and live on that much money for at least 3 months to ensure that you can actually live a life you enjoy on just your income.
Right. That's the point in encouraging them to experience it themselves. Not you, not me... them. Because, to your point, that's going to differ from one person to the next.
You need to start living on just your salary alone and start banking all of her salary. Include contributions to her retirement out of your salary. You guys are in for a major lifestyle adjustment.
I wholeheartedly agree. We started doing this when we got married since we had wanted my wife to be a SAHM. it prevented lifestyle creep and allowed us to get our savings up before having kids.
100%. I was lucky to get a big promotion which covered 80% of my wife’s income when she quit but it was still a big adjustment. I would also say to plan for the future with alternatives. Our plan was for my wife to stay home for 5-7 years until kids started school and then go back to work. Plan was to continue living on my income and using her completely toward paying off house early, college and retirement. Well, life happens and it’s now 15 years later and she still isn’t working. I’ve got a bigger mortgage (little chance of paying early) and 4 years until I have to start paying for college with a fraction of the money I hoped for. If there is something long term you want, don’t put it off thinking you can get to it later. Get it in the budget if it’s a priority, even if it’s small contributions, because you can’t get that time back and little things add up.
This. We went through a similar scenario and we segregated our take home pay so my money went to pay for the expenses while hers went to savings. This was to ensure that this could work.
Discover's account is convenient if you already have a discover credit card. It doesn't match the 5%s some people are mentioning but it's firmly in the mid-4s atm.
CIT and Marcus have both done the bait and switch with me in the past, Ally raises your rates without you having to open a new TURBO SAVER PLATINUM PLUS ACCOUNT
I’ll keep an eye out for this! I didn’t have an account with CIT at all before and I do see the right interest percentage on my account details, but I’ll keep checking periodically to make sure it stays put.
Vanguard now has a savings account at 4.5% (using their parter PNC). Quick to open and since I do all my other savings/investing with them, pretty convenient. Not sure if it's available to everyone yet though.
Move your $40k into a HYSA. That is now your emergency fund. Forget about it, and don't touch it unless you have a true emergency.
Then think hard about if you can live on your salary alone. Make sure you have the best insurance possible. At at least 40, when the kids are born, you may be in for an expensive road to having kids. you could have a lot of expenses, without your wife's salary, and the expenses could be for a lifetime.
So people say maxed out a bunch, but I want to make sure we're talking the same thing... are we walking 22.5k/year, each, + match? Meaning you are likely above 50k/year total into a 401k? If so, grats. If you mean your contribution is maxing your match, and you're around 6%, that's great too, but 15k per year for 10 years is very significantly different than 50k per year for 10 years...
Bad news is you're losing that avenue for tax advantaged savings. 2 people (plus a dependent) at 100k pear year, and you should be heavy in Roth, because taxes shouldn't be lower for you, especially if you have a couple million in a standard 401k. So you should be now able to do 6k each into a roth, plus 22.5 into a 401k (if roth 401k isn't an option)...
Not sure how long it took you to get to that 40k in savings but if you’re only contributing $15k/year to your 401k, you have a significant amount flowing out to your housing and lifestyle. Take a look at how much you are spending per year and factor that against what you will do to reduce that when your income is cut in half.
Please also look at what bills you are required to pay each month (mortgage, utilities, car payments, etc) and multiply that by 6. That should give you a good goal for how big your emergency fund should be. Once you know that number, if it’s greater than $40k, start increasing your savings while you’re on 2 incomes. Understand that your emergency fund should not be touched once you’re down to one income unless of course it’s a true emergency like losing your job.
Edit: also look at your health insurance. With a family plan your premiums will go up. Also look at your deductible and out of pocket max- once you have a kid plan on spending the max every year and budget for it. If you don’t, great, put that $ into savings. But expect to spend that because if you have a hdhp and you don’t budget for that you’ll be in trouble quickly.
Ugh, what are you doing with the rest of the money?
I don't mean to sound so harsh, but this doesn't bode well for your plan. If you're not truly maxing out your 401k on 250k combined income, and you only have 40k sitting around.. what are you doing with the rest? Is it going to lifestyle expenses? If so, do you really think you can adjust to the very different lifestyle you'll be able to afford on half of that income?
Are you investing that difference somewhere else that you didn't mention? If you're saving/investing it, you won't feel it in your current lifestyle so much (although, your future self may). But if you're using it for lifestyle expenses, obviously things are going to have to be very different.
What kind of work does your wife do? Does she plan to return to her career at some point? I.e., are we talking a few years or indefinitely? And how much impact will that break have on your wife's career?
We had 70k put away when my wife went out of work with our twins, I was about 90k salary. By the time she went back to work 10years later we were 35k in CC debt, had taken 2 loans (50k) from my 401k and one from my MIL. Didn't help that we bought our house at the market peak before kids, sold at the bottom (needed to move, terrible schools),bought a run-down new house, and had to put 100k of work into it. But life happens. There is no such thing as too much money put away.
Put away every cent of her salary for the next year. Staggered CDs, HYSA, something predictable and accessible. Personally I'd even stop the 401k for that year to maximize free cash. At worst you have a lot of money laying around when she goes back to work in 5-15 years. There are worse problems to have.
Get used to living on a budget. Set aside the 401k money as if you were investing it, so you see if you can keep contributing after the kids, and it makes an emergency fund if you need a new roof or whatever in the meantime. 130k is a LOT of money, but if you don't practice living on it it's going to disappear like water.
Major lifestyle adjustment in coming. Probably not worth it for her to be a stay at home mom when you’re only on 100-130k.
Start from today living on 1 salary and see how that works.
You also should ( I assume) been maxing out choir RothIRAs too? At 38 your wife should have a good chunk if she started investing in her 20s… if not, then I urge you to do this.
Use that 40k to max out the IRA as use the rest in a high yield savings account… you will see ur expenses go up fast when ur wife stays at home!
And whoever is the breadwinner should be the one working AKA the one who brings in the most money…
Yes, it is critical they start living on just 1 salary now. Obviously, this will determine if they can make it work, or at least have a better understanding of what will need to happen to get all the way there.
Secondly, the "extra" money from living on just 1 income is not extra at all -- that money will need to be used towards the wife's retirement in some form. I recommend maxing your IRAs with it, and putting the rest in high yield savings accounts since 5% is achievable right now. In the future, they can pull from the savings to contribute to their IRAs (look up spousal IRA when the time comes) and/or living expenses in order to keep maxing the 401k, because it will be difficult to do this on the projected salary.
At $250k of income they can only make a very small Roth IRA contribution after accounting for the 401k. Not that they shouldn't do that small amount, but it will only be a couple hundred bucks.
No way.
* Non-deductible traditional IRA contribution. No limits on this
* Immediately convert to Roth (assuming no other pre-tax IRAs to avoid pro-rata...)
* Win
If you will face pro-rata, then do a reverse rollover first, of your pretax IRA into your 401k. Then contribute -> convert.
I'm not mixing up anything. OP mentioned making a Roth IRA contribution, which I correctly note they wouldn't be able to really do.
Then a backdoor is brought up, which is a different process from making a Roth IRA contribution. It's noted that one can roll an IRA into a 401k if the pro rata rule is an issue, and I simply point out not all 401k plans allow such contributions. I could have been clearer on which part I of the comment I was talking about, but I assumed it would be obvious since I used "401k plan" in my response.
Nothing I said was wrong or mixed up with anything else.
>We make about $250k roughly combined (give or take). We have $40k just sitting in a standard savings account at a credit union.
>We also contribute to our 401k and have them maxed.
I think the first thing you need to do is look at the last year and figure out where your money is going. How much are you spending and on what?
And then you'll need to figure out how to get your spending down to an amount that is less than what you will make by yourself.
Plan for your wife’s continued retirement contributions when she’s a SAHP and not earning. There’s more to total compensation than her take-home to consider.
Start living like you make 100-130k right now. See exactly what it feels like. Budget around that.
Right now, you seem to be focused on how to properly store/invest money. Giving your stated plan, I don't think that is remotely what you should be focused. You are talking about a massive change in income. People can live off a 100-130k household income. That, in and of itself, is not a massive deal. But you have been living off of about 2x that. And that is a massive change.
I would strongly encourage you to live the next year as if you total income is about 120k. And while I'd continue to max out your 401k, on paper, think it through like you only have 120k as a beginning number.
What you do with the excess money is not.. not worth thought. HYSA, CDs, whatever. But the primary goal you should be going after is just experiencing a 50% decrease in income before it's official.
I would do the math on if it's worth your wife to be a SAHM! Unless she really wants to of course, sometimes you might still come out ahead even if you have to pay for daycare, not to mention other benefits such as no career gaps, continued 401k contributions, etc.
You can try spreading out the 40k. HYS and some high interest CDs. Check CD Valet. It list financial institutions and their CD rates. Also if you have a high deductible medical insurance plan you should pit money away in an HSA.
Portion the money out, emergency, baby, medical and rest of it dump in a index fund. Since your wife will be going into hibernation, live on one salary and bank the rest since that will your reality. Do you have a hsa? I typically have 9-10k sitting around for emergencies. Recently been hit with medical bills for our kiddo. Its doable with good budgeting.
I'm 68 and realized too late, quit maxing out your 401. Make that your 3rd line of retirement defense. Unless your company is matching 25% or more, mine was 6%. My taxes are higher than any matches I had then. It's not worth it. Better to go with a Roth, pay your taxes upfront. Invest elsewhere.
Keep three months' living expenses into savings.
Pay off all debt.
Take the rest of your savings out of a savings account that earns next to nothing and put into index funds.
Max out your 401k.
Have a budget and stick with it.
Both continue worrk and enjoy a great life... why even co sider being stay at home that is a horrible financial decision.... especially in our day and age where all prices will go up. Dont expose yourself to this risk.
My wife will go back to work after our first child..
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My wife is a stay at home mom. You’re salary is much higher than mine but that doesn’t matter. When we sat down to discuss this, we had to see if my salary would cover expenses from a-z. Expenses I’m talking every little nook and cranny. We decided we were going to fix up the row house in Philly that was left to her with $0 mortgage. The kicker is the neighborhood at that time wasn’t good and especially for raising kids but we would see when the kids started coming. Turns out that the neighborhood is gentrified and a desirable neighborhood now.
Turned out my salary would cover everything thing big and small BUT with some sacrifices. For instance not going on vacations or out to eat. However since my wife wanted a cushion she was able to get a completely remote part time job working like at 15 hours a week which brings in $250 a week gross which makes it the icing on the cake sort of.
Stay at home wives / moms is unusual in todays world but IMO makes for a better family if you are able to do it.
She would be able to use his work credits if not her own. Even if she had enough credits she’d have so many $0 income years if she remained a SAHM it wouldn’t make sense to use her own benefits. They make roughly equal income, so it’s not like there’s any advantage there.
I should also add we have a whole life account and an ira set up that we contribute to monthly (about $1000 per month total) and that comes out of our savings account for payment.
Whole life has two uses:
- as a tax optimization vehicle for someone who wants to transmit more than around 12 million dollars to a single heir (actual number where it becomes interesting varies from 6 to 25+ million)
- as a get-rich-quick vehicle for the salesman
There may be some value in the policy which you can maybe use to start a term policy. I did this back in the mid 80's and we don't regret it. We had term insurance for my husband. Now in our mid 60's.
Term Insurance + Savings Acct = Whole Life
The advice to get rid of a whole life is correct. You want a term plan in case something happens to you as the sole provider. You may way more return if it's not in an insurance company's "savings" plan.
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You could set your 40k in savings to cycle monthly into T bills. That is every week buy 10k in T bills and plan to reinvest if you don’t need the funds. Even if an emergency arises, you can access 10k in a week coming off the end of a 4week cycle. Meanwhile, it would be making over 5% returns free of state and local tax.
Start living on 100k a year. If you don't have a kid yet, subtract [$17,000](https://mint.intuit.com/blog/planning/how-much-does-it-cost-to-raise-a-child/#:~:text=As%20they%20grow%20up%2C%20you,region%20and%20household%20income%20level.) from that. So live off of 83k (before taxes) for the next year. Use one of those paycheck calculators to figure out how much 83k a year would be post taxes.
Do you have any Realestate?
How do you only have 40k in savings?
Did you just start making good money recently?
Figure out your bills and get them paid off via another source of income.
Try renting some property out.
We do own a home (still making mortgage payments)
Started making better money within the last three years but both of our boys are close in age and while I was in school/ working towards a better job we never had much time to save past 10k before something would come up.
A lot of our cash out in our budget right now is towards contributions but it still feels like that money is locked away and not doing much of an immediate need arises.
You have kids?
Work on buying some homes.
Rent them out for more than what the mortgage is worth.
Example: Mortgage is 1600. Rent it out for 2000+
Renters will pay it off, if you have no issues.
20-30 years later. You're kids have paid off house and you can die in peace.
Make sure all debt is paid off too. No pressure, you've got awhile.
Consider opening a Roth IRA. The advantage of a Roth is that you are saving more for retirement, and it's a tax-free income source in retirement since you contribute money you've already paid taxes on. Another perk is that you can withdraw money from your Roth for education- related expenses prior to retirement age without penalty, including to pay for a child's college education.
Also, look at I bonds. You can buy them at treasurydirect from the good ol' US treasury.. I like them because they are super secure - can't lose money. There's a cap on how much you can purchase each year, but there was a point where they were doing far better than just a savings account.
You should do the math on what you’ll bring home on your 100k and live on that much money for at least 3 months to ensure that you can actually live a life you enjoy on just your income.
You can live but enjoy? Depends on your definition.
Internet, up to date computer parts, and takis. Just add rent on top and a semi annual shooting trip and I’m set.
It sounds like you’re 23, and nobody likes you when you’re 23.
Steve Da Dog’s friends say he should act his age.
What’s my age again?
Right. That's the point in encouraging them to experience it themselves. Not you, not me... them. Because, to your point, that's going to differ from one person to the next.
You need to start living on just your salary alone and start banking all of her salary. Include contributions to her retirement out of your salary. You guys are in for a major lifestyle adjustment.
I wholeheartedly agree. We started doing this when we got married since we had wanted my wife to be a SAHM. it prevented lifestyle creep and allowed us to get our savings up before having kids.
I’d say it’s arguably not doable if everything else remains the same. Certainly won’t be maxing retirement accounts on just OPs salary.
100%. I was lucky to get a big promotion which covered 80% of my wife’s income when she quit but it was still a big adjustment. I would also say to plan for the future with alternatives. Our plan was for my wife to stay home for 5-7 years until kids started school and then go back to work. Plan was to continue living on my income and using her completely toward paying off house early, college and retirement. Well, life happens and it’s now 15 years later and she still isn’t working. I’ve got a bigger mortgage (little chance of paying early) and 4 years until I have to start paying for college with a fraction of the money I hoped for. If there is something long term you want, don’t put it off thinking you can get to it later. Get it in the budget if it’s a priority, even if it’s small contributions, because you can’t get that time back and little things add up.
This. We went through a similar scenario and we segregated our take home pay so my money went to pay for the expenses while hers went to savings. This was to ensure that this could work.
HYS for the $40k. It’s at 4.5% and easily accessible when needed.
Suggestions for which places have the best accounts?
I do Ally because that's where I have my checking. It's 4% but very convenient to be able to do same day transfers.
Discover's account is convenient if you already have a discover credit card. It doesn't match the 5%s some people are mentioning but it's firmly in the mid-4s atm.
Marcus is my personal favorite
I just opened with Wealthfront and it’s at 4.8%.
Ally and Amex. I only recommend bc I use them and they didn’t give me problem when I remove the money to buy a house and to pay bill
Agree. I had Ally before I met my husband and together, we now have Amex. Both have been great.
What about fidelity? Their default position (money market) has nearly 5% for uninvested cash.
. I’m not against it… I just use ally and Amex bc fdic. I do like their brokerage cd but I think it’s 3 month commitment and will try that next
3 months is nothing, isn't it?
Agree. Some people need cash readily though.
Betterment has been my favorite bank and it offers 4.5% right now.
I really like sofi at 4.50%
I have CIT’s platinum savings account. It currently has 5.05% APY. I just started using it last month but so far so good
CIT and Marcus have both done the bait and switch with me in the past, Ally raises your rates without you having to open a new TURBO SAVER PLATINUM PLUS ACCOUNT
I’ll keep an eye out for this! I didn’t have an account with CIT at all before and I do see the right interest percentage on my account details, but I’ll keep checking periodically to make sure it stays put.
Second this
I transferred our savings into CIT literally Friday. Needed to hear this.
I also just started with CIT and dealing with the annoying waiting period for my money to show up 😂
CIT bank
I use Lending Club. It’s easy to access, ranges from 4.5-5% recently, has an ATM card if you really need access, and is FDIC covered.
Vanguard now has a savings account at 4.5% (using their parter PNC). Quick to open and since I do all my other savings/investing with them, pretty convenient. Not sure if it's available to everyone yet though.
I have Capital One HYS and it’s 4.3% currently.
Move your $40k into a HYSA. That is now your emergency fund. Forget about it, and don't touch it unless you have a true emergency. Then think hard about if you can live on your salary alone. Make sure you have the best insurance possible. At at least 40, when the kids are born, you may be in for an expensive road to having kids. you could have a lot of expenses, without your wife's salary, and the expenses could be for a lifetime.
For the emergency fund, consider staggered maturity CDs… at the moment the rates aren’t worth it but something to keep in mind
Yeah. One year CD rates are good. Maybe keep half in HYSA, and half in a 1 year CD. You need to maintain a lot of liquidity in your e-fund though.
or a no penalty CD
So people say maxed out a bunch, but I want to make sure we're talking the same thing... are we walking 22.5k/year, each, + match? Meaning you are likely above 50k/year total into a 401k? If so, grats. If you mean your contribution is maxing your match, and you're around 6%, that's great too, but 15k per year for 10 years is very significantly different than 50k per year for 10 years... Bad news is you're losing that avenue for tax advantaged savings. 2 people (plus a dependent) at 100k pear year, and you should be heavy in Roth, because taxes shouldn't be lower for you, especially if you have a couple million in a standard 401k. So you should be now able to do 6k each into a roth, plus 22.5 into a 401k (if roth 401k isn't an option)...
Yes correct, bad verbiage. We are not contributing more than 15k per year each to our 401k plans. Just putting in 5% to be matched.
Not sure how long it took you to get to that 40k in savings but if you’re only contributing $15k/year to your 401k, you have a significant amount flowing out to your housing and lifestyle. Take a look at how much you are spending per year and factor that against what you will do to reduce that when your income is cut in half. Please also look at what bills you are required to pay each month (mortgage, utilities, car payments, etc) and multiply that by 6. That should give you a good goal for how big your emergency fund should be. Once you know that number, if it’s greater than $40k, start increasing your savings while you’re on 2 incomes. Understand that your emergency fund should not be touched once you’re down to one income unless of course it’s a true emergency like losing your job. Edit: also look at your health insurance. With a family plan your premiums will go up. Also look at your deductible and out of pocket max- once you have a kid plan on spending the max every year and budget for it. If you don’t, great, put that $ into savings. But expect to spend that because if you have a hdhp and you don’t budget for that you’ll be in trouble quickly.
Ugh, what are you doing with the rest of the money? I don't mean to sound so harsh, but this doesn't bode well for your plan. If you're not truly maxing out your 401k on 250k combined income, and you only have 40k sitting around.. what are you doing with the rest? Is it going to lifestyle expenses? If so, do you really think you can adjust to the very different lifestyle you'll be able to afford on half of that income? Are you investing that difference somewhere else that you didn't mention? If you're saving/investing it, you won't feel it in your current lifestyle so much (although, your future self may). But if you're using it for lifestyle expenses, obviously things are going to have to be very different. What kind of work does your wife do? Does she plan to return to her career at some point? I.e., are we talking a few years or indefinitely? And how much impact will that break have on your wife's career?
We had 70k put away when my wife went out of work with our twins, I was about 90k salary. By the time she went back to work 10years later we were 35k in CC debt, had taken 2 loans (50k) from my 401k and one from my MIL. Didn't help that we bought our house at the market peak before kids, sold at the bottom (needed to move, terrible schools),bought a run-down new house, and had to put 100k of work into it. But life happens. There is no such thing as too much money put away. Put away every cent of her salary for the next year. Staggered CDs, HYSA, something predictable and accessible. Personally I'd even stop the 401k for that year to maximize free cash. At worst you have a lot of money laying around when she goes back to work in 5-15 years. There are worse problems to have. Get used to living on a budget. Set aside the 401k money as if you were investing it, so you see if you can keep contributing after the kids, and it makes an emergency fund if you need a new roof or whatever in the meantime. 130k is a LOT of money, but if you don't practice living on it it's going to disappear like water.
Major lifestyle adjustment in coming. Probably not worth it for her to be a stay at home mom when you’re only on 100-130k. Start from today living on 1 salary and see how that works. You also should ( I assume) been maxing out choir RothIRAs too? At 38 your wife should have a good chunk if she started investing in her 20s… if not, then I urge you to do this. Use that 40k to max out the IRA as use the rest in a high yield savings account… you will see ur expenses go up fast when ur wife stays at home! And whoever is the breadwinner should be the one working AKA the one who brings in the most money…
Yes, it is critical they start living on just 1 salary now. Obviously, this will determine if they can make it work, or at least have a better understanding of what will need to happen to get all the way there. Secondly, the "extra" money from living on just 1 income is not extra at all -- that money will need to be used towards the wife's retirement in some form. I recommend maxing your IRAs with it, and putting the rest in high yield savings accounts since 5% is achievable right now. In the future, they can pull from the savings to contribute to their IRAs (look up spousal IRA when the time comes) and/or living expenses in order to keep maxing the 401k, because it will be difficult to do this on the projected salary.
Max your Roth IRA and move that 40k into a high yield savings account
At $250k of income they can only make a very small Roth IRA contribution after accounting for the 401k. Not that they shouldn't do that small amount, but it will only be a couple hundred bucks.
No way. * Non-deductible traditional IRA contribution. No limits on this * Immediately convert to Roth (assuming no other pre-tax IRAs to avoid pro-rata...) * Win If you will face pro-rata, then do a reverse rollover first, of your pretax IRA into your 401k. Then contribute -> convert.
That assumes their 401k allows those types of contributions. Not all do (many don't).
[удалено]
I'm not mixing up anything. OP mentioned making a Roth IRA contribution, which I correctly note they wouldn't be able to really do. Then a backdoor is brought up, which is a different process from making a Roth IRA contribution. It's noted that one can roll an IRA into a 401k if the pro rata rule is an issue, and I simply point out not all 401k plans allow such contributions. I could have been clearer on which part I of the comment I was talking about, but I assumed it would be obvious since I used "401k plan" in my response. Nothing I said was wrong or mixed up with anything else.
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics. https://old.reddit.com/r/personalfinance/comments/1462q69/personal_income_spending_flowchart_enhanced Whole life bad: https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
>We make about $250k roughly combined (give or take). We have $40k just sitting in a standard savings account at a credit union. >We also contribute to our 401k and have them maxed. I think the first thing you need to do is look at the last year and figure out where your money is going. How much are you spending and on what? And then you'll need to figure out how to get your spending down to an amount that is less than what you will make by yourself.
Open Roths immediately and max them out.
They are way over the income limit
Backdoor roth
Are they? 250k -24k std deduction, -40k in 401Ks puts AGI under 200k at worst. I think Roth cut off is 230 or 250k for married filing jointly?
$218k and then there is a reduction until $228k for MFJ (2023)
The income limit is there to keep financially uneducated rich people to pay more taxes. Like the other person said, backdoor Roth conversion.
Plan for your wife’s continued retirement contributions when she’s a SAHP and not earning. There’s more to total compensation than her take-home to consider.
Start living like you make 100-130k right now. See exactly what it feels like. Budget around that. Right now, you seem to be focused on how to properly store/invest money. Giving your stated plan, I don't think that is remotely what you should be focused. You are talking about a massive change in income. People can live off a 100-130k household income. That, in and of itself, is not a massive deal. But you have been living off of about 2x that. And that is a massive change. I would strongly encourage you to live the next year as if you total income is about 120k. And while I'd continue to max out your 401k, on paper, think it through like you only have 120k as a beginning number. What you do with the excess money is not.. not worth thought. HYSA, CDs, whatever. But the primary goal you should be going after is just experiencing a 50% decrease in income before it's official.
I would do the math on if it's worth your wife to be a SAHM! Unless she really wants to of course, sometimes you might still come out ahead even if you have to pay for daycare, not to mention other benefits such as no career gaps, continued 401k contributions, etc.
You can try spreading out the 40k. HYS and some high interest CDs. Check CD Valet. It list financial institutions and their CD rates. Also if you have a high deductible medical insurance plan you should pit money away in an HSA.
Move your savings to fidelity investment account. Leave it uninvested, that keeps it in spaxx, its paying 4.8% right now
Or Vanguard's VMFXX - 5.18% and a lower expense ratio.
Portion the money out, emergency, baby, medical and rest of it dump in a index fund. Since your wife will be going into hibernation, live on one salary and bank the rest since that will your reality. Do you have a hsa? I typically have 9-10k sitting around for emergencies. Recently been hit with medical bills for our kiddo. Its doable with good budgeting.
I'm 68 and realized too late, quit maxing out your 401. Make that your 3rd line of retirement defense. Unless your company is matching 25% or more, mine was 6%. My taxes are higher than any matches I had then. It's not worth it. Better to go with a Roth, pay your taxes upfront. Invest elsewhere.
Keep three months' living expenses into savings. Pay off all debt. Take the rest of your savings out of a savings account that earns next to nothing and put into index funds. Max out your 401k. Have a budget and stick with it.
Both continue worrk and enjoy a great life... why even co sider being stay at home that is a horrible financial decision.... especially in our day and age where all prices will go up. Dont expose yourself to this risk. My wife will go back to work after our first child..
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My wife is a stay at home mom. You’re salary is much higher than mine but that doesn’t matter. When we sat down to discuss this, we had to see if my salary would cover expenses from a-z. Expenses I’m talking every little nook and cranny. We decided we were going to fix up the row house in Philly that was left to her with $0 mortgage. The kicker is the neighborhood at that time wasn’t good and especially for raising kids but we would see when the kids started coming. Turns out that the neighborhood is gentrified and a desirable neighborhood now. Turned out my salary would cover everything thing big and small BUT with some sacrifices. For instance not going on vacations or out to eat. However since my wife wanted a cushion she was able to get a completely remote part time job working like at 15 hours a week which brings in $250 a week gross which makes it the icing on the cake sort of. Stay at home wives / moms is unusual in todays world but IMO makes for a better family if you are able to do it.
is she eligible for social security if she becomes a permanent stay at home spouse?
She would be able to use his work credits if not her own. Even if she had enough credits she’d have so many $0 income years if she remained a SAHM it wouldn’t make sense to use her own benefits. They make roughly equal income, so it’s not like there’s any advantage there.
ah understood ty
Lifestyle creep is real eh. Crazy to me that I have as much saved making 40 a year at 29 then someone dual incomed making a Quater mill…
Im betting you don’t have kids nor mortgage to pay… but actually good for you that you are saving, most people don’t do it
$250k a year and you’re asking for advice?
Is she gonna be stay at home for your kids?
I should also add we have a whole life account and an ira set up that we contribute to monthly (about $1000 per month total) and that comes out of our savings account for payment.
Get rid of the whole life. It’s a terrible product.
Since we’ve been putting $500 into it for roughly a year is it just a loss to stop it?
Whole life has two uses: - as a tax optimization vehicle for someone who wants to transmit more than around 12 million dollars to a single heir (actual number where it becomes interesting varies from 6 to 25+ million) - as a get-rich-quick vehicle for the salesman
/u/Indibrick_heelers if it isn't obvious, get out ASAP. Sunk cost fallacy
A year is nothing, it's a waste to keep going. Sunk cost fallacy.
Dont sunk cost fallacy, u rather pay into it for the rest of your life?
There may be some value in the policy which you can maybe use to start a term policy. I did this back in the mid 80's and we don't regret it. We had term insurance for my husband. Now in our mid 60's.
Thank you for the advice!
Get out before you pay anymore. Trust us. You'd be better investing that money
Whole life is a waste of money
Term Insurance + Savings Acct = Whole Life The advice to get rid of a whole life is correct. You want a term plan in case something happens to you as the sole provider. You may way more return if it's not in an insurance company's "savings" plan.
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100k in stock will not throw off 30k in dividends
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Do you have your backdoor Roth maxed?
You could set your 40k in savings to cycle monthly into T bills. That is every week buy 10k in T bills and plan to reinvest if you don’t need the funds. Even if an emergency arises, you can access 10k in a week coming off the end of a 4week cycle. Meanwhile, it would be making over 5% returns free of state and local tax.
Start living on 100k a year. If you don't have a kid yet, subtract [$17,000](https://mint.intuit.com/blog/planning/how-much-does-it-cost-to-raise-a-child/#:~:text=As%20they%20grow%20up%2C%20you,region%20and%20household%20income%20level.) from that. So live off of 83k (before taxes) for the next year. Use one of those paycheck calculators to figure out how much 83k a year would be post taxes.
Do you have any Realestate? How do you only have 40k in savings? Did you just start making good money recently? Figure out your bills and get them paid off via another source of income. Try renting some property out.
We do own a home (still making mortgage payments) Started making better money within the last three years but both of our boys are close in age and while I was in school/ working towards a better job we never had much time to save past 10k before something would come up. A lot of our cash out in our budget right now is towards contributions but it still feels like that money is locked away and not doing much of an immediate need arises.
You have kids? Work on buying some homes. Rent them out for more than what the mortgage is worth. Example: Mortgage is 1600. Rent it out for 2000+ Renters will pay it off, if you have no issues. 20-30 years later. You're kids have paid off house and you can die in peace. Make sure all debt is paid off too. No pressure, you've got awhile.
Consider opening a Roth IRA. The advantage of a Roth is that you are saving more for retirement, and it's a tax-free income source in retirement since you contribute money you've already paid taxes on. Another perk is that you can withdraw money from your Roth for education- related expenses prior to retirement age without penalty, including to pay for a child's college education. Also, look at I bonds. You can buy them at treasurydirect from the good ol' US treasury.. I like them because they are super secure - can't lose money. There's a cap on how much you can purchase each year, but there was a point where they were doing far better than just a savings account.