Can I afford to stop working overtime?

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miamivice
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Can I afford to stop working overtime?

Post by miamivice » Tue Jan 24, 2017 9:05 pm

Serious question.

Things aren't going well for me at home. Let me simply say that, use your imagine to figure out the rest of the story. I think the kids need me around at home a lot more often.

I have expenses ~$9000 a month. Will try to cut back but probably can't cut back more than $1000 per month, so figure the best month would be about $8000 a month in expenses. Expenses do not include taxes.

Income is $164,000 base salary (pretax, for family) + bonus + overtime. Past overtime has been around $40,000 per year but I'm looking to cut back to $0.

Have ~$550,000 in non-retirement, $500,000 in retirement (50% Roth, 50% 401k), and sufficient amount in 529 for kids college.

Wife and I are ~37.

Do you think that I can afford to stop working overtime?
Last edited by miamivice on Tue Jan 24, 2017 9:28 pm, edited 2 times in total.

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pennstater2005
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Re: Can I afford to stop working overtime?

Post by pennstater2005 » Tue Jan 24, 2017 9:11 pm

If things aren't going well at home my primary thought would be the kids come first. Retirement savings would be a secondary thought for me. I would work more years if I had to to sacrifice for my kids.
“Life is short, Break the Rules, Forgive quickly, Kiss slowly, Love truly, Laugh uncontrollably, And never regret anything that made you smile" - Unknown

miamivice
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Re: Can I afford to stop working overtime?

Post by miamivice » Tue Jan 24, 2017 9:11 pm

pennstater2005 wrote:If things aren't going well at home my primary thought would be the kids come first. Retirement savings would be a secondary thought for me. I would work more years if I had to to sacrifice for my kids.


+1

Elbowman
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Re: Can I afford to stop working overtime?

Post by Elbowman » Tue Jan 24, 2017 9:14 pm

It depends if you are 40 or 70, right? What will your income requirements be in retirement, and how long does that $1,050,000 have to grow before you start withdrawing?

acunn
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Re: Can I afford to stop working overtime?

Post by acunn » Tue Jan 24, 2017 9:15 pm

100% agree with above.
Family above money. Every. Single. Time.

KlangFool
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Re: Can I afford to stop working overtime?

Post by KlangFool » Tue Jan 24, 2017 9:19 pm

miamivice wrote:Serious question.

Things aren't going well for me at home. Let me simply say that, use your imagine to figure out the rest of the story. I think the kids need me around at home a lot more often.

I have expenses ~$9000 a month. Will try to cut back but probably can't cut back more than $1000 per month, so figure the best month would be about $8000 a month in expenses. Expenses do not include taxes.

Income is $164,000 base salary (pretax, for family) + bonus + overtime. Past overtime has been around $40,000 per year but I'm looking to cut back to $0.

Have ~$550,000 in non-retirement, $500,000 in retirement (50% Roth, 50% 401k), and sufficient amount in 529 for kids college.

Do you think that I can afford to stop working overtime?


miamivice,

It is very simple.

The easiest and hardest question in a person's life is what is the #1 priority in your life? If you answer that question, the rest is easy.

<< I have expenses ~$9000 a month. Will try to cut back but probably can't cut back more than $1000 per month, so figure the best month would be about $8000 a month in expenses. Expenses do not include taxes.>>

It is very simple. If you believe more time with your family is more important, then, everything else is negotiable. If you do not believe that it is important, you will not take the necessary action to make it happen.

<<Do you think that I can afford to stop working overtime?>>

It is your life. You can afford to do anything if you believe that it is important enough for you. And, you are willing to make the necessary sacrifice to make it happen.

KlangFool
Last edited by KlangFool on Tue Jan 24, 2017 9:27 pm, edited 1 time in total.

ny_rn
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Re: Can I afford to stop working overtime?

Post by ny_rn » Tue Jan 24, 2017 9:23 pm

I am a single male with no children. I work overtime like a crazy person, and I'm beginning to cut back. Why? To enjoy friends and family more. I believe you answered your own question. In my opinion, nothing else in your initial post matters except, "I think the kids need me around at home a lot more often."

miamivice
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Re: Can I afford to stop working overtime?

Post by miamivice » Tue Jan 24, 2017 9:28 pm

Elbowman wrote:It depends if you are 40 or 70, right? What will your income requirements be in retirement, and how long does that $1,050,000 have to grow before you start withdrawing?


Wife and I are age 37. Forgot to include that bit of information in the first post.

Gropes & Ray
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Re: Can I afford to stop working overtime?

Post by Gropes & Ray » Tue Jan 24, 2017 10:15 pm

$164k is before bonus and overtime? Seems doable. You know how to make a budget, right? Make a budget and see if the numbers work.

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jimb_fromATL
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Re: Can I afford to stop working overtime?

Post by jimb_fromATL » Tue Jan 24, 2017 10:17 pm

miamivice wrote:Serious question.

Things aren't going well for me at home. Let me simply say that, use your imagine to figure out the rest of the story. I think the kids need me around at home a lot more often.

I have expenses ~$9000 a month. Will try to cut back but probably can't cut back more than $1000 per month, so figure the best month would be about $8000 a month in expenses. Expenses do not include taxes.

Income is $164,000 base salary (pretax, for family) + bonus + overtime. Past overtime has been around $40,000 per year but I'm looking to cut back to $0.

Have ~$550,000 in non-retirement, $500,000 in retirement (50% Roth, 50% 401k), and sufficient amount in 529 for kids college.

Wife and I are ~37.

Do you think that I can afford to stop working overtime?


Not enough information. Among other things, it depends on how much you can count on getting as a bonus. While you seem to have quite a bit of assets, unless a lot of those expenses are savings It sounds somewhat like you may be living beyond your means for your base salary.

How many kids?
Do you have a state income tax?
How much are you contributing to retirement?
Is this a one-income family or is spouse working?
Do you have mortgage interest or other items that exceed the standard deduction and get any extra tax break?

$9000 per month is a lot of expenses. With your base salary alone, and if you have a state income, tax, you would barely be able to invest the max in a single 401(k) and a Roth IRA and be able to pay the bills without the overtime.

Do you have some unusually expensive playthings, or perhaps a very expensive home, or private schools, or other things that might be cut back even more?

As an estimate:

For 2016 a married couple with total income of $204,000 contributing 8.8% ($18,000) to a tax-deferred 401(k) and taking the standard deduction of $12,600 and personal exemptions of $16200 for 4 has an AGI of $186,000 and a taxable income of $157,200. They'd pay $31,002 federal income tax, $2,958 medicare, and $7,347 Social Security taxes for a total federal tax of $41,307. They would have $5,300 of their income taxes in their top bracket of 28.%. Their federal income tax before any credits is 15.2% of their wages and their total fed taxes are 20.25% of their wages. After $0 child tax credit their federal income tax is 15.2% of their income.

With $204,000 income and 4 exemptions, after subtracting the $18,000 for pre-tax retirement contributions, $5500 for Roth IRAs, $41,307 federal taxes (including $10,305 FICA) and perhaps $9,672 state taxes, they have $129,522 per year, $10,793 per month after taxes (but before any other deductions such as health insurance, etc).

Without the $40K overtime:

For 2016 a married couple with total income of $164,000 contributing 11.0% ($18,000) to a tax-deferred 401(k)s and taking the standard deduction of $12,600 and personal exemptions of $16200 for 4 has an AGI of $146,000 and a taxable income of $117,200. They'd pay around $20,843 federal income tax, $2,378 Medicare, and $7,347 Social Security taxes (if one wage earner) for a total federal tax of $30,568. They would have $41,900 of their income taxes in their top bracket of 25.%. Their federal income tax before any credits is 12.71% of their wages and their total fed taxes are 18.64% of their wages.

With 4 exemptions, after subtracting the $18,000 for pre-tax retirement contributions, $5500 for a Roth IRAs, $30,568 federal taxes (including $9,725 FICA) and perhaps $7,272 state taxes, they have around $102,661 per year, $8,555 per month after taxes (but before any other deductions such as health insurance, etc) and before any itemized deductions.

jimb
Last edited by jimb_fromATL on Tue Jan 24, 2017 10:23 pm, edited 1 time in total.

J_Markov
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Re: Can I afford to stop working overtime?

Post by J_Markov » Tue Jan 24, 2017 10:20 pm

miamivice wrote:Serious question.

I have expenses ~$9000 a month. Will try to cut back but probably can't cut back more than $1000 per month, so figure the best month would be about $8000 a month in expenses. Expenses do not include taxes.

Income is $164,000 base salary (pretax, for family) + bonus + overtime. Past overtime has been around $40,000 per year but I'm looking to cut back to $0.

Have ~$550,000 in non-retirement, $500,000 in retirement (50% Roth, 50% 401k), and sufficient amount in 529 for kids college.



Is the bonus a significant portion of your total income? Just wondering since I'm having trouble doing the math. You're saying you have 9k/month in expenses which would be 108k/year. If your base salary (pretax) is 164k, then your take home pay after taxes is probably most likely closer to 100k. I suppose what you're saying is that if you stop working overtime then you won't be able to save much more? Would you still be able to maximize your 401K?

Otherwise I'd say you've done a great job saving so far.

Ron Ronnerson
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Re: Can I afford to stop working overtime?

Post by Ron Ronnerson » Tue Jan 24, 2017 11:11 pm

miamivice wrote:Serious question.

Things aren't going well for me at home... I think the kids need me around at home a lot more often.

Do you think that I can afford to stop working overtime?


Can you afford NOT to?

Even if you didn't save anything further (not that I'm saying you should stop saving), what you have invested already should hopefully grow to quite a nice sum by retirement time. If there is a pension and/or social security coming, that would help meet retirement expenses as well. Also keep in mind that since your overtime income is on top of your base salary, a big percentage of the overtime income is going toward taxes. A penny saved is worth more than a penny earned (Ben Franklin got the saying wrong), so I would really look carefully at where costs could be reduced. By the way, your base salary is very nice so if you can keep your costs down, it doesn't seem like overtime is needed, particularly in light of your young age and the fact that you've already saved more than a million dollars.

miamivice
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Re: Can I afford to stop working overtime?

Post by miamivice » Tue Jan 24, 2017 11:34 pm

OK, some more information

- the bonus is about $10k/year. Not a huge part of my salary.

- No state income tax in Florida.

- I'm confused about the questions about whether I'll be able to max my 401k without the overtime. I've never maxed out my 401k in my life. Wife and I each have $18k a year in 401k space, and I've never contributed $36k a year. Should I really put maximizing retirement ahead of providing for children's needs?

- Financial Engines is estimating a $230,000 annual annuity if we keep up current savings rate (not maxing out 401k), today's dollars. I estimate retirement needs to be about $60,000 to $70,000 so it seems to be that we are far ahead of where we need to be.

- The $9000 per month spending includes mortgage payment, daycare, and monthly spending. Daycare is on a gradual (very gradual) downward slope so costs should fall each year to about $6000 per month in another 5 years or so.

- We are generally thrifty. We have a big mortgage payment (3.25% interest, I opted for maximum loan due to low interest rate) and expensive daycare (purchasing quality). Otherwise I feel we keep our expenses down.

jjface
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Re: Can I afford to stop working overtime?

Post by jjface » Tue Jan 24, 2017 11:48 pm

Someone spending $9k a month is not thrifty. But whatever works for you.

Goal33
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Re: Can I afford to stop working overtime?

Post by Goal33 » Wed Jan 25, 2017 1:06 am

jjface wrote:Someone spending $9k a month is not thrifty. But whatever works for you.


+1
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abonder
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Re: Can I afford to stop working overtime?

Post by abonder » Wed Jan 25, 2017 1:36 am

You've gotten a lot of well-intentioned responses. I suspect that your finances will be ok either way. This isn't a financial decision, but rather a family decision. Do what is right for your family. You'll absolutely be ok without OT for a while. Reassess after you've utilized the time to address important issues at home. Those matter most.

I don't think the commments judging the OPs spending are helpful in this situation. If he needs to trim the budget, that can be done at a later time. He has over a million in savings (half in taxable), funded college. It could be a lot worse. Put the non-financial need first. You've been diligent and this is why you've saved - so you have he flexibility when you need it.

UncleBen
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Re: Can I afford to stop working overtime?

Post by UncleBen » Wed Jan 25, 2017 6:37 am

You probably can't afford to not stop working OT.

It seems pretty simple to me that you need to know your monthly take home pay and cut your expenses back accordingly. If your take home is $8k/month great, if it's only $7500 you need to shave off another $500. A majority of Americans are living on far less. You can do it if it is important to you and your family.

You have done an excellent job of saving at an early age which gives you a good financial base to build upon.

cherijoh
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Re: Can I afford to stop working overtime?

Post by cherijoh » Wed Jan 25, 2017 6:41 am

abonder wrote:You've gotten a lot of well-intentioned responses. I suspect that your finances will be ok either way. This isn't a financial decision, but rather a family decision. Do what is right for your family. You'll absolutely be ok without OT for a while. Reassess after you've utilized the time to address important issues at home. Those matter most.

I don't think the commments judging the OPs spending are helpful in this situation. If he needs to trim the budget, that can be done at a later time. He has over a million in savings (half in taxable), funded college. It could be a lot worse. Put the non-financial need first. You've been diligent and this is why you've saved - so you have he flexibility when you need it.


Actually it sounds like the OP has $500K in taxable because he chose to make a minimum down payment on an expensive house. This has resulted in having a large mortgage payment that is taking a big chunk of his cash flow.

OP - if you need to reduce your cash flow demands so that you can cut back on overtime, maybe you should look into seeing if your mortgage company will recast your mortgage if you make a large prepayment (by selling something in your taxable account).

Aren't you the same poster who was bragging about a month ago about achieving "Great Wealth" and being in the top 1% of wealth for your age group? I'm happy to hear that you seem to be rethinking your priorites.

student
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Re: Can I afford to stop working overtime?

Post by student » Wed Jan 25, 2017 8:40 am

miamivice wrote:Income is $164,000 base salary (pretax, for family) + bonus + overtime. Past overtime has been around $40,000 per year but I'm looking to cut back to $0.

Can you first cut back from $40,000 to $20,000 for one year and then reevaluate your situation?

crit
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Re: Can I afford to stop working overtime?

Post by crit » Wed Jan 25, 2017 9:01 am

Reading between the lines, you must have multiple very young children to require $3k/mo in daycare.

Yes, you are needed at home. Your wife should absolutely not be a sole caretaker of multiple very young children. This is a hard time for everyone who goes through it, even with both spouses at home. You are needed at home. Drop the overtime until the youngest is in school.

Frisco Kid
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Re: Can I afford to stop working overtime?

Post by Frisco Kid » Wed Jan 25, 2017 9:18 am

Is it possible to use some of your 500k in taxable to reduce expenses thereby improving cash flow? For example how much of your monthly spending is for car payments? If that is significant perhaps you sell one or trade down as you mention daycare expense I assume you own multiple vehicles? That tardeoff would alllow you to cut back on the overtime. Good luck, you have done well so far..................

Inverted Pyramid
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Re: Can I afford to stop working overtime?

Post by Inverted Pyramid » Wed Jan 25, 2017 9:23 am

I don't think it's been mentioned but how many hours a week of overtime are you averaging to get the 40k? If it's 25 hours+ that's 4-5 hours a day go ahead cut that back to just 1 hour a day that frees up 3-4 hours everyday should be more than enough to be there for your family while still making a few extra bucks. If you are currently only working 10 hours of overtime a week to hit 40k a year, and 10hours is currently hurting your personal life then cut back to zero.

researcher
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Re: Can I afford to stop working overtime?

Post by researcher » Wed Jan 25, 2017 9:40 am

miamivice wrote:Daycare is on a gradual (very gradual) downward slope so costs should fall each year to about $6000 per month in another 5 years or so.


How much of the $164K household income comes from your wife?

If you are hoping daycare costs drop to $6000/month 5 years from now, I'm guessing you pay $7K-$8K currently.

I assume this is more than what your wife makes each month. Does she have any desire to stay home with the kids?

Gropes & Ray
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Re: Can I afford to stop working overtime?

Post by Gropes & Ray » Wed Jan 25, 2017 10:10 am

researcher wrote:
miamivice wrote:Daycare is on a gradual (very gradual) downward slope so costs should fall each year to about $6000 per month in another 5 years or so.


How much of the $164K household income comes from your wife?

If you are hoping daycare costs drop to $6000/month 5 years from now, I'm guessing you pay $7K-$8K currently.

I assume this is more than what your wife makes each month. Does she have any desire to stay home with the kids?


I'm not sure you read his statement correctly. Daycare will drop until his overall expenses hit $6k. That means daycare is <$3,000. And since we don't know why he needs to be home, maybe more time with the mother is the oposite of what the kids need. I'm not jumping to that conclusion, just keeping an open mind.

OP, you are 37 and have $1,000,000. If you need to suspend retirement savings for a few years until your kids are in school, then that is what you do. This is an investment forum, so that is a tough nut for us to swallow, but you can always work a few more years. There is no such easy answer if your children are at risk.

LarryAllen
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Re: Can I afford to stop working overtime?

Post by LarryAllen » Wed Jan 25, 2017 10:15 am

Yes you can afford it. I would cut back to zero or close to zero overtime for a while and see how things go.

Divorce is MUCH more expensive.

Likewise children that do not become productive adults can be very expensive.

Focus on your family for now.

Maybe next year work SOME overtime.

GOOD LUCK!

ved
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Re: Can I afford to stop working overtime?

Post by ved » Wed Jan 25, 2017 10:21 am

I agree that family comes first.
But, before you take an decision on emotions, please consider the workplace expectations (and manage them properly)

Is overtime mandatory at your workplace?
How will the employer be impacted by you not doing this work? Will someone be able to take up the additional hours?
Can you stop working OT "cold turkey"? Or, do you need to transition it over a period of time to someone else that your manager will designate?
Will you be able to get back overtime, if things settle down at home, or you decide that you need the money?

Thanks

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Watty
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Re: Can I afford to stop working overtime?

Post by Watty » Wed Jan 25, 2017 10:27 am

As others you have said, you can afford to cut back on your overtime even if you have to cut back on your retirement savings. With half a million in retirement savings that you already have you will do just fine if you just leave that invested for another 25+ years.


Frisco Kid wrote:Is it possible to use some of your 500k in taxable to reduce expenses thereby improving cash flow? For example how much of your monthly spending is for car payments? If that is significant perhaps you sell one or trade down as you mention daycare expense I assume you own multiple vehicles? That tardeoff would alllow you to cut back on the overtime. Good luck, you have done well so far..................


+1

In addition to paying off other debt like car loans another option would be to use part of it to "recast your mortgage"(Google this) if you do something like pay your mortgage down by 50% in a recast then your mortgage payment would also be reduced by 50%.

toto238
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Re: Can I afford to stop working overtime?

Post by toto238 » Wed Jan 25, 2017 10:30 am

Here's my source:
http://www.babycenter.com/0_how-much-youll-spend-on-childcare_1199776.bc

And the quote:
The average cost of center-based daycare in the United States is $11,666 per year ($972 a month), but prices range from $3,582 to $18,773 a year ($300 to $1,564 monthly), according to the National Association of Child Care Resource & Referral Agencies (NACCRRA).


Even using that upper estimate of $18,773, that would imply you have 4 kids in daycare. Holy wow. If you shopped around and found a cheaper daycare, and are still spending $6k per month on it, that would imply even more kids.

Once a child reaches age 5 or 6, they start entering pre-school or kindergarten, so daycare costs should decrease or go away. So that implies that all 4+ kids you have are 4 or younger. Normal human gestation time basically maxes out females to one pregnancy per year (40 weeks for pregnancy, add in average of 20+ weeks for a couple to successfully start a pregnancy and consider humans have an average 30% miscarriage rate). That implies you and your wife were blessed enough to have 4 children in 4 years, or possibly more. Twins or triplets even seem like a likely explanation.

I'm not you, and you're not me, so how I would handle the situation could and very well may be different than you. If I found myself in that situation, my first priority would be ensuring I didn't have any more children. At $6,000+ per month for daycare costs, that comes out to $72,000 per year. Your joint income is $164,000 meaning if that were an even 50-50% split between the two of you it would be $82k per person and you're both better working than staying at home probably. However, it is very unlikely both your incomes are the same. I don't know which one of you is paid more, but I know if my wife was making more money and I was making less than $72k per year, I would gladly become a stay-at-home-dad to save our family that $72k per year. Maybe that conversation is a non-starter between you and your spouse. I don't know. I'm just telling you what I would do, financially speaking.

If your spouse and you can't approach the topic and discuss your options, it may be worth the $1-2k it would cost to see a marriage counselor for a few months. This is awfully blunt for me to say, but it's the truth. If you can't talk openly and frankly about finances in your marriage right now it's something you need to address.

You have a large family income, about than triple what the average American household has. You have plenty enough income to make your situation work without doing any overtime at all. The problem you have is not a lack of income, but a family issue. Whatever "things aren't going well for me at home" means, get that resolved. That's what is standing in your way more than anything else.

JGoneRiding
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Re: Can I afford to stop working overtime?

Post by JGoneRiding » Wed Jan 25, 2017 10:34 am

miamivice wrote:OK, some more information

- the bonus is about $10k/year. Not a huge part of my salary.

- No state income tax in Florida.

- I'm confused about the questions about whether I'll be able to max my 401k without the overtime. I've never maxed out my 401k in my life. Wife and I each have $18k a year in 401k space, and I've never contributed $36k a year. Should I really put maximizing retirement ahead of providing for children's needs?

- Financial Engines is estimating a $230,000 annual annuity if we keep up current savings rate (not maxing out 401k), today's dollars. I estimate retirement needs to be about $60,000 to $70,000 so it seems to be that we are far ahead of where we need to be.

- The $9000 per month spending includes mortgage payment, daycare, and monthly spending. Daycare is on a gradual (very gradual) downward slope so costs should fall each year to about $6000 per month in another 5 years or so.

- We are generally thrifty. We have a big mortgage payment (3.25% interest, I opted for maximum loan due to low interest rate) and expensive daycare (purchasing quality). Otherwise I feel we keep our expenses down.


on the bold-you have 500k some how in non retirement funds--simply start shifting that to retirement. I.e. if you need the funds have more deducted from your paycheck and then take funds out of here, you are paying 28% in your top tax bracket--YES you should be maxing retirement!!! The kids only "suffer" if their parents aren't there to provide love and support, one less gadget one less meal out of the house one less trip really doesn't qualify

on the budget--besides the house is any of the 9k debt payment? If so I would take some of that 500k and pay that off to reduce the needed monthly burn. I might even refi the house to reduce that payment so you can feel more comfortable working less.

I am facing this same delima i am planning to work less on-call it will be a 24k chunk of income loss PLUS an infant in a few months. But retirement savings isn't what I am willing to give up "things" are. So I will be cutting up the Credit card--not because I carry balances but because I know I justify higher spending when I have them then cash/check etc.

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Earl Lemongrab
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Re: Can I afford to stop working overtime?

Post by Earl Lemongrab » Wed Jan 25, 2017 11:22 am

cherijoh wrote:OP - if you need to reduce your cash flow demands so that you can cut back on overtime, maybe you should look into seeing if your mortgage company will recast your mortgage if you make a large prepayment (by selling something in your taxable account).

That doesn't make much sense. It would be better to sell small amounts of the taxable holdings as needed to supplement the spending.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Pranav
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Re: Can I afford to stop working overtime?

Post by Pranav » Wed Jan 25, 2017 11:28 am

+1 for stopping overtime
Pranav

ponyboy
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Re: Can I afford to stop working overtime?

Post by ponyboy » Wed Jan 25, 2017 11:29 am

What if your company completely cuts overtime...then what? Huge red flag if you have to ask if I can afford to stop working overtime. IF you have to rely on overtime to make ends meet you're in big trouble.

grettman
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Re: Can I afford to stop working overtime?

Post by grettman » Wed Jan 25, 2017 11:38 am

ponyboy wrote:What if your company completely cuts overtime...then what? Huge red flag if you have to ask if I can afford to stop working overtime. IF you have to rely on overtime to make ends meet you're in big trouble.


Yep.

jerkstore
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Re: Can I afford to stop working overtime?

Post by jerkstore » Wed Jan 25, 2017 11:49 am

no idea tubbs and crockett had such a strong compensation package...

yes, financially you can afford to stop working overtime. if you gave a detailed list of expenses and savings goals, then people could give a detailed response of how you you can afford to stop the OT.

inbox788
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Re: Can I afford to stop working overtime?

Post by inbox788 » Wed Jan 25, 2017 12:28 pm

jimb_fromATL wrote:Not enough information.
...
$9000 per month is a lot of expenses
...
Do you have some unusually expensive playthings, or perhaps a very expensive home, or private schools, or other things that might be cut back even more?

As an estimate:

For 2016 a married couple with total income of $204,000 contributing 8.8% ($18,000) to a tax-deferred 401(k) and taking the standard deduction of $12,600 and personal exemptions of $16200 for 4 has an AGI of $186,000 and a taxable income of $157,200. They'd pay $31,002 federal income tax, $2,958 medicare, and $7,347 Social Security taxes for a total federal tax of $41,307. They would have $5,300 of their income taxes in their top bracket of 28.%. Their federal income tax before any credits is 15.2% of their wages and their total fed taxes are 20.25% of their wages. After $0 child tax credit their federal income tax is 15.2% of their income.

With $204,000 income and 4 exemptions, after subtracting the $18,000 for pre-tax retirement contributions, $5500 for Roth IRAs, $41,307 federal taxes (including $10,305 FICA) and perhaps $9,672 state taxes, they have $129,522 per year, $10,793 per month after taxes (but before any other deductions such as health insurance, etc).

Without the $40K overtime:

For 2016 a married couple with total income of $164,000 contributing 11.0% ($18,000) to a tax-deferred 401(k)s and taking the standard deduction of $12,600 and personal exemptions of $16200 for 4 has an AGI of $146,000 and a taxable income of $117,200. They'd pay around $20,843 federal income tax, $2,378 Medicare, and $7,347 Social Security taxes (if one wage earner) for a total federal tax of $30,568. They would have $41,900 of their income taxes in their top bracket of 25.%. Their federal income tax before any credits is 12.71% of their wages and their total fed taxes are 18.64% of their wages.

With 4 exemptions, after subtracting the $18,000 for pre-tax retirement contributions, $5500 for a Roth IRAs, $30,568 federal taxes (including $9,725 FICA) and perhaps $7,272 state taxes, they have around $102,661 per year, $8,555 per month after taxes (but before any other deductions such as health insurance, etc) and before any itemized deductions.

Yup. Not enough information. $9000 per month is a lot of expenses.

I'm surprised it's only moving about $5k from 28% to 25% tax bracket. I would have guessed it were more. This marginal difference isn't going to be as big difference as I had initially imagined. ($129,522 - 102,661 = 26,861) Bottom line is you make $40k more but only get to spend $26,861 (less on the goods when you have to pay sales tax). If you only made half that, you'd have $13,430 and some to spend. Sometimes the "and some" can be substantial if you're at certain thresholds.

Is OT an all or none proposition? The marginal value of OT is ever decreasing and that's the marginal value of spending time with family is highest, so if you're asking the question, you probably should be cutting down if not stopping.

It's all about how much you get to spend when you make extra money after marginal taxes. Those in the highest tax brackets, after federal tax, medicare tax, state and local taxes, plus sales taxes wind up spending only about 40% of what the earn. So it's not a penny saved is a penny earned, but a penny saved is TWO pennies earned. If you can avoid a $1 expense, you can earn $2 less.

https://taxfoundation.org/high-income-t ... tax-season

Elasticity of demand says that if costs go up, people consume less normal goods. It's often easier (or necessary) to cut back than to work and earn more.

OP, if you're struggling now, wait until you have to pay for private school. So if you've got private school in you sights, no, you can't stop working overtime and have to find ways to increase your income.

J_Markov
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Re: Can I afford to stop working overtime?

Post by J_Markov » Wed Jan 25, 2017 6:39 pm

If the OP lives in South Florida (as the nickname suggests), and he has a big family (3 kids?), then 9k/month is not unreasonable. Real estate is very expensive and property tax very high in South Fl. In any case, I'm still somewhat confused. The OP said he has never maximized his 401k. He must have done extremely well in his investments then because to have a 500k in retirement at the age of 37 with that income, that amount expenses and maximizing retirement accounts, is a big achievement.

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Re: Can I afford to stop working overtime?

Post by 2Birds1Stone » Wed Jan 25, 2017 8:12 pm

These #'s don't jive with me either.

I am also curious how someone gets to $500k in retirement accounts by age 37 without maxing 401k/tIRA.

OP, think long and hard about needs vs. wants. $9000 is a LOT of money to be spending. I live in a HCOL area (Long Island, NY) and spend ~$3.5k/month for two adults living a nice middle class lifestyle.

You certainly CAN make things happen without OT, the question is, will you make the "sacrifices" to do so?

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Re: Can I afford to stop working overtime?

Post by miamivice » Wed Jan 25, 2017 8:41 pm

2Birds1Stone wrote:OP, think long and hard about needs vs. wants. $9000 is a LOT of money to be spending. I live in a HCOL area (Long Island, NY) and spend ~$3.5k/month for two adults living a nice middle class lifestyle. ?


Are you include housing payment + property taxes + insurance + utilities in your $3.5k/month spending figure? Or is $3.5k/month just what you spend excluding housing?

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Re: Can I afford to stop working overtime?

Post by 2Birds1Stone » Wed Jan 25, 2017 8:49 pm

miamivice wrote:
2Birds1Stone wrote:OP, think long and hard about needs vs. wants. $9000 is a LOT of money to be spending. I live in a HCOL area (Long Island, NY) and spend ~$3.5k/month for two adults living a nice middle class lifestyle. ?


Are you include housing payment + property taxes + insurance + utilities in your $3.5k/month spending figure? Or is $3.5k/month just what you spend excluding housing?


I pay $1100/month for a nice apartment ~12 miles from work. That is included in the $3.5k/month, we have no debt whatsoever. Spend ~$1900 on Rent, utility, food, insurance. The remaining $1600 is spent on "wants", such as 2 smart phones ($100 total), bars, restaurants, travel, vacations, date nights, gifts, charity, clothes, etc.

We have been churning high reward credit cards and bank account bonuses for the past two years earning thousands of dollars worth of free hotel stays, flights, and statement credits. If you spend a couple thousand a month that could be put on CC's to farm reward points/miles it can be a huge factor in your vacation spending category.

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Re: Can I afford to stop working overtime?

Post by ksleo » Wed Jan 25, 2017 9:27 pm

miamivice wrote:Things aren't going well for me at home. Let me simply say that, use your imagine to figure out the rest of the story. I think the kids need me around at home a lot more often.


I think you're asking the wrong question. The correct question is not "Can I afford to stop working overtime?" The correct question is "Can I afford to not spend more time with my kids?"

Stop working overtime. You only get one chance with your children.
Actions have consequences.

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Re: Can I afford to stop working overtime?

Post by Grt2bOutdoors » Wed Jan 25, 2017 9:31 pm

miamivice wrote:
pennstater2005 wrote:If things aren't going well at home my primary thought would be the kids come first. Retirement savings would be a secondary thought for me. I would work more years if I had to to sacrifice for my kids.


+1


+2 - Money can always be made, time with family can never be made up. Fix the problem at home first.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Can I afford to stop working overtime?

Post by Grt2bOutdoors » Wed Jan 25, 2017 9:34 pm

jerkstore wrote:no idea tubbs and crockett had such a strong compensation package...
:mrgreen:
yes, financially you can afford to stop working overtime.


+1
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

miamivice
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Re: Can I afford to stop working overtime?

Post by miamivice » Wed Jan 25, 2017 9:47 pm

Thank you all. I know exactly what I need to do. My time is needed at home and that is exactly where I will be.

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Re: Can I afford to stop working overtime?

Post by junior » Wed Jan 25, 2017 10:01 pm

miamivice wrote:Serious question.

Things aren't going well for me at home. Let me simply say that, use your imagine to figure out the rest of the story. I think the kids need me around at home a lot more often.

I have expenses ~$9000 a month. Will try to cut back but probably can't cut back more than $1000 per month, so figure the best month would be about $8000 a month in expenses. Expenses do not include taxes.

Income is $164,000 base salary (pretax, for family) + bonus + overtime. Past overtime has been around $40,000 per year but I'm looking to cut back to $0.

Have ~$550,000 in non-retirement, $500,000 in retirement (50% Roth, 50% 401k), and sufficient amount in 529 for kids college.

Wife and I are ~37.

Do you think that I can afford to stop working overtime?


My advice: Spend a year without overtime and track all of your expenses. (I use mint.com- I use 12 or so categories and assign all credit card or debit transactions to one of the categories- other people use more complex tools like You Need A Budget). In the end of the year you'll be able to see a complete picture of your cash flow. How much money you took in and how much you took out. At that point you can figure out how many years you can go without overtime, where the money is going, and evaluate whether you need to downsize your home or take other steps to spend more time with your family (Though I'm guessing you won't need to if your cash flow situation is temporary due to child care costs.).

Think of the 550,000 in non-retirement as a great emergency fund and buffer to let you have some more time with your family.

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HomerJ
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Re: Can I afford to stop working overtime?

Post by HomerJ » Wed Jan 25, 2017 11:08 pm

miamivice wrote:The $9000 per month spending includes mortgage payment, daycare, and monthly spending. Daycare is on a gradual (very gradual) downward slope so costs should fall each year to about $6000 per month in another 5 years or so.


Yes you can afford to stop working overtime. Your expenses won't stay that high forever, as your kids get older.

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Re: Can I afford to stop working overtime?

Post by Dandy » Thu Jan 26, 2017 9:27 am

One thing that I learned is that there are usually people in similar situations that do fine and earn less than you. So, it can be done.

The important focus on children is your love, attention and the guidance you can give them. If they lean toward troubled behavior, have social or health issues or academic challenges you can have a great role to play to get them off to a good start in life. Your caring involvement will build a stronger lifetime bond. Life seems a bit more challenging than it used to be especially when there are two working parents.

Financially, most advise making sure your retirement savings is on track as a higher priority than children's college savings. Your children will not likely be in a position to help you with an underfunded retirement and you probably wouldn't want them to. There are ways to fund college and help them with loan repayment if necessary. There are lots of pressure and guilt involved in getting parents to get the best for their children--most times it involves money e.g. clothes, gadgets, schools, etc. you have to be the adult in the room and know when to say yes and no. But remember you are the best thing your child has.

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DaftInvestor
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Re: Can I afford to stop working overtime?

Post by DaftInvestor » Thu Jan 26, 2017 9:49 am

You recently posted a thread whereby you stated you have achieved "great wealth" and are in the 99%-ile and now you are asking if you can stop working OT? When I read that other thread I thought you were getting ready for early retirement.

In any case, you've got $1M in the bank PLUS enough in 529's to fund your kids educations at age 37 (this is more than many here have achieved by age 47) - I'd say you most certainly don't need to work OT at your income level.

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Re: Can I afford to stop working overtime?

Post by Gropes & Ray » Thu Jan 26, 2017 10:09 am

DaftInvestor wrote:You recently posted a thread whereby you stated you have achieved "great wealth" and are in the 99%-ile and now you are asking if you can stop working OT? When I read that other thread I thought you were getting ready for early retirement.

In any case, you've got $1M in the bank PLUS enough in 529's to fund your kids educations at age 37 (this is more than many here have achieved by age 47) - I'd say you most certainly don't need to work OT at your income level.


This is one of those situations where "wealth" is a completely relative term. Over at the Mr. Money Mustache forums people are celebrating FIRE at age 30 with $750k because they only spend $3k/month. But at this forum, although we believe in living below your means, below your means often means you can have a Mercedes and work until you're 60. Even someone with $1 billion could not retire if she spent $12 million/month

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Re: Can I afford to stop working overtime?

Post by TIAX » Thu Jan 26, 2017 10:29 am

miamivice wrote:- I'm confused about the questions about whether I'll be able to max my 401k without the overtime. I've never maxed out my 401k in my life. Wife and I each have $18k a year in 401k space, and I've never contributed $36k a year. Should I really put maximizing retirement ahead of providing for children's needs?

Why do you not max your 401ks but have over $500k in taxable? Max the 401ks even if you save less in taxable.

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DaftInvestor
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Re: Can I afford to stop working overtime?

Post by DaftInvestor » Thu Jan 26, 2017 10:31 am

Gropes & Ray wrote:
DaftInvestor wrote:You recently posted a thread whereby you stated you have achieved "great wealth" and are in the 99%-ile and now you are asking if you can stop working OT? When I read that other thread I thought you were getting ready for early retirement.

In any case, you've got $1M in the bank PLUS enough in 529's to fund your kids educations at age 37 (this is more than many here have achieved by age 47) - I'd say you most certainly don't need to work OT at your income level.


This is one of those situations where "wealth" is a completely relative term. Over at the Mr. Money Mustache forums people are celebrating FIRE at age 30 with $750k because they only spend $3k/month. But at this forum, although we believe in living below your means, below your means often means you can have a Mercedes and work until you're 60. Even someone with $1 billion could not retire if she spent $12 million/month


I hear you on this but in this case it was the same person who asked in one thread "What can I do now that I have obtained great wealth?" and now in this thread asks "Can I stop working OT?". So the OP feels wealthy enough that he needs to ask the question regarding what to do with his feeling of wealth but yet isn't confident enough to stop working OT without running it by the forum. I guess, like a lot of us (me included), its just insecurity about money at play.

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