Getting married, spouse low/no-income. What to do?

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MotoTrojan
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Getting married, spouse low/no-income. What to do?

Post by MotoTrojan »

I plan to get married early this year. Are there any financial actions I should be looking at? My future-DW and I are moving and thus she has left her job. She is not rushing to get a new one, and will likely be fairly low income for 2020 (~$30-45K at the most) with a possibility of not working (may start having children).

My income is generally around $130K gross. I have a $20K taxable account, Roth IRA, 401k, and HSA. She has a Roth IRA maxed for 2019 (holding off on 2020 for now, of course), and a small 401k she will be rolling to a Roth and rollover tIRA (combination of assets). We have a joint bank account, and plan to start saving for a home (1-2 years away from purchase) while renting. She will be covered on my work healthcare plan unless/until she finds a new job.

We are moving from a high-tax state to a moderate-tax one.

1: If we remained unmarried she could convert her tIRA to Roth free of tax, but that isn't worth it to us. Any other options?

2: Assuming it isn't worth it to contribute to an HSA for her as she may move to a non-HDHP if she gets a job, and then contributions would be disallowed, correct?

3: As soon as we are married in 2020, I can use $6K of my income for her Roth irregardless of her working, correct?

4: Should I consider Roth 401k if it becomes clear she won't be working, or is pre-tax 401k still the way to go?

5: Other than enjoying significantly reduced income tax next year when we file jointly (we should file jointly, correct?), is there anything I should take advantage of?
Last edited by MotoTrojan on Fri Jan 03, 2020 10:20 am, edited 1 time in total.
toblerone
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Re: Getting married, spouse low/no-income. What to do?

Post by toblerone »

1. Not marrying her for tax reasons may have unintended consequences! :wink:
2. I'm not sure about this, if she is covered part of the year by your HDHP. I would just wait and decide later in the year, depending on circumstances.
3. Yes, spousal IRA. She doesn't need income.
4. At that income you are probably still better with a traditional 401k. More information needed.
5. Yes, you should see significant tax savings filing jointly. Other than maxing out the HSA, next thing to look at would be I-bonds and taxable savings.
mortfree
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Re: Getting married, spouse low/no-income. What to do?

Post by mortfree »

Got term life insurance for either or both of you?

Something to think about and figure out what timing is best. Mostly around kid arrival.


Congrats!
DeDad
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Re: Getting married, spouse low/no-income. What to do?

Post by DeDad »

OP,

My 2c is that 35-40k is good income. It is not always about the money. Having a job is very fulfilling for a person and they don't know it until they leave. Once you have kids, one might conclude that it is a wash to stay home and take care of the kids and not have to spend money on daycare and preschools. However, the loss of normal adult interaction can hurt a person.
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MillennialFinance19
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Re: Getting married, spouse low/no-income. What to do?

Post by MillennialFinance19 »

I'd be careful on this. Have you discussed whether her long term goals are to be a SAHM or a working professional and mom simultaneously? My wife wouldn't be able to function without her job. In fact, it makes coming home to our children every evening even better.

Also, as someone stated above, $35-40k in income is solid money, especially in a LCOL area, and especially when ADDED to $130k. I would just take some time to examine the pro/con situation of what you're considering before committing your soon-to-be spouse to a lifetime of staying home.
For the love of God, stick to your plan!!!
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Tamarind
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Re: Getting married, spouse low/no-income. What to do?

Post by Tamarind »

With regard to the HSA:

Just contribute for her on a month to month basis. Even if she gets a new job and a non-HDHP later, she will remain eligible for prorated contributions for any month when she was covered by the HDHP on the 1st day of the month. There's a short IRS worksheet here that will help you calculate prorated contribution limits assuming that you'll switch from family to individual only eligibility at some point in the year: https://www.irs.gov/pub/irs-pdf/i8889.pdf.
OnTrack2020
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Re: Getting married, spouse low/no-income. What to do?

Post by OnTrack2020 »

DeDad wrote: Fri Jan 03, 2020 6:02 am OP,

My 2c is that 35-40k is good income. It is not always about the money. Having a job is very fulfilling for a person and they don't know it until they leave. Once you have kids, one might conclude that it is a wash to stay home and take care of the kids and not have to spend money on daycare and preschools. However, the loss of normal adult interaction can hurt a person.
MillennialFinance19 wrote: Fri Jan 03, 2020 7:20 am I'd be careful on this. Have you discussed whether her long term goals are to be a SAHM or a working professional and mom simultaneously? My wife wouldn't be able to function without her job. In fact, it makes coming home to our children every evening even better.

Also, as someone stated above, $35-40k in income is solid money, especially in a LCOL area, and especially when ADDED to $130k. I would just take some time to examine the pro/con situation of what you're considering before committing your soon-to-be spouse to a lifetime of staying home.
That $35-$40k is going to drop very quickly once day care is figured in, along with gas/insurance/maintenance and wear and tear of a vehicle getting to and from work, lunches, clothes, take-out evening meals, etc., and the time factor of there simply not being enough hours in the day to get everything done that needs to be done while working, etc. I don't know of anyone paying less than $800-$1,000 per month for daycare, even in a LCOL area. But people don't usually want to discuss this. So now, that 2nd person working might be bringing in around $10,000 after all taxes and expenses are accounted for. One really needs to figure out if that money is worth it in the long-run. Sorry, I've never lacked for normal adult interaction being at home.
wineandplaya
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Re: Getting married, spouse low/no-income. What to do?

Post by wineandplaya »

MillennialFinance19 wrote: Fri Jan 03, 2020 7:20 am I'd be careful on this. Have you discussed whether her long term goals are to be a SAHM or a working professional and mom simultaneously? My wife wouldn't be able to function without her job. In fact, it makes coming home to our children every evening even better.

Also, as someone stated above, $35-40k in income is solid money, especially in a LCOL area, and especially when ADDED to $130k. I would just take some time to examine the pro/con situation of what you're considering before committing your soon-to-be spouse to a lifetime of staying home.
+1
My wife loves her job and staying home all day would drive her crazy. Economic factors are secondary. She is now essentially working part-time and we ended up getting a nanny 25-ish hours per week. Works great for us but everyone's situation is different.
cshell2
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Re: Getting married, spouse low/no-income. What to do?

Post by cshell2 »

OnTrack2020 wrote: Fri Jan 03, 2020 7:49 am
That $35-$40k is going to drop very quickly once day care is figured in, along with gas/insurance/maintenance and wear and tear of a vehicle getting to and from work, lunches, clothes, take-out evening meals, etc., and the time factor of there simply not being enough hours in the day to get everything done that needs to be done while working, etc. I don't know of anyone paying less than $800-$1,000 per month for daycare, even in a LCOL area. But people don't usually want to discuss this. So now, that 2nd person working might be bringing in around $10,000 after all taxes and expenses are accounted for. One really needs to figure out if that money is worth it in the long-run. Sorry, I've never lacked for normal adult interaction being at home.
There are other advantages to working during those years even if you're just breaking even. While you might not need the adult interaction and sense of purpose beyond taking care of the house/kids, other people do. Also, keeping job skills up to date can be important. The daycare years are not that long, eventually they end and it can be hard to get back into the workforce in some professions after taking a number of years off.

I stayed home the first three years with my first and went back after 3 months with my second. I think overall, I was happier the second go round. Yes, the house wasn't as clean, but it was good enough and everything that NEEDS to be done gets done even with me working full time (and I'm single). Once the kids got into a hundred different activities nobody was ever home anyhow.

Also, average daycare here is $150/week. I never paid more than 7K/year 5 years ago when youngest was in full time care and that was offset by tax credits/deductions .
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Sandtrap
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Re: Getting married, spouse low/no-income. What to do?

Post by Sandtrap »

What are your plans for health insurance?
What would happen if you lost your job?
Would it be beneficial if your spouse worked part-time?
Do you have an "exit plan" to turn "low income" into "more income" if you go into debt or hardship?

Note: be careful of cutting your numbers close. Thingz can happen and do happen when financial planning and strategy meets real life scenarios. Often on the lesser side of finances.

j :happy
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ohai
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Re: Getting married, spouse low/no-income. What to do?

Post by ohai »

I have not done the calculations, but I suspect that since she has no income, the tax reduction from filing as a married household will outweigh any kind of losses from those IRA or health things mentioned above.
Regattamom
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Re: Getting married, spouse low/no-income. What to do?

Post by Regattamom »

ohai wrote: Fri Jan 03, 2020 9:08 am I have not done the calculations, but I suspect that since she has no income, the tax reduction from filing as a married household will outweigh any kind of losses from those IRA or health things mentioned above.
+1
And before this gets into a debate over whether it's better to have/be a SAHP, I would say that you and your wife should do what is best for your family. Drown out the noise because it can get ugly.
Luke Duke
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Re: Getting married, spouse low/no-income. What to do?

Post by Luke Duke »

OnTrack2020 wrote: Fri Jan 03, 2020 7:49 am That $35-$40k is going to drop very quickly once day care is figured in, along with gas/insurance/maintenance and wear and tear of a vehicle getting to and from work, lunches, clothes, take-out evening meals, etc., and the time factor of there simply not being enough hours in the day to get everything done that needs to be done while working, etc. I don't know of anyone paying less than $800-$1,000 per month for daycare, even in a LCOL area. But people don't usually want to discuss this. So now, that 2nd person working might be bringing in around $10,000 after all taxes and expenses are accounted for. One really needs to figure out if that money is worth it in the long-run. Sorry, I've never lacked for normal adult interaction being at home.
We were paying $128/wk per kid for daycare as of last summer. All of my kids were reading and knew basic addition and subtraction when they started kindergarten. This is in Dallas, TX.

Taking a decade off of work will cost much more than $10K/yr. Most women that I know who try to reenter the workforce after a long absence are no longer qualified for their old job. My sister was in sales making close to $100K 17 years ago when she quit working to stay at home to raise her family. Now she works part-time decorating cakes at the grocery store for $10/hr.
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Watty
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Re: Getting married, spouse low/no-income. What to do?

Post by Watty »

There are endless threads and opinions on when to use a Roth or traditional account and there is a wiki on the choice.

https://www.bogleheads.org/wiki/Traditional_versus_Roth

When you have a choice between using a traditional and Roth I am not as excited about Roths for middle class people as many people here because;

1) An over 65 retired couple can have over $100K in taxable income and still be in the 12% federal tax bracket. With a paid off house that is plenty for most people retirement expenses.

2) I live in a relatively low cost of living area and have a paid off house. I plan on delaying Social Security to get a larger check but once I do between both of us we can have $40K in Social Security and $25K in taxable income and pay almost not federal income taxes. Our state also have a retirement income exclusion so we would also pay no state income taxes. Around here, with a paid off house that is enough for an above average middle class lifestyle.

3) I think a lot of people overestimate their retirement income needs. When you first retire you may be active and doing things like a lot of travel but I have seen relatives get to be in their mid 70s and naturally slow down even though they were in relatively good health. At that point they did not want to travel much and they were more interested in downsizing than buying stuff. Even though they could have afforded to spend a lot more there were often months when they did not even spend their entire Social Security check.

4) "Life happens" and you have run into things like health or career setbacks that cause you to retire in a lower than expected tax bracket. I was lucky but especially when I was going through my 50s I saw a lot more people than I would have expected run into things like this.

4) Currently the next tax bracket above 22% is 24% which is only 2% higher. That is not a lot of rewards for paying the taxes decades before you need to. Tax rates may increase but it is hard to see a scenario where you would really save a lot by using a Roth in the 22% tax bracket.

It is just me but I would use as many deductible traditional accounts as you can in the 22% federal tax bracket.


mortfree wrote: Fri Jan 03, 2020 4:12 am Got term life insurance for either or both of you?
+1

And disability insurance for you too.

Also build up your emergency fund to a really good level.

With one income you will be depending a lot on your income.
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MotoTrojan
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Re: Getting married, spouse low/no-income. What to do?

Post by MotoTrojan »

Regattamom wrote: Fri Jan 03, 2020 9:16 am
ohai wrote: Fri Jan 03, 2020 9:08 am I have not done the calculations, but I suspect that since she has no income, the tax reduction from filing as a married household will outweigh any kind of losses from those IRA or health things mentioned above.
+1
And before this gets into a debate over whether it's better to have/be a SAHP, I would say that you and your wife should do what is best for your family. Drown out the noise because it can get ugly.
Thank you. If it were up to me (the numbers guy) she’d work. This is her choice. She’s a very driven person and frankly I think is just nervous about finding a new job after the move, without settling for something. Kids aren’t an immediate next step and I’d guess she will be working, or at least aggressively looking, sooner than later.

Sounds like the biggest thing is to leverage pro-rated HSA contributions.
Freetime76
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Re: Getting married, spouse low/no-income. What to do?

Post by Freetime76 »

Sandtrap wrote: Fri Jan 03, 2020 8:56 am What are your plans for health insurance?
What would happen if you lost your job?
Would it be beneficial if your spouse worked part-time?
Do you have an "exit plan" to turn "low income" into "more income" if you go into debt or hardship?

Note: be careful of cutting your numbers close. Thingz can happen and do happen when financial planning and strategy meets real life scenarios. Often on the lesser side of finances.

j :happy
Congratulations on your marriage plans!
To echo the above advice: healthcare is a big one. Try to have a good plan through one of your jobs, which means you, including later if she might quit or go part time.
My DH and I have flip-flopped many times for who is the main earner with full benefits (who carries the water, as he says). We’ve both had periods of unemployment, job changes, career shifts, and moving for each others’ jobs. It’s been a benefit to us to do the following:
1) always fully fund both Roth’s if we can afford it, no matter where we scrape up the money
2) yes, file jointly
3) keep a generous cash amount in savings - especially when moving and/or job changes. This has saved our a**es many times.
4) keep extended family (in laws!) out of it. Your (joint) goals are your own.
5) keep our fingers in our professions even if not working full time. Meaning, don’t let your skills and contacts get too stale. Especially true for women, who tend to be the ones to take time off from work if anyone does, imho (you never know what happens). DW needs social contacts outside of just her DH, and work is one option.
6) never ever cash in on home equity. It either stays in the house, goes to the next house or goes to retirement. Not cars, furniture, vacation, gifts, Amazon, in laws etc etc. sacred law in our house :happy not all bh’ers follow this of course.

For your fiancé, I suggest reading Lean In. Two ladies (strangers) on a plane suggested it to me when we were chatting about an upcoming decision I had to make. I read it that weekend, and it’s served me well. It’s worth it to get work in a new city just to show yourself you can ( I understand her trepidation - please encourage her to find something paid after moving, to just not bow out too soon).
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