Hi! I'm 39 years old and I got laid off from my employer of 12 years. I live with my husband (39) and two young kids (4 and 6). This is our current balance sheet:
**Assets**
Combined 401k: $2M
Taxable Brokerage: $350K
HYSA: $200K
HSA: $9K
Kids’ college savings (529s): $32K
Estimated home value: $750K
2 paid off cars and a boat
**Liabilities**
Mortgage: $450K (6.1%)
I was making gross income of about $168K before I got laid off. My husband makes $235K. Obviously, losing my income is a big hit, but I'm having trouble finding another job. I'm considering just embracing the SAHM role so I can do school bus duty, volunteer for the PTA, stay home when one is sick, etc.
At the moment, we spend just about all of my husband’s take home pay of roughly $11k/month (and sometimes more) on our mortgage/utilities/food/kid extracurriculars/travel/etc. The take home pay seems low because he maxes out his 401k and HSA and also contributes to a dependent care FSA.
My question is… if my husband continues to max out his 401k and HSA, will we be okay just living paycheck to paycheck on his income alone considering the amount we have saved? It makes me uncomfortable not to be adding any more to cash savings or brokerage right now. I’m also nervous about not being able to reenter the workforce if I take a few years off. Thoughts? Anyone else in a single income household with a budget this tight?
Please Help Evaluate Our Financial Position… Do I need to get a job?
byu/Icy_Ad3214 inpersonalfinance
Posted by Icy_Ad3214
13 Comments
If you want to stay home, you have to adjust the lifestyle. You can’t safely spend every dollar , or more, that you bring in every month. If you can’t adjust the lifestyle to fit the new income then you can’t stay home.
If you’re not going back to work, he shouldn’t do the dependent care FSA next year–that money will just be added back into taxable income at tax time. To your larger question–it’s possible that staying home your expenses will drop–one commute instead of two, likely fewer rushed drive-through dinners, etc., giving you a little cushion. I don’t think I could take that leap, but it really depends on your comfort zone and preferences.
You are doing exceptionally well. If he can pay all the bills on that take home pay, stay at home for a bit and enjoy the time with your kids. When they’re off to school, maybe ease back into the workforce with something family-friendly flexible and maybe 30 hrs a week.
I’d take the tax hit and start investing in the brokerage more rather than tying up more 401k money for the next 20 years (but I’m not an investment adviser, so take that for what it’s worth!).
Relax. Your family is way ahead of most.
You’re right, you can’t just take a few years off and expect to pick up where you left off, resume gaps are (unfortunately) not attractive in a candidate. If you “take a break”, you need to accept that your career path will change. Not to say you’ll never work again, but the trajectory you were on will definitely change.
I think you really need to create a detailed budget for what life should look like on just your husband’s salary, and live like that while you look for work. As a single income family, would you still be boat people? With these gas prices?!?! If you find a job but the lifestyle changes were acceptable and you’re willing to accept the changes to your career path, then cool. If the lifestyle changes are difficult, then you know looking for a job is the right move.
We can’t really help you make this decision, but I feel like there’s no harm in trying to get a new job while you figure out what your lives look like on a reduced income.
Living paycheck to paycheck is not what you think it is. Personal finance will downvote me for this comment.
You could easily retire, same with your husband and live a great life. That’s up to you and your husband.
Personally if I had bout three mil locked in, I’d never work another day in my life. Priorities are obviously personal, tho.
You need to get a job or cut your expenses. You’re spending too much.
The math actually works if you’re willing to pull 4% from your investments yearly, which is like 80k before taxes. That’s tight with two kids but not impossible if you cut the lifestyle stuff.
Is there any way for you to do some contract work in your field? A special project or maybe a part time contract through one of your former colleagues at another company?
Financially it seems like you’ll be fine if you don’t work, but it doesn’t sound like that sits well with you personally (from the comments in your post).
Realistically, if you never go back to work and neither of you ever contribute another dime toward retirement, you’ll still be able to replace your old inflation adjusted hh income prior to deductions at age 56-58. This obviously depends on the market behaving normally and you being 100% equities. That’s aggressive and may not happen… but just trying to put this into perspective for you.
If you go back to work and keep aggressively saving, you can both start your retirements in your early 50’s.
Kind of a similar spot as you, just smaller numbers.
Wife and I are 28 and have one kid in daycare, I make 130k base another 50k or so in bonuses. My wife has not worked for the past 8 months and has been unable to find employment. At this point I think she has left the workforce for good.
We have $550k invested, $100k in cash, $50k in home equity. We max our IRAs, HSA, and put my employer match into my 401k but it is a coin flip whether we spend more than we make in any given month. Ultimately we contribute about $50k a year into retirement or savings.
It is not so bad because my income is still growing very quickly and we could easily cut $22k a year in expenses (daycare) once my wife decides to call it quits on the job search. I would be very stressed if my salary is stagnant. Our budget has no flab. No travel, no frills.
I am definitely excited to be able to eat out and book experiences again carefree. If you can do that in your current budget I think it’s fine. Y’all will surely reach retirement with plenty.
You have juat over 2.5m invested, you spend around 134k/year.
Without changing your lifestyle you’d need to get that invested total up to 3.2-3.6m to live off your assets without running out of money depending on your risk tolerance. I think you have enough of a cushion that its not too risky, but its gping to take much longer to hit that target of 3.2+ on one income. You also have the challenge that most of the assets are in a 401k, you really need to build up the taxable accounts so that you can bridge the gap until you can take from 401k without penalty.
People have brought up some good points already, but consider this angle. What if your husband were to pass away, or things ended in divorce in the near to mid-term future?
If you not working now is compatible with that, then maybe it’s a good idea. You have nearly enough saved that maybe in a catastrophic scenario you’d still be fine.
With all you have saved for retirement already, I think you guys are safe to stop making contributions or at least considerably cut back if the budget is tight. That $2 million in 401k should alone be enough for you both to retire young