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Started By
Message
How do I optimize retirement savings when my wife doesn't work
Posted on 8/5/22 at 12:53 am
Posted on 8/5/22 at 12:53 am
She is a stay at home mom and I appreciate her taking care of our 2 young children (5 and 7). We're blessed to be in a position where she doesn't need to work, but I would also like to retire one day.
I currently bring home ~250k/year and I'm 42. Got a late start on savings but I have ~200k in retirement account. I max my 401k (company max is only at 3%). Also max HSA and contribute a small amount ($200/month) to kids 529. I do not have 6 months emergency savings either. I don't do Roth, but not sure I can at my income (I honestly don't know)?
My wife does actually have some hobbies that bring in around $10k/year and I'd like to see that grow since she loves it so much. We don't have an LLC for her but maybe that is something we need for her to contribute to retirement?
Is there a way for me to contribute to a retirement account for her? I've read about maybe creating an LLC and adding spouse as an employee but I don't know what I'm doing or where to start.
I'd prefer to retire by 55 but that is likely not on the cards for me.
Any advice?
I currently bring home ~250k/year and I'm 42. Got a late start on savings but I have ~200k in retirement account. I max my 401k (company max is only at 3%). Also max HSA and contribute a small amount ($200/month) to kids 529. I do not have 6 months emergency savings either. I don't do Roth, but not sure I can at my income (I honestly don't know)?
My wife does actually have some hobbies that bring in around $10k/year and I'd like to see that grow since she loves it so much. We don't have an LLC for her but maybe that is something we need for her to contribute to retirement?
Is there a way for me to contribute to a retirement account for her? I've read about maybe creating an LLC and adding spouse as an employee but I don't know what I'm doing or where to start.
I'd prefer to retire by 55 but that is likely not on the cards for me.
Any advice?
This post was edited on 8/5/22 at 12:55 am
12
Posted on 8/5/22 at 1:26 am to frankthetank
LINK
In a big fan of the Money Guy approach. This is their “order of operations” which simplifies it a good bit. There was a really cool PDF another poster posted awhile back with a detailed flow of decisions that I recall being spot on. I may have bookmarked….will check tomorrow.
In a big fan of the Money Guy approach. This is their “order of operations” which simplifies it a good bit. There was a really cool PDF another poster posted awhile back with a detailed flow of decisions that I recall being spot on. I may have bookmarked….will check tomorrow.
Posted on 8/5/22 at 6:09 am to frankthetank
Emergency savings and also with you being the sole bread winner for your family, making sure you have a term life insurance policy if don't already would be my priorities.
Otherwise,
A backdoor Roth is an option for you assuming you have no other trad IRA accounts.
You could do a solo401k for your wife and divest some of the hobby income into that...but that would also require you treating it more like a business with expenses and tax implications if you're not already doing that.
Lastly would be to diversify and consider real estate as an option whether in reits, and better would be syndications or actual property for the tax benefits.
Otherwise,
A backdoor Roth is an option for you assuming you have no other trad IRA accounts.
You could do a solo401k for your wife and divest some of the hobby income into that...but that would also require you treating it more like a business with expenses and tax implications if you're not already doing that.
Lastly would be to diversify and consider real estate as an option whether in reits, and better would be syndications or actual property for the tax benefits.
Posted on 8/5/22 at 6:56 am to lynxcat
quote:
There was a really cool PDF another poster posted awhile back with a detailed flow of decisions that I recall being spot on. I may have bookmarked….will check tomorrow.
Would like to see that too but I find JPM’s Guide to Retirement they put out each year very helpful. Each year I just Google “JPM Guide to Retirement 2022” and the PDF pops up on Google. Some great stuff in it
JPM Guide to Retirement
^check out page 46 for the “flow chart” JPM has
Posted on 8/5/22 at 7:05 am to frankthetank
IF she is picking up the 10K in income... here is what I would do.
1) Set up a solo 401K plan for the SE income. Max it out.
2) Set up a nondeductible IRA. Contribute 6K to that. Then backdoor Roth.
If you want to do a backdoor Roth... you CANNOT do a SEP IRA instead of the solo 401K. This is because of the pro-rata rule.
In addition, a SEP is going to be more limiting in what you can contribute.
Doing a Backdoor Roth here will help as that can serve as a proxy for some of the e-fund shortage... but in any event you want to try to get to at least 3 months.
1) Set up a solo 401K plan for the SE income. Max it out.
2) Set up a nondeductible IRA. Contribute 6K to that. Then backdoor Roth.
If you want to do a backdoor Roth... you CANNOT do a SEP IRA instead of the solo 401K. This is because of the pro-rata rule.
In addition, a SEP is going to be more limiting in what you can contribute.
quote:
I do not have 6 months emergency savings either.
Doing a Backdoor Roth here will help as that can serve as a proxy for some of the e-fund shortage... but in any event you want to try to get to at least 3 months.
Posted on 8/5/22 at 7:06 am to frankthetank
Get a load of this guy…. finds a way to tell us he makes $250k a year with no daycare costs AND that he’s worried about retirement one day.
You hope you can retire by 55 but don’t think it’s possible? Baw, my wife and I both work, making $160,000 a year combined, got two kids, and we could both retire at 59 if we want to. We won’t, but we could as long as there isn’t some earth-shattering disruption to the markets. If I were you, I’d start maxing out a traditional IRA for both you and your wife. You’re already maxing your 401k. Let her use her hobby income as fun money. Y’all will be just fine.
You hope you can retire by 55 but don’t think it’s possible? Baw, my wife and I both work, making $160,000 a year combined, got two kids, and we could both retire at 59 if we want to. We won’t, but we could as long as there isn’t some earth-shattering disruption to the markets. If I were you, I’d start maxing out a traditional IRA for both you and your wife. You’re already maxing your 401k. Let her use her hobby income as fun money. Y’all will be just fine.
Posted on 8/5/22 at 7:06 am to Puffoluffagus
quote:
and also with you being the sole bread winner for your family, making sure you have a term life insurance policy if don't already would be my priorities.
Good advice... I'd add to this that he needs a good disability policy as well... at least until he gets his e-fund up to 6 months.
This post was edited on 8/5/22 at 7:07 am
Posted on 8/5/22 at 7:23 am to LSUFanHouston
quote:
Get a load of this guy…. finds a way to tell us he makes $250k a year with no daycare costs AND that he’s worried about retirement one day.
Don’t be a hater man. Did you ask him where he lives? $250k in Baton Rouge is a lot different than $250k in NY/DC/LA I promise as I live it myself. I promise you it’s a huge difference.
The OP sounds just like my situation except I’m 49 and my wife doesn’t work at all. Interested to hear others thoughts.
Dumb question, but don’t stay at home moms get some credit towards SSN benefits starting at 62. Of course it won’t be nearly the max, but it’s some right?
Posted on 8/5/22 at 7:30 am to TDsngumbo
quote:
we could both retire at 59 if we want to. We won’t
Why not? Put me out of my misery now if I'm still working in my 60s.
Posted on 8/5/22 at 7:35 am to frankthetank
Address the emergency fund first, get it to six months. IBonds could be a place for efunds, but keep in mind you’re limited to $20k/yr (maybe 30 since you could use your wife’s business for another 10), but you can’t get at the money for a year.
You could also use the Roth for that, but you’ll end up paying penalties if you withdraw before 59 1/2.
You could also use the Roth for that, but you’ll end up paying penalties if you withdraw before 59 1/2.
Posted on 8/5/22 at 8:14 am to LSUFanHouston
If I'm able to open a Roth, for both her and myself, then I'll do that soon. I wasn't sure if I'd be able to after a certain income, so that is why I haven't done it yet.
And to those saying I'm trying to brag, I only included my income because it is relevant to my question. I'm fortunate to bring in what I do, but I'm not where I feel I should be at this point in my retirement savings.
And to those saying I'm trying to brag, I only included my income because it is relevant to my question. I'm fortunate to bring in what I do, but I'm not where I feel I should be at this point in my retirement savings.
This post was edited on 8/5/22 at 9:08 am
Posted on 8/5/22 at 8:16 am to frankthetank
You can back door a Roth. I max one out every year for myself.
I think it’s $6000 to $6500.
I think it’s $6000 to $6500.
Posted on 8/5/22 at 8:23 am to frankthetank
quote:
And to those saying I'm trying to brag, I only included my income because it is relevant to my question.
Don’t worry about it. The biggest criticism I have with most “what should/can I do” posts is that people are too vague about income, age and family situation. So I appreciate you offering details. And you’ve gotten some very good advice because you did that.
Posted on 8/5/22 at 8:26 am to frankthetank
My man complaining when he lives the perfect dream life and has purpose
Some of us are out here having to work every day can’t even get gfs and all the chicks on the market are suffering from bidenflation and whatever clever economic pun you can make for “being a single mom”
Some of us are out here having to work every day can’t even get gfs and all the chicks on the market are suffering from bidenflation and whatever clever economic pun you can make for “being a single mom”
Posted on 8/5/22 at 10:22 am to Im4datigers
quote:
Dumb question, but don’t stay at home moms get some credit towards SSN benefits starting at 62. Of course it won’t be nearly the max, but it’s some right?
Non-working spouses can receive up to 50% of their spouse's benefit amount. If she is only staying home for a few years while the kids are little, but works the rest of the time, her own full benefits would likely be better than half of yours. She could also draw a combination of her own benefits and a portion of yours.
SSA LINK
Posted on 8/5/22 at 10:35 am to frankthetank
So save more for retirement. Nothing is stopping you.
Posted on 8/5/22 at 10:57 am to frankthetank
Good advice above; only tax sheltered retirement add is
mega back door Roth:
Your almost exact example in link:
LINK
One more for your consideration is to find the bloat in your lifestyle and convert that to "retirement savings", albeit without tax shelter. Putting money in non-tax sheltered account to be used for retirement can certainly help your cause.
Good luck!
mega back door Roth:
Your almost exact example in link:
LINK
quote:
Here’s a quick summary of what you need to have in place for the ideal mega backdoor Roth strategy:
A 401(k) plan that allows “after-tax contributions." After-tax contributions are a separate bucket of money from your traditional 401(k) and Roth 401(k) contributions. For example, let's say you earn $200,000 annually and you contributed the pre-tax limit of $20,500 in 2022. Your employer also matched your contributions by 6% of your salary, adding $12,000 to your contributions. That brings your total pre-tax contributions for that year to $32,500. Because the total limit is $61,000, you can still contribute an additional $28,500 in after-tax dollars.
In-service distributions. Your employer has to offer either in-service distributions to a Roth IRA — that is, you can take money out of the 401(k) plan while you’re still working at the company — or lets you move money from the after-tax portion of your plan into the Roth 401(k) part of the plan. If you’re not sure, ask your human resources department or plan administrator.
Spare cash. You’ve got money left over to save, even after maxing out your regular 401(k) and Roth IRA contributions.
One more for your consideration is to find the bloat in your lifestyle and convert that to "retirement savings", albeit without tax shelter. Putting money in non-tax sheltered account to be used for retirement can certainly help your cause.
Good luck!
Posted on 8/5/22 at 12:50 pm to TDsngumbo
I don't understand how you make $250k and you DON'T have an emergency fund?
Posted on 8/5/22 at 1:18 pm to Turf Taint
quote:
Turf Taint
very helpful info, thanks!
Posted on 8/5/22 at 2:43 pm to frankthetank
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