Author Topic: Advice for FIRE-ing while spouse is still working?  (Read 2887 times)

tempesttenor

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Advice for FIRE-ing while spouse is still working?
« on: August 15, 2015, 01:27:35 PM »
Hey folks, long time blog reader, short time forum lurker, first (technically second) time poster. I need some FIRE-planning advice. Here is my current situation.

Age: 30
Salary: $120000
401k at new job: $2800 (maxing contributions)
Traditional IRA: $120000 (rollovers from old 401ks)
Roth IRA: $75000 (maxing contributions)
Principal on rental property: $54000 @ 5.5% (expected to pay off in ~1 year)
Taxable investments: $0

Fund allocation: 50% S&P Index / 25% International Index / 25% Bond Index

Annual living expenses: $24000
Annual rental property income after pay off: $9000

Iím currently throwing all extra cash into paying off the rental property mortgage because:
1) Eh, 5.5% is close enough to market returns
2) I get a warmer fuzzier feeling from reducing cash outflows than from increasing cash inflows
3) Iím sort of timing the market (I know, bad tempesttenor). S&P is at all time highs and, as previously mentioned, I just feel better paying the thing off anyway.

Once the mortgage is paid off in ~1 year, I will have $55000 a year to fund taxable investments.

My DFW (dear future wife), also 30-years-old, is in the medical field and currently earning $50000 at her residency. She expects to make $100000 when she finishes her residency in 2 years. We plan to get married and start a family ~3 years from now. I would like to FIRE and be a stay-at-home dad when that happens.

Hereís the dilemma:

I am concerned about the current lack of access to my retirement money. I would like to implement a Roth IRA pipeline as that is the simplest most flexible method. I currently have no money whatsoever in easily-accessible taxable investment accounts, though I expect to have a $120000 - $170000 balance when I FIRE.

So normally when one FIREs, one can use the standard deduction and personal exemption to build oneís Roth pipeline tax free each year. Living expenses are supplemented by tax-free income from qualified dividends and cash reserves. (Iím oversimplifying here, see Go Curry Crackerís excellent series of tax articles for the details)

In my case, however, my spouse will still be working and earning a significant salary when I FIRE so I wonít be able to take advantage of the tax free Roth pipeline. I ran the numbers and compared our future Single/MFJ/MFS tax scenarios. While it would be slick to stay Single so that I can implement the Roth pipeline, the numbers just donít add up and DFW would save so much in taxes if we filed MFJ.

Got any advice for how to build my Roth pipeline? It seems my current options are:

1) Suck it up and build the Roth pipeline while in the 15% bracket

2) Live as a complete leech off of DFWís salary. Wait until DFW FIREs and then we both start building our Roth pipelines. This is problematic for obvious ethical reasons and also because DFW has no concrete plans to retire early. She really likes her field and her career is just beginning (sigh, medical professionals)!

3) Cut off contributions to all tax-advantaged accounts right away and instead put all money towards taxable investments. This will allow access to tax-free qualified dividends while in the MFJ 15% tax bracket.

4) SEPP the Traditional IRA. Iíd rather not deal with SEPP though.

5) Something else Iím not seeing?

muckety_muck

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Re: Advice for FIRE-ing while spouse is still working?
« Reply #1 on: August 15, 2015, 01:43:49 PM »
This looks like a classic case of SAHP to me. One parent works, the other stays home. Both live off of the working parent's income. It's not a leach. You are providing priceless childcare in a loving home - your own! It's joint money. Don't think of it as "her money" and "my money" - you're a team now. Throw everything you can into the taxable account after you max the 401k and other tax-advantaged (HSA, etc) accounts. Good luck!

La Bibliotecaria Feroz

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Re: Advice for FIRE-ing while spouse is still working?
« Reply #2 on: August 15, 2015, 01:51:45 PM »
I agree that you will not be a leech. Well, not necessarily, anyway!

My sister has a SAHD for a spouse. I asked if he was going to go back to work when little one starts school. She says, nah, he's more valuable to me at home.

Cooking. Cleaning. Taking tot to the pediatrician so Mom doesn't have to take time off work. Taking the car in to the shop. Packing spouse's lunch, doing spouse's laundry--think how vastly improved is the life of a full-time worker whose spouse stays home.

wordnerd

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Re: Advice for FIRE-ing while spouse is still working?
« Reply #3 on: August 15, 2015, 02:45:36 PM »
Living off her salary makes the most sense on a lot levels. It's likely my DH will retire before me (like you, he also came into the relationship with significantly more savings), and I have no issue with my salary supporting the family until I FIRE as well. You may feel more comfortable with this once you're married and raising a child together. And, as a SAHD, you will not only be saving daycare costs but providing lots of value to the family.

If you plan to keep your finances completely separate forever, this may be more difficult. It might be time to talk about if/how you will combine finances, your desires to be a SAHD, and the logistics of that. It's great to have these conversations before you get married. It might be less of an issue than you imagine.
« Last Edit: August 15, 2015, 05:06:38 PM by wordnerd »

forummm

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Re: Advice for FIRE-ing while spouse is still working?
« Reply #4 on: August 15, 2015, 04:44:47 PM »
If you can save up enough that you're both comfortable with her continuing to work (especially since she may still want to work) while you SAHD, there's nothing wrong with that. I'm somewhat older than DW and she's still early in her career so we'll probably have a similar arrangement. But I haven't decided what to do with the rest of my career yet, so who knows.

tempesttenor

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Re: Advice for FIRE-ing while spouse is still working?
« Reply #5 on: August 17, 2015, 10:39:22 AM »
Thanks for the responses all.

I had fully intended for DFW and I to merge our finances so I was confused/surprised when many of the replies advised us to do so. I realize now that my dilemma only exists because I had not fully embraced the idea of merged finances. So that means option #2 (just wait until both of us FIRE before building the pipeline) is the winner.

Thanks everyone!