Author Topic: Convince me to stop working!  (Read 3280 times)

Jesstache

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Convince me to stop working!
« on: December 03, 2015, 09:55:44 AM »
My husband works full time as a W2 employee (engineer) grossing $140k.  He maxes his 401k.  We have 2 kids ages 2 and 4.  A few months after #2 was born, his company asked me to come on as an independent contractor (engineering) working 2 days per week and I jumped at the chance.  It wasn't about money, I needed adult interaction in my life.  About a year in, it went to 3 days per week. This year we added a second rental property to our existing rental property for a total of 2, which I do all the managing and yard maintenance for.

Needless to say, I'm feeling very busy and kind of stressed, even only working part time.  My actual job is very easy and enjoyable but it's the stress of getting the kids up and ready and to daycare on time and the rush after to get dinner cooked on work nights and the lack of free time to do everything else that's stressful... Cleaning, cooking, yard and house maintenance, grocery shopping, kid activities, socializing, rental property management, etc.  On top of that, I just really looked into how much I'm netting after taxes and daycare this year and it's starting to not feel worth it at all. 

Here's the break down (approximate):
                 My 2015 Gross: $60000
   15.4% Self Employment:   $9240
                                i401k: $10000
    2015 Fed/State Taxable: $50000
25% Marginal Federal Rate: $12500
     9% Marginal State Rate:   $4500
         Daycare 3 days/week: $10296

      Net after taxes/daycare + i401k: $23464

I know this isn't exact but it's close enough approximation for me because there are other deductions and credits that we'd qualify for without my income.  I ran more exact numbers in the case study spreadsheet and with me not working, our tax bill (total) would be approximately $28k this year, with me working it will be approximately $58k.  That's insane to me that adding less than half of my husband's gross income increases the taxes we pay by more than double!

So, currently, my plan is to go back to the original 2 day work week schedule to alleviate some stress immediately and continue until May, which will also allow me to finish up much of my current project.  My husband's 401k plan is maxed out but this past March, due to means testing, he got a $10k refund (which we invested into the 2nd rental house).  This spring, we expect a similar refund, which we would put into my i401k against 2015 (bringing it up to a $20k contribution for the year).  That's also part of the reasoning of me working until May next year so that we can make sure we have enough space to do a similar thing with any refunds he may get in the spring of 2017, applying to 2016 taxes.

This has the added benefit of spending a few months with my daughter before she starts Kindergarten and being able to be really involved in her school after she starts.  We have a high NW (7 figures) and about a 50% savings rate so we really don't need my income at all.  In fact, all of it goes into savings and extra debt pay  down (only debt we have are mortgages on our 3 properties). 

It seems obvious which way I'm leaning and should go but maybe there's something I missed in the numbers or that you all might think of that wouldn't make it so obvious? 

Anyone else go/going through a similar dilemma?

life is short

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Re: Convince me to stop working!
« Reply #1 on: December 03, 2015, 11:46:40 AM »
I read through it a couple times and may be missing something, but why have you guys opted not to take full advantage of your 401k? Isn't it something like a $53k limit for "self-employed"? At your high combined income that would be a huge tax savings.

Edit: Sorry I can't comment on much else of your situation seeing as we are without kids. The 401k is just what jumped out at me especially considering how much you're paying in taxes. Seems to me that would be several times better than paying off rental properties/mortgages. So assuming that it's allowed, if I were you I would max the i401k this year and next. As far as cutting back to two days I think that's a good idea to relieve some stress. I would bet you'll start craving that "adult interaction" again if you did decide to quit in May, so I wouldn't be too quick to drop it. If you do I'd find some groups where you could get involved with other parents with young kids. I've read about people talking of the same thing on this forum a lot.
« Last Edit: December 03, 2015, 12:01:05 PM by life is short »

Exflyboy

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Re: Convince me to stop working!
« Reply #2 on: December 03, 2015, 11:58:25 AM »
Absolutely.. MAx those 401k's out.. your giving away money at your top tax rate otherwise!

Krnten

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Re: Convince me to stop working!
« Reply #3 on: December 03, 2015, 12:04:19 PM »
I'm part time too and our child care expenses eat up my whole post-tax, post maxing-401k salary.  I still want to do it for the adult interaction and to easily reenter the FT workforce when our kids are older.  It sounds like you should do what your heart tells you to do because you're in great shape either way.

If you really enjoy working you should outsource more of the stuff you're DIY-ing.  It sounds like you're doing all the cleaning and the property management yourself?  That's a big burden!  Would you feel less stressed if you paid someone else to do those now and then?  What if, instead of daycare, you hired a nanny?  No more dropoffs/pickups, and he/she could do some light cooking and housekeeping.  Would that simplify your life? 

I know MMM has a strong DIY bent, which is great, but when you have two young kids you might want to throw some of your considerable income at the problems instead.

Exflyboy

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Re: Convince me to stop working!
« Reply #4 on: December 03, 2015, 12:16:08 PM »
Well of course you can stop work. You already have $1M+ and a 50% savings rate...

You were making it before you went back to work.

Your Hubby is making $140k... you have plenty of income and will likely end up at say a 40% savings rate with just his income.

Heck, chances are you'll be FI in 5 years anyway. Do the numbers to be sure.. i.e what do you actually spend vs what ill your take home be with 1 income?

pbkmaine

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Re: Convince me to stop working!
« Reply #5 on: December 03, 2015, 01:34:17 PM »
You say you like your work. What if you propose that you do it from home? They can take or leave your offer.


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Jesstache

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Re: Convince me to stop working!
« Reply #6 on: December 03, 2015, 02:04:38 PM »
Yes, we should and will absolutely max the 401k.  The limit is 18k (individual) + 20% "company" match of net profits, up to $53k. That's about 18k + about $11k or $29k total (or am I doing that wrong?).  The only reason we aren't maxing the contributions (yet) to my i401k is that we purchased the rental property this year with the down payment coming out of our cash savings and have been putting money towards building that back up (though not optimal, we still prefer to have a decent emergency fund for various reasons) and that's largely back up to where we'd like it to be.

Come tax time, I plan to see exactly how much the refund from my husband's 401k will be in a couple of months and then that combined with the 10k I've already contributed, we will make up the difference.  I estimate I will contribute another 7-9k to max it and reduce our taxes in the spring.  Taxes are reduced about $310 for every $1000 I contribute.  That would bring my net take home to around $26k.

Any debt pay down is strictly on our main mortgage as my husband will not RE until we do not have a main house payment any more (we've discussed this at length and I'm on board, I'm not a fan of the debt either, even at the low rate we have).  We do not pay extra on our rentals.  I would like nothing more than for him to RE so all extra outside of tax deferred space is going towards that now that our e-fund is back up there.  It is the tipping point on him quitting work or not, from a cash flow perspective.

When I first started working we had been living in our current state for about a year, much of which I was pregnant (i.e. exhausted and nauseous all day), and hadn't made many friends yet.  I am part of a mom's group and play soccer once a week now so I'm not sure I'll miss the social interaction of work this time around but I do worry that I will since conversations about kids are way different than engineering discussions.  I do feel like my current job is a very good gig and exceedingly lucky to have the option.  My hours are flexible and generally well paid, especially for our area.  I worry that I will not have an easy time getting back in if I do leave but I could also see myself volunteering at my kids' school if I do feel the need for something more.

Sorry, I always feel like I'm so long winded!

Axecleaver

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Re: Convince me to stop working!
« Reply #7 on: December 04, 2015, 12:41:19 PM »
Solo 401k contributions are 18k for "employee" portion and up to 25% of net profit (on Schedule C, usually) for the "employer" portion. So add up your gross income, deduct all your expenses, and you're left with a net income (profit). You can contribute 18k + 25% of that number, up to $53k.

See: https://www.irs.gov/Retirement-Plans/One-Participant-401(k)-Plans

I'll assume the 60k you quoted represents your net income after expenses. Your maximum contribution would be 18k + 15k = 33k. Plenty of room to increase your contribution this year if you can find the money before April.


lhamo

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Re: Convince me to stop working!
« Reply #8 on: December 04, 2015, 01:42:52 PM »
I would go back to 2 days a week first, and see how that feels.  You may find that it really improves things.  You will still have plenty of time to volunteer at your kids schools, etc.  If it doesn't help and you are still feeling too stressed, then maybe just tell them you need to take a break until your oldest is in full-time school, and see how it goes being at home for awhile.  Not that they will hold a position open for you, necessarily, but just so that they know you might eventually be interested in resuming the part-time arrangement.  And maybe also let them know you might be available for project-based short-term PT work. 

mozar

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Re: Convince me to stop working!
« Reply #9 on: December 04, 2015, 05:33:03 PM »
Just wanted to note that you pay for daycare out of both of your incomes, not just yours.

Cressida

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Re: Convince me to stop working!
« Reply #10 on: December 04, 2015, 06:14:50 PM »

Just wanted to note that you pay for daycare out of both of your incomes, not just yours.

+1

Retire-Canada

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Re: Convince me to stop working!
« Reply #11 on: December 06, 2015, 09:16:25 AM »
Nothing wrong with working less or stopping working if you can afford it, but you are adding $33K to your NW each year you work which is nothing to sneeze at either.

Since you are stressed out you might want to sit down and take an honest inventory of what is stressing you out and why....be very specific about this. It may not be a comfortable process, but you will find that there are a limited number of things that are really causing you grief. It's quite possible you can eliminate/mitigate those issues without changing your income situation.

Your hubby helping out more with the kids and dinner on days you work could be all it takes to reduce your workload back to where you feel good again.

Once we are stressed everything seems overwhelming, but take away the one or two things that are putting the pressure on and everything else seems suddenly quite reasonable.