Author Topic: disparate incomes and retirement contributions  (Read 4279 times)

aneel

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disparate incomes and retirement contributions
« on: March 14, 2015, 04:11:33 PM »
I'm in the process of ramping up my and my husband's 401k/403b contribution.
The barebones facts are:
I make ~80k / year and am currently contributing 10% to a 401k
He makes ~28k/ year and is currently contributing 10% to a 403b
Obviously, that leads to a very large gap in the balance in our separate accounts.

I'd like to start increasing toward the maximums.  For whatever reason, we've always seen the contributions from the larger income as "more important".  The fund fees and offerings are not significantly different between the 401k and 403b.

Should we start trying to even out the contributions?  We are very happily married and have no money problems/issues talking about it, and we also equally fund IRAs, but since I was in "change" mode, I thought it would be good to get some outside opinions on this particular situation as I'm sure others have disparate incomes in their partnerships.  Are there any major points I'm missing?

Psychstache

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Re: disparate incomes and retirement contributions
« Reply #1 on: March 14, 2015, 04:58:42 PM »
If you combined your household funds,  you could easily max out both accounts.

mustachianteacher

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Re: disparate incomes and retirement contributions
« Reply #2 on: March 14, 2015, 05:02:02 PM »
My husband and I were in that scenario years ago, but in case anything ever happened to one of us (or we divorced) I wanted the accounts to be funded equally. We now each contribute the same dollar amount, rather than a certain percentage.

aneel

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Re: disparate incomes and retirement contributions
« Reply #3 on: March 14, 2015, 05:07:46 PM »
Thanks for the replies! We are working toward maxing it all out. The income is still relatively new, so we've been getting a handle on how much of it we need to come home, and how much we can staff away (and the answer is most of it). If my husband maxes out his 403b he would be taking home very little of his pay. Anything to worry about there?

WhatIsFrugalAfterAll

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Re: disparate incomes and retirement contributions
« Reply #4 on: March 14, 2015, 05:09:01 PM »
I mean, in most states if you DID get a divorce - you will need to split them up evenly anyway. So why not get them even now?

So
step 1) Meet matches fully in both
step 2) Raise his % until dollar amount matches your dollar amount
step 3) Raise them together keeping dollar amount the same, until all of your money to be saved is met.

Won't change taxes or anything.. not a big reason NOT to do this, unless one of you had way better fund options or something.

WhatIsFrugalAfterAll

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Re: disparate incomes and retirement contributions
« Reply #5 on: March 14, 2015, 05:09:23 PM »
Thanks for the replies! We are working toward maxing it all out. The income is still relatively new, so we've been getting a handle on how much of it we need to come home, and how much we can staff away (and the answer is most of it). If my husband maxes out his 403b he would be taking home very little of his pay. Anything to worry about there?

Nope (Though there may be a limit, like 50% of gross pay is max you can contribute)

TN_Steve

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Re: disparate incomes and retirement contributions
« Reply #6 on: March 14, 2015, 08:14:15 PM »
I join in the consensus.  When I was SAHD with part-time job paying less than 20,000 a year, we maxed my 403b, as well as DW's 401k.  (although, due to the huge employer contributions to DW's accounts in those years, I feel very insignificant when comparing our respective sizes.)  :-)

This really feeds into the "separate or combined finances" that is a subject of debate on many forums....

nobody123

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Re: disparate incomes and retirement contributions
« Reply #7 on: March 14, 2015, 11:16:50 PM »
This really feeds into the "separate or combined finances" that is a subject of debate on many forums....

Yep, the law generally looks at it as one pile of marital money if you get divorced, so how you divide it into accounts is moot.  A spouse can just absorb a deceased spouse's retirement account into their own, so that doesn't really matter either.  Make sure you are both getting at least the match, then put the rest of the money wherever the investment options are better.

$108K in salary minus 10% tax deferred savings, minus the standard deduction and 2 exemptions leaves about $1700 in the 25% federal tax bracket.  I'd increase the 401(k) amount to take care of that.  Since you mentioned this level of income is fairly new, I would also suggest making sure that your tax withholdings are in line with what your combined income will be this year.


Unique User

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Re: disparate incomes and retirement contributions
« Reply #8 on: March 15, 2015, 09:47:14 AM »
We just fund up to the max for each of us in both our IRAs and 401ks.  My husband makes about 30% less than I do in actual pay (but his benefits are better), but because he is over 50 we can put more away.  Between maxing his 401k, maxing the ESPP and FSA/HSA, his check is usually pretty small, but we live on less than 50% of what we earn anyway.  I've never really thought about the fact that one of us was the higher earner. 

seattlecyclone

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Re: disparate incomes and retirement contributions
« Reply #9 on: March 15, 2015, 10:18:31 AM »
Between 401(k) contributions (both pre-tax and after-tax), HSA contributions, ESPP contributions, health insurance premiums, and taxes, my wife's paycheck ends up being about zero. If you're operating on a shared finances system, this is no big deal because we still have cash coming in from my paycheck. Take advantage of the tax benefits available to you.

Abe

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Re: disparate incomes and retirement contributions
« Reply #10 on: March 15, 2015, 04:21:28 PM »
My wife's income is high enough to save the equivalent of my entire paycheck into both 401ks, and Roth IRAs. In event of death of one spouse, or divorce (didn't think about that scenario, but is usually the same), it won't matter who saved into what account.

Jakejake

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Re: disparate incomes and retirement contributions
« Reply #11 on: March 15, 2015, 04:29:31 PM »
Thanks for the replies! We are working toward maxing it all out. The income is still relatively new, so we've been getting a handle on how much of it we need to come home, and how much we can staff away (and the answer is most of it). If my husband maxes out his 403b he would be taking home very little of his pay. Anything to worry about there?
I am the one earning less in our marriage. I wasn't comfortable with the disparity in retirement funds after I opted for a career change to a more satisfying but less lucrative job.

We aren't fighting in the marriage or anything, no reason to think he's plotting to leave me, and we're coming up on our 20th anniversary. But I've been divorced before so I'm a little cautious. One of my concerns was that if we split up and he got remarried, the new wife would also own part of his retirement, potentially. I don't know exactly how that would work, but I'd rather not even have to puzzle it out, or have to think about if he remarries and I pass away, what would go to my daughter (from my previous marriage). So I am working toward maxing out a 403b, a 457 and a 401k. I don't have enough salary to make that happen, But pretty near every dime I get goes to evening the accounts up.

My take home pay is an impressive $2.27 now every two weeks for full time work. But our nonretirement money goes to a joint account so it really doesn't matter that it's his take home pay covering our current expenses.