two-income trap

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squished18
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two-income trap

Postby squished18 » Thu May 17, 2007 6:50 am

This one came off the MSNBC Clicked blog:

http://www.pfadvice.com/2007/05/10/two- ... the-money/

Look for the calculator at the end of the posting.

squished

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JerichoHill
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Postby JerichoHill » Thu May 17, 2007 8:53 am

Huh.

How does this affect pre-tax 401K savings? It doesn't. Those aren't taxed. So what does a second income do? Well, its basically you're retirement savings.

I ran through the analysis based on current tax rates since Im getting married. We will owe about 1000 more dollars in taxes by being a two-income earner household.

I'm not seeing it.
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Postby Gnashchick » Thu May 17, 2007 9:10 am

In my opinion, the expenses included on that quiz (and others I've seen like it) are questionable. Some are valid, that's true, but it's a quiz that's slanted (along with the little 'facts' in the quiz notes) to use fear and guilt in order to manipulate the reader. I found the NCPA study (on Social Security) to be little more than an opinion piece with unsubstantiated or self-referential statements and a distinct lack of actual data. You can say anything you want and call it a ‘study’ but it doesn’t mean squat if you don’t back it up with independently reviewed data. The subtext of the article and the quiz is underscored by the blog comments: Women should stay home with the kids, and her second income is worthless. Laying guilt, scorn, and derision on women who pursue both career and children is the new tactic of the “Kinder, Küche, Kirche” crowd. Claiming that women’s incomes are a financial drain on the family is particularly slick argument but I haven't seen actual numbers to back that up.

Should women stay home with their children? Sure! If they want to, and the whole family can make the necessary accommodations. Should women work outside the home? Sure! If they want to, and the whole family can make the necessary accommodations. Other than being a whole lot of fun to argue about, I really don't see how it's anyone's business but the family's.
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Postby Latro » Thu May 17, 2007 9:42 am

If only this applied to our situation and we just didn't know it.... Unfortunately my wife is a director of a daycare center so we get free child care. We also contribute a significant (close to 10%) of our income to charities each year which brings down the tax dollars.

I did the calculator and the second income is still a significant amount after all is said and done. I wish it wasn't and we could go to a single family income.

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Postby Jethro » Thu May 17, 2007 9:50 am

We came up as being ~$17000 ahead per year by my wife keeping her job (2 days a week)... don't think we'll be changing that any time soon.
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Postby canadiandream » Thu May 17, 2007 12:00 pm

My wife stopped working outside the home when we had our first kid. She now runs a home based daycare which provides some cost savings to us (ie: no daycare cost) and brings in a small income. She loves her 'job' so it all works out.

I don't think there is a right answer to this, yet I do understand the point that perhaps some people would be better off with one person at home.

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Postby consultantjournal » Thu May 17, 2007 12:38 pm

I don't think the article is pushing for women to stay at home. In fact, the author notes that her husband stays at home. I know several families where the father is at home. Many women earn more than their husbands do. And either partner may be in a better position to accommodate working from home or taking time out from a career.

The article instead looks at the financial realities of having one spouse stay at home. Often, people underestimate the costs of working. If one person wants to stay at home, it is not a loss of an entire salary. In fact, it may not result in a loss of income at all. The same logic could be applied to a situation where both partners were able to scale back to, say, 20 hours a week. By avoiding childcare costs and reducing some of the other costs of working, they might not be in such a bad position. However, in the US, I see there are some taxation issues that arise when both partners are working, at least from my quick look at the article.

Some time ago, I wrote a post on the <a href="http://www.consultantjournal.com/blog/consulting-brings-work-life-balance">work-life balance</a> that consulting can bring. But my point about eeking out a small income would work for those who want to work part-time or even not at all (when it comes to paid work). Some tax and social payment benefits arise from a lower income, making it efficient for one person to stay at home, at least in Canada.

Leaving your child in daycare from infancy may mean constant turnover of caregivers, limited one-on-one care for your child, a need to use formula and other important factors. I think the above article is just showing that, if you're heading back to work only (or significantly) because you think you can't live on one income (or two modified incomes), you might want to run the numbers.
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Postby Siobhan » Thu May 17, 2007 1:05 pm

I don't think the article is pushing for women to stay at home. In fact, the author notes that her husband stays at home.

I agree -- I think it's a fine article, and she actually addresses barriers to re-entry which most discussions of SAHPing omit. The comments are pretty nauseating, though...

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Postby consultantjournal » Thu May 17, 2007 2:04 pm

Yes, and most discussions of SAHPing also neglect to point out the many ways to maintain and build one's position with an eye to returning to work full-time outside the home.
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Postby Siobhan » Thu May 17, 2007 6:52 pm

True. I have absolutely no interest in staying home, but my husband thinks he might want to. We've agreed that he'll be sure to do some minimal amount of consulting every month so that he won't have to explain a giant gap in his resume. Luckily he's a very good computer programmer, so consulting jobs are easy enough to come by.

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Postby consultantjournal » Thu May 17, 2007 8:50 pm

Consulting is a good way to keep up his skills, experience and contacts. My website (link below) has tons of free articles about the topic. If he does some consulting -- even occasionally -- and perhaps takes a very short course prior to re-entering the workplace, I don't think he'll be in a bad position. Besides, depending on his future employer, they may actually put value on all the soft skills he will have gained. Not that you can say, hey, I'm a parent, so hire me...but the skills will come through when they speak with him.
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