We want to ditch my wife’s job soon, but we’re playing catch-up on retirement – what are we missing here?

It goes without saying that, ahead of retirement, it’s normal to start reconsidering everything and see what might be missing. Have you set aside enough money? Are your outstanding debts still too high? These are perfectly acceptable questions to ask yourself before leaving the workforce. 

For one Redditor posting in r/HENRYfinance, this is very much what they are doing right now. With the wife planning to step away from work in the near future, the couple is concerned about their financial situation with just one income. This concern is boosted by a feeling of needing to play catch-up with retirement planning. 

Retirement Planning

For the Redditor and his wife, who bring in a combined $375,000 in household income, they should be living quite comfortably in a medium-cost-of-living area. The key point here is that the bulk of this combined salary comes from the husband, which creates an opportunity for the couple to discuss the wife potentially stepping away from the workforce. 

Currently, the family has two young children, so they are understandably worried about finances. This is why it’s central to this story that the husband and Redditor isn’t looking to leave his job anytime in the future. Even with only a small amount of debt to manage, including a modest mortgage, the husband enjoys his job and wants to continue working. However, there is a student loan that needs to be paid off, something the family plans to do next year. 

Where things are tricky is with the retirement accounts, as the couple only recently became high earners. This means that there is only around $400,000 in a tax-advantaged retirement account and $30,000 in a brokerage account. The Redditor is fully maxing out his 401(k) contributions, with IRAs already fully funded and backdoor IRAs being converted.

In other words, the family is rushing to set aside at least $75,000 in retirement funds between them. To maintain this pace without the wife’s salary, they likely need to examine where they can make some cuts in their budget. They will need to make up as much as $20,000 that the wife is currently contributing to a 401(k) and IRA.

Given all of this information, the Redditor is wondering what else they might be missing. 

Not As Bad As Anticipated 

The good news is that, in their late 30s, this couple, with roughly $430,000 saved for retirement, is in a relatively good situation. On the plus side, their mortgage payment being gone will allow them to put away money. The same goes for no longer having to pay for daycare, as the wife will now be at home. 

This likely means that even with some budget cuts in mind, things balance out more than the Redditor initially expects. Even so, the biggest concern here, as other Redditors point out, is that the Redditor needs to stop equating the wife leaving work with retiring. She’s leaving work to spend more time with young children and not lounge around all day.

This individual, who isn’t in nearly as bad a financial situation as he believes, should focus better on how he sees what his wife is slowly moving toward. He acknowledges this conversation has taken place, but it needs to be a constant reminder based on the language used in the post. 

Vocabulary aside, this Redditor also needs to consider a Spousal IRA situation, which they can backdoor at their income level. Again, if there is extra money after a mortgage is paid off, perhaps the first place this money goes is into a Spousal IRA fund for the wife. 

Doing the Math 

Ultimately, the biggest question here is how the wife’s salary compares to the cost of daycare. It’s not uncommon, depending on where this couple lives, for daycare costs to be as high as a full-time salary. If this is the case, then all of this math and worrying is pretty much unnecessary, and in a medium cost of living, I’m guessing this is the case.

The good news is that since this scenario is likely, the Redditor isn’t going to be in the negative as much as he believes the couple will be. The best part and arguably the most important part of this story is that the family can afford to have one spouse not working. This is a great scenario, and even if it results in a few thousand less being saved for retirement, you can’t get this time back with children.