i could honestly see somebody making anything less than like $200k asking this, but at $500k you're hardly even going to miss that $23k. it's your wife ffs.
I was thinking, wrongly, that I’d be using my post tax money to fund her pre tax account and then get taxed on it again. But I realize now that since we file together we’ll get the tax break
You can’t directly fund her 401k. She will have to do it from payroll withholding.
what you are doing is just giving her cash to offset her payroll deductions.
Be sure to check if the plan has a limitation on maximum percentage of salary that can be contributed. I have seen some bad plans limit to like 50% of earnings
Mine is 90% limit. I absolutely sent it for the first three weeks of the year to max out the matching (my company matches heavily for the first few thousand) and then brought it down to 30% contribution. Hoping to max my 401k for the first time ever this year.
That makes a lot more sense. Me and my wife have always had separate accounts and spilt the bills accordingly. I pay some she pays others. I feel like my life choices were blocking me coming to that conclusion lol
You need her to withold $3333.33 a month
She wants 3333.33 a month in spending money instead. You have her set her witholdings at that, and you call your bank and setup an automatic transfer to her account for that amount once a month.
If she argues, tell her she can keep the extra marginal 4-5K in tax savings as a end of year bonus to go on a vegas trip or something.
Yeah, in my last job we had a number of sales people making $250k to $500k or more who didn’t contribute to the 401k! They didn’t get the free money (company match). The benefits people talked to them and some of them still said, “Nah, that’s okay.”
Makes sense if you’re looking to buy a house or saving for another large purchase. After all, it’s not really “free money” if it’s locked up until your 60s, along with a bunch of your own cash.
Can actually add to tax efficiency. Let’s say you each have 100k in 401k assets versus $200k in one account. In many divorces, you’ll have to liquidate assets to make it fair, which would come with a penalty and taxes. In the equal distribution, you’d each keep 100k theoretically
I don't know the economics of this but a husband asking this tells me everything I need to know about how they see their wife and how they treat her, specially when he makes many times over what she makes lol
Or OP just isn't particularly savvy with finances. You might think someone with that kind of income is, but you'd be surprised.
I know a number of doctors who are financially clueless, for example.
Edit: and according to OPs post history, he's an ER doc. Nailed it!
I asked one of my doctor friends, who I'm pretty close with, if they had any financial advisor recommendations - I want to meet with one on an hourly basis for some long term/tax planning stuff.
She tells me about her person she likes who charges $1500 per quarter!
Even if you are not planning on being married in retirement, if they divorce she will be entitled to half of her 401k plan. If they are both maxing out, there will be a bigger pot to split.
They should also consider over funding their 401k with after tax dollars and doing Backdoor ROTH Conversions of that money.
They need to talk to their tax advisor and financial planner about this.
They need to create a budget which includes both the spending and savings goals.
Then, they should create a joint account or she should be given a personal transfer to spend as she sees fit for family and personal expenses.
This is not an allowance as she is not a child.
Your household income is $540k. Your greatest enemy is taxes. Financially, it is a no-brainer to max both 401ks.
Follow these steps: [https://www.bogleheads.org/wiki/Prioritizing\_investments](https://www.bogleheads.org/wiki/Prioritizing_investments) . You want to utilize 401k for each of you, [Backdoor Roth IRA](https://www.bogleheads.org/wiki/Backdoor_Roth) for each of you, HSA if eligible, and 529 if relevant.
The rest is more of a relationship question on *how* to do that with such an obvious income imbalance, and her completely understandable desire to feel self sufficient.
By sharing finances, do you mean you file jointly? If filing separately, then Roth 401k should be a great option. If filing jointly, then she should do traditional 401k to help with the household marginal tax rate
There is NEVER a benefit to filing separately unless you are MID divorce, and then you should in your divorce settlement include a clause that you will have a joint tax person go amend them to file jointly and split the savings was always my understanding.
Edit I stand corrected maybe, see reply’s
There are instances involving long-term capital gains where filing separately can be advantageous (ex: income limit that allows for 0% LT cap gain taxes).
They are saying it because the Roth IRA has an income limitation and if filing jointly, the best option is through the company 401K as the traditional IRA also has limitations so they should be changing their retirement witholding amount first and foremost.
You should have her max it all out.
At your tax bracket her putting away the max is saving an extra 30+% post tax investment. If you don't put the 23k into a 401k you're paying 30%+ taxes on it and getting less. This way you're investing it all and it'll be significantly more when you retire.
At your income, max every tax advantaged account you can.
Wife as the lower earner should additionally try to defer as much as her salary as possible from payroll deductions. If she has an HSA, max it out. If eligible for a dependent care savings account, she should max out 100% of contributions for family. She should so as much pre-tax deductions as possible while still fully-funding her 401k.
Since she has the lower salary, those pre-tax deductions are a much greater percentage of her income. They’ll save more money combined if she takes all the deductions.
Yes, at your family’s income level you should be maxing all tax advantaged account options.
The part about giving her cash is odd to me. Do you cover all expenses and she just gets to spend “her own money” on whatever she wants, so that’s why she doesn’t want to reduce that bucket? It sounds like that’s a deeper conversation worth having.
We have percentages of our income allocated into various accounts: joint checking, joint savings, individual checking, individual savings. All household stuff gets spent out of joint accounts and we have liberty to spend our individual allocations as we wish without consulting the other. However, our incomes are much more even. With that income disparity it seems in the best interest of the relationship for you to transfer money directly to her to compensate for that if that’s how you do things.
I cover all household expenses and large purchases. She uses her money as she sees fit. I don’t feel like it’s worth it to have her pay 9% of all bills given our income disparity
Exactly this. You are just replacing the funds that she is contributing. She needs to get over what the source of funds in her account are from, in the end it's better for both of you that she contribute the max.
I'm coming to a similar situation, I make roughly double my spouse, they don't max retirement. We keep finances separate except a few things. I have been considering ways to take expenses to allow them more freedom to contribute to retirement.
Unrelated to the original post, but what percentages do you allocate to the those accounts? Gonna be married sometime soon and want to do something similar for finances, so just want to know what works for other people.
I think ours is currently at 65/10/25 for joint checking, joint savings, individual accounts. This is all from net take home after retirement accounts, taxes, joint brokerage, etc.
It’s shifted a bit as our needs and spending has shifted. When we were still building our emergency fund, the joint savings amount was higher. When we started paying for daycare and kids stuff, individual amount dropped and more went into joint accounts. We have the option to direct deposit payroll into multiple accounts so it all just gets distributed with our allocations every paycheck.
Any personal expenses (clothing, haircuts, individual phones, personal care, fuel for cars, shopping, etc) is paid from individual. We also rotate paying on our individual cards when eating out and doing activities as a family. We’re not super strict with it and we typically have extra in our joint account that we either move to individual if one of us is low or we put the extra into our savings. We just want some independence with money and to not have to check with the other for every little thing.
I’m in basically the same spot as you except we just have one bank account. We fully fund her retirement accounts, using her income, and the joint fund pays our expenses. Backdoor Roth contributions come from joint account, so 80% my salary.
Does her company offer any other retirement plans too like a 457 (deferred compensation plan)? She should take advantage of any opportunity she has even if she literally draws no take home paycheck.
Obviously this is an emotional not financial issue and I have seen this multiple times with couples. She is actually helping you as a team because her job is giving you additional tax benefits yours alone isn’t since she can contribute to another 401k.
Realistically it sounds like it’s important for her to feel secure financially and make some independent decisions so you should just set up an auto withdrawal from your account to hers of a certain amount monthly that is her no questions asked money that you both agree upon.
Obviously it’s all “your” family money, but especially for some women who have seen financial abuse in relationships it is important for them to feel in control of money and not have to ask to make purchases. If she doesn’t already have joint access to all family accounts she needs to.
Yes, absolutely. My wife and are in a similar boat. She gets (illogically) frustrated from time to time because her take home is so small and she feels like she works for nothing. For some reason she cannot understand the concept that our money is pooled in the cosmic sense.
Anyway, hopefully your spouse doesn't make that an issue because it makes sense to do it.
This makes total sense, especially if you are married filing jointly. You should absolutely be maxing every account everywhere possible.
I did the same this with my wife for years. She was part time somewhere and I had her defer 100% of her pay and I paid her instead.
You absolutely should max it out. Have her put basically her entire income to the 401k and you can bankroll her spending money. You are a marriage, not a partnership. You're only harming yourself avoiding tax free accounts.
Do it. My wife and I were in a similar situation. She worked for the local school system making $35k to $40k. We max’d out her 403b and 457 accounts (about $17k each, like a 401k) every year for 20 years or more. After she paid her FICA, her payroll deposit was about $50 or something. We just lived on my salary. I max’d my 401k, too, and we made a bunch of non-deductible IRA contributions so it added up nicely. We also took advantage of all the catch-up retirement contributions allowed (HSA, too).
I’ve been doing this for years. Her 457 too! What a dumb system we have where I essentially get to stuff corporate money in
$46k of a teacher’s account. But that’s the system!
My partner and I share finances but she is a graduate student paid peanuts. We use my salary to max her IRA, her own stipend she is free to do what she wants with it. Thankfully she is frugal and invets it in brokerage accounts.
Yes, as long as she's okay with you essentially paying her a salary. My wife probably wouldn't feel comfortable with it even if it makes sense on paper - feeling like she has her own money is important to her. People can be more complicated than math.
Unfortunately this is my world. My wife absolutely refuses to contribute more to her retirement account. She considers it to be her money. She understands that she would still get the same amount of money in her bank account but the fact that I would "give" it to her is the problem.
Similar situation in my household.
A little over half of my spouse’s income funds a 403b, 457b, and a cash contribution to a pension. She wouldn’t be able to do that without my income, but we file jointly and it shields a significant part of our income from taxes (including my 401k and two IRAs). Across 6 tax advantaged accounts we reap a significant tax benefit.
We do this. My wife has access to both a 403b and a 457 and so max both of those out. This means her take home pay is like $400 a month but it's definitely the best financial decision.
Are you stopping at 7K for the back door Roth because that’s what you’ve got left to contribute or because you think that’s the limit?
The backdoor Roth doesn’t have the same 7K limit as a standard Roth. I believe you are only limited by the overall limit on contributions which is $69,900. This includes all tax deferred, Roths and employer matches. This does get a bit tricky so, if interested, look into it more…don’t take the advice of some yahoo on Reddit
Only in America do people get married and still want “their” money. Doesn’t make sense man.
And yes, you should always max out tax advantaged accounts.
Doesn't make sense to me either, but personal finances are... personal.
We're not talking about protecting large premarital assets or something. This is money that's earned while they are married. The only scenario I see that could kind of makes sense is if the spouse has a gambling or spending problem that would bankrupt the family and needs to be protected from themselves.
She should 100% max it. It’s an extra tax preferred vehicle with a match, presumably, that you otherwise don’t have access to.
If you have to, pay her back the $24,500.
I would say yes, but gauge how your wife feels about the idea before getting serious about it. Even though money is fungible, she might still like spending the dollars she earned herself.
I'm doing maximum payroll deductions until I hit $11500, as my company won't match beyond that.
It will be my first year maxed out. From 16-20, I never worked, which was my own mistake.
Obviously the math works out on that. Especially if you have a non-qualified plan and have trouble making it, or get money returned at the end of the year.
I'm sure the more accountant question is whether filing separately and her contributing to a Roth and 401K makes sense. I'm not sure how all that works.
Are you kidding? How is this even a question.
I make 7-figures and my wife makes 20k. She takes her 20k and puts it in some account I don't know about and I pay the taxes and put 20k into her 401k and Roth IRA.
Yes you should be contributing the max always…and you don’t have to say your wife 401k …you guys are married…everything is both of yours so max out your other 401k
Yes you should absolutely max her retirement account. I don’t want to get into the marital minefield of discussing why each of you wants your “own” money.
Max it out. You're already paying $130k in federal taxes. Plan on investing most of your money and you can make more than double the market rate. Also backdoor roth too! 401k with after tax money That way it grows and you're not taxed much later since you can afford the taxes now.
Have extra money? Buy stocks. Do it yourself or have someone so it for you. 25% capital gains is better than your 35% with 1 year of holding stocks. However, you can increase your income even more via options... but 35% tax. $693750 is your tax ceiling.
Tell her if she's worried about accessing her pre-tax money in retirement or early retirement there is the Roth ladder or 72t. I prefer Roth ladder but whatever floats your boat. Then, as you said just transfer her the post tax money she's missing after she maxes out her contribution.
We have a joint account so this was never a thing. We only briefly had separate accounts to each get the $700 Citi bonus. Citi is weird because they don't have a concept of joint accounts. We joined Bank America to get Platinum Honors with money we moved into Merill plus our revolving checking account balance. We have separate checking and savings accounts and just keep small amounts of money in there.
In the early days of our marriage, I used to budget some money for my wife to spend on whatever when she making $12.50 an hour (plus tips) or when she was working on her second bachelor's (only internships for money). Now my wife makes more money than me. You make HHI $540K so your wife can spend a little more if she wants.
we do the same thing with health insurance. I use to have it through my work, but my wifes plan at her job ended up being better (cost and care). I just set up an automatic transfer for the days that she gets paid to offset the difference in her paycheck so that I'm still paying for it. not the same thing, but the same idea.
You should do so as soon as possible. It is one way for her to make sure she has her own millions in the future. Also, please give her money for traditional IRA or back door Roth IRA as well. Maximize those.
If I had a partner, I would love for him to help me out this way. There’s a huge difference in your income between the two of you. And helping her out to make sure she secure when she gets older if you’re together or not. With help her out. I understand, wanting to keep your independence and having your own money. I wish my dad would’ve thought this for my mom, but instead, he would only give her an allowance to cover the bills for the month and never have an opportunity to put money aside. When she did have a job, he expected her to pay for everything very unfair
Very safe. Very good as a default for most people. Very conservative. I think you should see what else is in there but VOO has out preformed target funds not by a marginal amount. I wouldn’t invest in a target fund in my 30s.
I would do some more research. Personally not a fan of target funds. 2060 fund last five years is 38%. VOO is 87%. That’s a lot left on the table.
Don’t get me wrong retirement funds are get for people who don’t want to touch anything. I just don’t believe in their performance.
Usually they will give a spy equivalent a dividend and a growth fund. I would just review and make sure you know what you’re doing. If not retire fund is ok. But you saw how it preformed verses spy in last 5 years. 40% less.
Don’t get me wrong 9% return a year is not bad.
It can be incredibly stressful at times. Most of the time it’s routine. I invest in stocks as well. Mostly VTI but occasionally I put some in individual stocks. Mostly tech like Amazon, Microsoft and Google and some long shots like Palantir
You should zero out your wife’s income if possible - 23k to deferred, and max out Roth IRA and/or the after tax Roth 401k with the remaining if she has that option. Then you write her a check for spending cash.
Side question so I hopefully won’t have to make an entire new post for something similar.
I make 240k and my wife makes 35k. Anyone in a similar situation that can share what their splits are? I max all of my tax advantaged accounts. She contributes her match and that’s it.
You cannot fund your wife’s 401(k) directly. You can however supplement her income by allowing her to fully participate in her 401(k) plan. As an alternative, you can open and fund her IRA and then backdoor convert it to a ROTH and have no-tax withdrawals when ready.
It’s complicated. I agree with your sentiment but it’s totally reasonable for a partner, especially a woman, who makes 8% of their partner’s income to want money that feels like ‘their own’.
You make a $540k and aren't maxing out tax advantaged accounts? Time to sort that out.
i could honestly see somebody making anything less than like $200k asking this, but at $500k you're hardly even going to miss that $23k. it's your wife ffs.
I was thinking, wrongly, that I’d be using my post tax money to fund her pre tax account and then get taxed on it again. But I realize now that since we file together we’ll get the tax break
You can’t directly fund her 401k. She will have to do it from payroll withholding. what you are doing is just giving her cash to offset her payroll deductions. Be sure to check if the plan has a limitation on maximum percentage of salary that can be contributed. I have seen some bad plans limit to like 50% of earnings
Not bad plans. Most plans
Mine is 90% limit. I absolutely sent it for the first three weeks of the year to max out the matching (my company matches heavily for the first few thousand) and then brought it down to 30% contribution. Hoping to max my 401k for the first time ever this year.
congrats!
Mine is 75%.
mine is one not most, but we can do 70%
That makes a lot more sense. Me and my wife have always had separate accounts and spilt the bills accordingly. I pay some she pays others. I feel like my life choices were blocking me coming to that conclusion lol
You need her to withold $3333.33 a month She wants 3333.33 a month in spending money instead. You have her set her witholdings at that, and you call your bank and setup an automatic transfer to her account for that amount once a month. If she argues, tell her she can keep the extra marginal 4-5K in tax savings as a end of year bonus to go on a vegas trip or something.
BTW, your withholding calculation totals $40K a year. Max contribution is a total of $23K in 2024. Unless I am missing something.
I assume for remaining months this year. Or something lol
Alright, you might be onto something.
My 401K just stops taking my money when I hit the limit. I'm guessing most do this.
Ahhh for pre-tax yes… I max out post tax contributions.
Why not just have her use her pre tax money and then give her after tax money or however you guys manage your finances
I don't know what state you are in, but most likely if you are married you don't make 500k and she doesn't make 540k. You collectively make 540k.
Yeah, in my last job we had a number of sales people making $250k to $500k or more who didn’t contribute to the 401k! They didn’t get the free money (company match). The benefits people talked to them and some of them still said, “Nah, that’s okay.”
Makes sense if you’re looking to buy a house or saving for another large purchase. After all, it’s not really “free money” if it’s locked up until your 60s, along with a bunch of your own cash.
Worst take of all time.
There are plenty of ways to access retirement funds early without paying penalties.
Lmao, this is about to be the most profitable Reddit comment of your life.
Someone said that Reddit can be life changing for some.
If you're planning on being with her in retirement, yes. How is this a question?
Even if not, depending on the state 401k is comunal property
That was actually my next sentence but I erased it - even if not she's getting half of yours so might as well.
Can actually add to tax efficiency. Let’s say you each have 100k in 401k assets versus $200k in one account. In many divorces, you’ll have to liquidate assets to make it fair, which would come with a penalty and taxes. In the equal distribution, you’d each keep 100k theoretically
Wouldn’t you just do a rollover? I can’t imagine liquidating a 401k, paying the 10% penalty and taxes is the best for any party.
Assuming no prenup.
I don't know the economics of this but a husband asking this tells me everything I need to know about how they see their wife and how they treat her, specially when he makes many times over what she makes lol
Or OP just isn't particularly savvy with finances. You might think someone with that kind of income is, but you'd be surprised. I know a number of doctors who are financially clueless, for example. Edit: and according to OPs post history, he's an ER doc. Nailed it!
I think you're right, I jumped the gun too soon 😂
I asked one of my doctor friends, who I'm pretty close with, if they had any financial advisor recommendations - I want to meet with one on an hourly basis for some long term/tax planning stuff. She tells me about her person she likes who charges $1500 per quarter!
Good guess lol
I think OP is all for this plan and is just checking that it won’t screw up their taxes or something
Even if you are not planning on being married in retirement, if they divorce she will be entitled to half of her 401k plan. If they are both maxing out, there will be a bigger pot to split. They should also consider over funding their 401k with after tax dollars and doing Backdoor ROTH Conversions of that money. They need to talk to their tax advisor and financial planner about this. They need to create a budget which includes both the spending and savings goals. Then, they should create a joint account or she should be given a personal transfer to spend as she sees fit for family and personal expenses. This is not an allowance as she is not a child.
Pretty sure there's no tax advisor if they're looking to reddit for advice . . .
Your household income is $540k. Your greatest enemy is taxes. Financially, it is a no-brainer to max both 401ks. Follow these steps: [https://www.bogleheads.org/wiki/Prioritizing\_investments](https://www.bogleheads.org/wiki/Prioritizing_investments) . You want to utilize 401k for each of you, [Backdoor Roth IRA](https://www.bogleheads.org/wiki/Backdoor_Roth) for each of you, HSA if eligible, and 529 if relevant. The rest is more of a relationship question on *how* to do that with such an obvious income imbalance, and her completely understandable desire to feel self sufficient.
Edit You said 401k. Got it now. Pls ignore.
Also if she works for a public agency 457b would be applicable too!!
By sharing finances, do you mean you file jointly? If filing separately, then Roth 401k should be a great option. If filing jointly, then she should do traditional 401k to help with the household marginal tax rate
I'm by no means a tax expert, but with that big a difference in income isn't it unambiguously better to be filing jointly?
Yes, income disparity is basically the only reason to file jointly.
There is NEVER a benefit to filing separately unless you are MID divorce, and then you should in your divorce settlement include a clause that you will have a joint tax person go amend them to file jointly and split the savings was always my understanding. Edit I stand corrected maybe, see reply’s
Also In some cases with income based student loans
There are instances involving long-term capital gains where filing separately can be advantageous (ex: income limit that allows for 0% LT cap gain taxes).
There are a lot of income limits/cutoffs for deductions that don't double when moving from Single to MFJ.
They are saying it because the Roth IRA has an income limitation and if filing jointly, the best option is through the company 401K as the traditional IRA also has limitations so they should be changing their retirement witholding amount first and foremost.
We file jointly so it’d be pre tax 401k
Yes no brainer to max out 401k and back door Roth for both of you (if no balance in a traditional IRA)
You should have her max it all out. At your tax bracket her putting away the max is saving an extra 30+% post tax investment. If you don't put the 23k into a 401k you're paying 30%+ taxes on it and getting less. This way you're investing it all and it'll be significantly more when you retire. At your income, max every tax advantaged account you can.
Yes. Max both 401ks and backdoor roths.
And HSA if you have one.
And additional HSA if she is on her company's health plan
Wife as the lower earner should additionally try to defer as much as her salary as possible from payroll deductions. If she has an HSA, max it out. If eligible for a dependent care savings account, she should max out 100% of contributions for family. She should so as much pre-tax deductions as possible while still fully-funding her 401k. Since she has the lower salary, those pre-tax deductions are a much greater percentage of her income. They’ll save more money combined if she takes all the deductions.
How can you max wife’s Roth with your own money? Is it as simple as just depositing into her Roth account from your checking?
Yes. My wife used to do this for me or write me a check.
Interesting, thanks
Yes, at your family’s income level you should be maxing all tax advantaged account options. The part about giving her cash is odd to me. Do you cover all expenses and she just gets to spend “her own money” on whatever she wants, so that’s why she doesn’t want to reduce that bucket? It sounds like that’s a deeper conversation worth having. We have percentages of our income allocated into various accounts: joint checking, joint savings, individual checking, individual savings. All household stuff gets spent out of joint accounts and we have liberty to spend our individual allocations as we wish without consulting the other. However, our incomes are much more even. With that income disparity it seems in the best interest of the relationship for you to transfer money directly to her to compensate for that if that’s how you do things.
I cover all household expenses and large purchases. She uses her money as she sees fit. I don’t feel like it’s worth it to have her pay 9% of all bills given our income disparity
Then yes, assuming it isn’t misaligning anything in your budget, I’d transfer the difference to her.
Exactly this. You are just replacing the funds that she is contributing. She needs to get over what the source of funds in her account are from, in the end it's better for both of you that she contribute the max. I'm coming to a similar situation, I make roughly double my spouse, they don't max retirement. We keep finances separate except a few things. I have been considering ways to take expenses to allow them more freedom to contribute to retirement.
Haa. I'm sorry. Why would she pay 9%. Does she have a stash of egg and butter money ?
Because she makes 9% of what he does. That way bill paying is "fair"
40÷(500+40)=0.074 It would actually be 7.4% because that's the percent of their total income that she makes.
Is that what this is about ? Fair ? It is starting to sound sillier by the minute.
I don’t do that because it would be silly
His comment is literally about it not being worth it to do that. You're sounding sillier by the minute
The comment was specifically about not doing that because it's silly...
I think he’s just rounding to what is proportional. Technically she makes 8% of his income but you get the point.
Unrelated to the original post, but what percentages do you allocate to the those accounts? Gonna be married sometime soon and want to do something similar for finances, so just want to know what works for other people.
I think ours is currently at 65/10/25 for joint checking, joint savings, individual accounts. This is all from net take home after retirement accounts, taxes, joint brokerage, etc. It’s shifted a bit as our needs and spending has shifted. When we were still building our emergency fund, the joint savings amount was higher. When we started paying for daycare and kids stuff, individual amount dropped and more went into joint accounts. We have the option to direct deposit payroll into multiple accounts so it all just gets distributed with our allocations every paycheck. Any personal expenses (clothing, haircuts, individual phones, personal care, fuel for cars, shopping, etc) is paid from individual. We also rotate paying on our individual cards when eating out and doing activities as a family. We’re not super strict with it and we typically have extra in our joint account that we either move to individual if one of us is low or we put the extra into our savings. We just want some independence with money and to not have to check with the other for every little thing.
Yes it reduces your taxable income and it grows!
If my spouse made 500k a year I would be retired already lol
I would be a house husband if my wife made $500k. Instead we both have to work but we still get close to that number.
What do yall do for living?
Dual physician couple.
Nice! That's how you met I assume. 👏
Yup! Both working on a kidney-harvesting venture back in 2016. It was love at first slice.
Wow! Congrats lol must be amazing meeting someone special like that.
I’m in basically the same spot as you except we just have one bank account. We fully fund her retirement accounts, using her income, and the joint fund pays our expenses. Backdoor Roth contributions come from joint account, so 80% my salary.
Does her company offer any other retirement plans too like a 457 (deferred compensation plan)? She should take advantage of any opportunity she has even if she literally draws no take home paycheck. Obviously this is an emotional not financial issue and I have seen this multiple times with couples. She is actually helping you as a team because her job is giving you additional tax benefits yours alone isn’t since she can contribute to another 401k. Realistically it sounds like it’s important for her to feel secure financially and make some independent decisions so you should just set up an auto withdrawal from your account to hers of a certain amount monthly that is her no questions asked money that you both agree upon. Obviously it’s all “your” family money, but especially for some women who have seen financial abuse in relationships it is important for them to feel in control of money and not have to ask to make purchases. If she doesn’t already have joint access to all family accounts she needs to.
Thank you for your thoughtful response. She doesn’t have a 457 but I do which I max out
Is this a government job? Are you hiring? 😂
Yes, absolutely. My wife and are in a similar boat. She gets (illogically) frustrated from time to time because her take home is so small and she feels like she works for nothing. For some reason she cannot understand the concept that our money is pooled in the cosmic sense. Anyway, hopefully your spouse doesn't make that an issue because it makes sense to do it.
Thank you!
Ah got it
This makes total sense, especially if you are married filing jointly. You should absolutely be maxing every account everywhere possible. I did the same this with my wife for years. She was part time somewhere and I had her defer 100% of her pay and I paid her instead.
I heard a quote once that was if you truly love someone, help them be financially independent so that they are with you completely by choice.
Love this thanks!
given your income disparity it would be very nice. id also fund her ROTH as well.
You absolutely should max it out. Have her put basically her entire income to the 401k and you can bankroll her spending money. You are a marriage, not a partnership. You're only harming yourself avoiding tax free accounts.
Is this a financial planning question or a marriage advice question?
Do it. My wife and I were in a similar situation. She worked for the local school system making $35k to $40k. We max’d out her 403b and 457 accounts (about $17k each, like a 401k) every year for 20 years or more. After she paid her FICA, her payroll deposit was about $50 or something. We just lived on my salary. I max’d my 401k, too, and we made a bunch of non-deductible IRA contributions so it added up nicely. We also took advantage of all the catch-up retirement contributions allowed (HSA, too).
Yes. You are paying over 30% in taxes on the top slice of income.
You should be maxing out both 401Ks, both HSAs and both ROTHs
I’ve been doing this for years. Her 457 too! What a dumb system we have where I essentially get to stuff corporate money in $46k of a teacher’s account. But that’s the system!
My partner and I share finances but she is a graduate student paid peanuts. We use my salary to max her IRA, her own stipend she is free to do what she wants with it. Thankfully she is frugal and invets it in brokerage accounts.
Yes, as long as she's okay with you essentially paying her a salary. My wife probably wouldn't feel comfortable with it even if it makes sense on paper - feeling like she has her own money is important to her. People can be more complicated than math.
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Unfortunately this is my world. My wife absolutely refuses to contribute more to her retirement account. She considers it to be her money. She understands that she would still get the same amount of money in her bank account but the fact that I would "give" it to her is the problem.
How much more do you make than her?
Definitely unless you don't like your wife and don't want to work towards her retirement accts together
Uhh. You should be doing this for her 401K and MAXING out a Roth IRA (or a back door IRA with your income level).
Similar situation in my household. A little over half of my spouse’s income funds a 403b, 457b, and a cash contribution to a pension. She wouldn’t be able to do that without my income, but we file jointly and it shields a significant part of our income from taxes (including my 401k and two IRAs). Across 6 tax advantaged accounts we reap a significant tax benefit.
We do this. My wife has access to both a 403b and a 457 and so max both of those out. This means her take home pay is like $400 a month but it's definitely the best financial decision.
Thanks we just changed it so we’ll do that. We’ll be able to put away $46k into each of our 401ks, $23k into my 457 and $14k backdoor Roth ($7k each)
85k per year in tax advantaged accounts is fantastic. Stuff as much as possible into your brokerage and work will be optional in no time.
Are you stopping at 7K for the back door Roth because that’s what you’ve got left to contribute or because you think that’s the limit? The backdoor Roth doesn’t have the same 7K limit as a standard Roth. I believe you are only limited by the overall limit on contributions which is $69,900. This includes all tax deferred, Roths and employer matches. This does get a bit tricky so, if interested, look into it more…don’t take the advice of some yahoo on Reddit
100% would do what you are saying.
Yes, you made a smart move. That’s what we do with my wife’s salary, it goes to benefits and her 401 K.
If her company has a match, you should take advantage of that free money.
Only in America do people get married and still want “their” money. Doesn’t make sense man. And yes, you should always max out tax advantaged accounts.
Doesn't make sense to me either, but personal finances are... personal. We're not talking about protecting large premarital assets or something. This is money that's earned while they are married. The only scenario I see that could kind of makes sense is if the spouse has a gambling or spending problem that would bankrupt the family and needs to be protected from themselves.
You make 500k a year she makes 40 why is she working right now. She better fucking love her job.
Yeah I can’t understand either. It’s a “I earn my own money!”, while simultaneously having everything covered for them.
Yes, if she has a Roth 401K option, that's what I'd have her invest in! Great idea either way, though!
Only if they aren’t filling taxes jointly. Otherwise traditional all the way.
Why does it make a difference filing jointly?
Because they’re in the highest tax bracket right now?
Not with a household income of $540k. Traditional is favorable
She should 100% max it. It’s an extra tax preferred vehicle with a match, presumably, that you otherwise don’t have access to. If you have to, pay her back the $24,500.
Would definitely be beneficial tax wise.
Out of principle I would match both 401Ks.
Yeah I don’t see the harm. Would definitely help her. I would fund her Roth as well through the backdoor method.
I would say yes, but gauge how your wife feels about the idea before getting serious about it. Even though money is fungible, she might still like spending the dollars she earned herself.
I would. Both of you would gain from it
Yes and you’re in mega backdoor Roth territory
My company doesn’t offer that unfortunately
Yes. Also max IRA and HSA.
I'm doing maximum payroll deductions until I hit $11500, as my company won't match beyond that. It will be my first year maxed out. From 16-20, I never worked, which was my own mistake.
If you can afford it, max it out. This is the way.
Max hers with her salary. Live on your salary.
They can do BOTH with this kinda total income!
Have you thought about investing in her so she can earn more money?
May as well she's entitled to half of it anyways.
Obviously the math works out on that. Especially if you have a non-qualified plan and have trouble making it, or get money returned at the end of the year. I'm sure the more accountant question is whether filing separately and her contributing to a Roth and 401K makes sense. I'm not sure how all that works.
Speak to your accountant. He will give you the best advice.
Are you kidding? How is this even a question. I make 7-figures and my wife makes 20k. She takes her 20k and puts it in some account I don't know about and I pay the taxes and put 20k into her 401k and Roth IRA.
Yes you should be contributing the max always…and you don’t have to say your wife 401k …you guys are married…everything is both of yours so max out your other 401k
Yes you should absolutely max her retirement account. I don’t want to get into the marital minefield of discussing why each of you wants your “own” money.
Max it out. You're already paying $130k in federal taxes. Plan on investing most of your money and you can make more than double the market rate. Also backdoor roth too! 401k with after tax money That way it grows and you're not taxed much later since you can afford the taxes now. Have extra money? Buy stocks. Do it yourself or have someone so it for you. 25% capital gains is better than your 35% with 1 year of holding stocks. However, you can increase your income even more via options... but 35% tax. $693750 is your tax ceiling.
she should max out her 401k up to the amount that the company matches.
Yeah. She should max out her 401k. If nothing else, Explain to her that 401ks are generally protected from bankruptcy and lawsuits
Tell her if she's worried about accessing her pre-tax money in retirement or early retirement there is the Roth ladder or 72t. I prefer Roth ladder but whatever floats your boat. Then, as you said just transfer her the post tax money she's missing after she maxes out her contribution. We have a joint account so this was never a thing. We only briefly had separate accounts to each get the $700 Citi bonus. Citi is weird because they don't have a concept of joint accounts. We joined Bank America to get Platinum Honors with money we moved into Merill plus our revolving checking account balance. We have separate checking and savings accounts and just keep small amounts of money in there. In the early days of our marriage, I used to budget some money for my wife to spend on whatever when she making $12.50 an hour (plus tips) or when she was working on her second bachelor's (only internships for money). Now my wife makes more money than me. You make HHI $540K so your wife can spend a little more if she wants.
we do the same thing with health insurance. I use to have it through my work, but my wifes plan at her job ended up being better (cost and care). I just set up an automatic transfer for the days that she gets paid to offset the difference in her paycheck so that I'm still paying for it. not the same thing, but the same idea.
You should do so as soon as possible. It is one way for her to make sure she has her own millions in the future. Also, please give her money for traditional IRA or back door Roth IRA as well. Maximize those.
Yes absolutely. Roth too.
Dude. Do you love her and want what’s best for you and her? Then yes. Unless you see divorce in the future or you think she’s lazy or something.
If I had a partner, I would love for him to help me out this way. There’s a huge difference in your income between the two of you. And helping her out to make sure she secure when she gets older if you’re together or not. With help her out. I understand, wanting to keep your independence and having your own money. I wish my dad would’ve thought this for my mom, but instead, he would only give her an allowance to cover the bills for the month and never have an opportunity to put money aside. When she did have a job, he expected her to pay for everything very unfair
Target funds ?!
What’s wrong with target funds?
Very safe. Very good as a default for most people. Very conservative. I think you should see what else is in there but VOO has out preformed target funds not by a marginal amount. I wouldn’t invest in a target fund in my 30s. I would do some more research. Personally not a fan of target funds. 2060 fund last five years is 38%. VOO is 87%. That’s a lot left on the table. Don’t get me wrong retirement funds are get for people who don’t want to touch anything. I just don’t believe in their performance.
Ok cool I’ll check to see what she has offered when she comes home
Usually they will give a spy equivalent a dividend and a growth fund. I would just review and make sure you know what you’re doing. If not retire fund is ok. But you saw how it preformed verses spy in last 5 years. 40% less. Don’t get me wrong 9% return a year is not bad.
What do you do by the way if you don't mind me asking
I’m a physician
Cool just figured it out by looking through ur account it's stressful isn't it? Are you investing in stocks as well or just work?
It can be incredibly stressful at times. Most of the time it’s routine. I invest in stocks as well. Mostly VTI but occasionally I put some in individual stocks. Mostly tech like Amazon, Microsoft and Google and some long shots like Palantir
I think Microsoft is a good bet as well as Google because they're getting into ai which seems like it could be a big part of the future markets
That as well as they, and Amazon, provide a large chunk of the server space that will be needed in the future
That's true as well do you have any of your own top 10 companies that you would reccomend to invest in?
The only other ones I invest in are Nividia and Qcomm. Everything else is VTI and a little VXUS
You should zero out your wife’s income if possible - 23k to deferred, and max out Roth IRA and/or the after tax Roth 401k with the remaining if she has that option. Then you write her a check for spending cash.
Side question so I hopefully won’t have to make an entire new post for something similar. I make 240k and my wife makes 35k. Anyone in a similar situation that can share what their splits are? I max all of my tax advantaged accounts. She contributes her match and that’s it.
It would make sense to have her stop working cheapass loll
But how will I afford avocado toast
You mean you share finances and she doesn’t.
Yes, immediately
You cannot fund your wife’s 401(k) directly. You can however supplement her income by allowing her to fully participate in her 401(k) plan. As an alternative, you can open and fund her IRA and then backdoor convert it to a ROTH and have no-tax withdrawals when ready.
You need a F.A.not reddit.
You make $500k/year wtf do you do sell feet pictures on onlyfans???
lol I wish. I’m a doctor
This is a no-brainer. Yes, max out all tax advantaged accounts you two have available.
What’s even the point of being married if you don’t optimize finances and tax liability?
Lol love I guess
Sir, this is a finance subreddit.
well.... it was....
"give her the cash"........... you are not a team, that sound "me" and "her" and awful. Change that. One budget, common goals and dreams.
We have a joint bank account and our own individual accounts. She likes having her own money and I don’t see anything wrong with that
It’s complicated. I agree with your sentiment but it’s totally reasonable for a partner, especially a woman, who makes 8% of their partner’s income to want money that feels like ‘their own’.