Spouse Returns To or Increases Hours at Work
In some instances, the paycheck of one parent or both parents may not be sufficient to meet private school or higher education expenses. In this case, to bolster discretionary income, parents may have to consider having a previously stay-at-home spouse return to the workforce or having one previously working spouse increase his or her hours.
- Unique Strategy: Obtain more earned income for school expenses
- Additional income may push family into higher tax bracket
- Expenses such as daycare, transportation, and housekeeping may offset additional income
- Less time to manage household
- Increased stress
Variations from State to State
How Difficult Is It to Implement?
- A new job search can be time-consuming, depending on the type of position sought
- An increase in hours is easier to implement
What is it?
In some instances, the paycheck of one parent or both parents may not be sufficient to meet private school or higher education expenses. In this case, to bolster discretionary income, parents may need to consider having a previously stay-at-home spouse return to the workforce or having a working spouse increase his or her hours at work. Depending on the type of position sought, a new job search may be time-intensive, involving research of employment listings, resume preparation, cover letters, and interviews. In addition, other incidental items may need to be taken care of, such as purchasing a second car or finding the right day-care arrangement.
Obtain more earned income for school expenses
When a spouse returns to work or increases hours at work, the family obtains more earned income. Consequently, there is more money to put toward education costs. Before a spouse returns to the workforce, it's a good idea to determine exactly how much money will be available on an after-tax basis by doing a second-income analysis.
Additional income may push family into higher tax bracket
If a spouse returns to work, the additional income may push the family into a higher tax bracket, resulting in more income taxes due.
Expenses like day care, transportation, and housekeeping may offset additional income
Returning to work often means incurring incidental expenses that may not have been included in the budget, such as day care, commuting costs, dry-cleaning bills, housekeeping costs, and fast-food dinner costs. It is likely that parents of elementary-school-age children will incur the greatest expenses, due to the need for day care. All of these costs reduce the amount of income that is ultimately available to put toward education savings.
Less time to manage household
Dad was home full-time with the kids and now he's back at work. This means he's spending less time paying the bills, doing laundry, grocery shopping, and taking care of household repairs. The result is that everyone is going to have to pitch in for the household to run smoothly, and the effort required may cut into weekend leisure time.
Working outside the home puts work demands on top of household and child-rearing demands. Scheduling conflicts are bound to arise, which can bring increased stress in trying to balance conflicting demands.
Tip: There are many support programs available for working parents, and employers increasingly recognize the need of their employees to balance work and family.
Is this strategy right for your family?
There is no right answer to the question of whether a spouse should return to work or increase his or her hours at work in order to save more money for education expenses. Each family situation is different. For example, one family may have a strong aversion to putting their children in a day-care environment five days per week, while another family may have grandparents nearby who could watch the children instead.
Each family needs to make its own decision after a careful evaluation of the pros and cons of such a move. Answering the following questions can get parents started on the decision-making process:
- Is our education goal for our child realistic? Do we need to modify it in any way (e.g., pay for four years of private high school and only two years of private college rather than four years of private college)?
- How much more money do we need to save each month? Can we come up with this money by reducing spending in other areas of our budget (e.g., monthly entertainment and vacations)?.
- Assuming one spouse does return to the workforce, are other family members willing to help out with household responsibilities on a consistent basis?
- Are we willing to put our child in day care if necessary?
- Will we be disciplined about earmarking the additional income for education savings, or will we be tempted to start remodeling the house?
This material was prepared by Broadridge Investor Communication Solutions, Inc. and does not necessarily represent the views of John Jastremski, Jeremy Keating, Erik J Larsen, Frank Esposito, Patrick Ray, Robert Welsch, Michael Reese, Brent Wolf, Andy Starostecki and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.
The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.
John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.
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