The lure of a two-income family is so desirable these days that the mere notion of having to give up one of those salaries to raise the kids is downright daunting. But the reality is that, financially, it might not be so inconceivable.
Granted, there are many factors other than money affecting the decision for one spouse to stay home and take care of the children. On one end of the spectrum, there's the personal gratification of spending time with the kids. On the other end, many people actually like their jobs and are afraid that stepping out of this frenetic workforce can mean diminished job growth and lower bonuses, and that could translate into an inability to afford things for their kids.
We'd like to hear from readers who are facing -- or have faced -- this dilemma. We'd particularly like to hear from readers who found that the costs of going back to work would eat up most, if not all, of their paychecks.
Please post your thoughts and experiences on our
Going Back to Work message board. We might follow up with a story based on your postings.
If you're facing this back-to-work decision,
calculator for weighing the financial costs.
Crunching the numbers could turn out to be a sobering experience, especially if the job you're going back to pays $25,000 to $50,000 per year. Once day care, work-related expenses and taxes are deducted from your paycheck, there may not be much left.
Let's assume you bring home $30,000 a year after taxes. That's $2,500 a month. Deduct day-care costs right off the top. Assuming $400 a week, that's $1,600 -- more than half -- gone already. (If an in-home nanny is hired, don't forget to include employment taxes as part of the costs.)
Now deduct the costs of actually going to work, mainly transportation and work attire. Assume a monthly lease payment on the car of $200, $100 for auto insurance, $30 for gas and tolls.
Then assume two new suits a year at $200 each. That's $33 a month, plus $30 a month in dry cleaning and shoe shines.
Full-time workers have less time to do household chores, so they often spend additional money on cleaning services and take-out food. So drop in $100 a month to have the house cleaned and another $150 for lunch every day and pizza at night.
Just $300 a month left from your paycheck.
Is it worth it?
"After running the numbers, it often doesn't make financial sense for the second spouse to work, especially if they're earning a low wage," says Paula Kennedy, a senior manager in
Ernst & Young's
personal financial counseling group in Minneapolis and co-author of
Ernst & Young's Financial Planning for Women
On the tax front, don't forget that a second income can bump the family into a higher tax bracket.
Let's assume one spouse makes $70,000 and the other makes $30,000. Together, assuming no major deductions or credits, they're in the 31% federal tax bracket. If the spouse making $30,000 stays home with the kids, the family drops to the 28% bracket, and the tax bill drops falls to $10,950 from $19,760.
You can add that extra $9,000 in taxes to the cost of going back to work.
To get a better idea of the tax impact on your family, drop the numbers into an online tax-preparation site like
TaxCut. Run the numbers with and without the extra income.
Granted, money isn't the only factor in your decision to go back to work.
And when both couples have been financially contributing to the household, the spouse who stays home may begin to feel like he is no longer paying his fair share. "Marriages break up over perceived inequality," notes Kennedy.
"If you love your job, then I don't think you should give it up," she says.
So telecommuting or working a flexible workweek might be an option. That would allow you to continue contributing to a 401(k) or pension plan. (See our recent
story on the retirement issues of women who leave their jobs.)
Sure, an individual retirement account (IRA) is an option for a stay-at-home parent. But the annual contribution is limited to $2,000. If you've got a job at a company that offers a 401(k) retirement plan, you could contribute as much as $10,500 toward your retirement -- and if your employer matches all or part of your contribution, the benefits are even greater.
The decision to stay home or go back to work is not an easy one since the emotional decisions often overpower the financial ones. Is it more important to the family for one parent to stay home with the kids? Or is it better to work and bring more money into household so the family can afford more opportunities?
Granted, both the emotional and financial aspects should be considered in tandem, but if couples figured out how much of the second spouse's income remained after day care and other job-related costs were paid, it might make the decision process a whole lot easier.