Maximize the benefits of lower paid employment

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By Alaina Trivax, WCI columnist

For families where only one partner is a doctor, sometimes it takes some math to determine if the second partner will be or even should work outside the home. During the formative years, this conversation can be quite simple – if the family needs extra income, that answers the question pretty quickly. Once the doc completes their training and is employed as an assistant, the conversation can get a bit more complex.

Does the other spouse want to work? Will a second income push the family into a higher tax bracket? What additional expense would that entail? If there are children in the family, how will this extra income compare to the increased childcare costs?

It’s a conversation that my husband, Brandon, and I have had a few times. I am a college teacher and he is in the early years of his career as a PM&R physician in private practice. I love what I do, but the numbers don’t lie; my salary is less than a quarter of his, and we had to do some calculations, especially since our family has grown and now includes two young children. Although I am employed in a much less lucrative field, we maximize almost all of the benefits offered by my employer.

As a result, my work saves us tens of thousands of dollars a year.

Here’s how we approached it.

403(b) Contributions

First, we maximize my 403(b) contributions each year. My employer offers an 8% match, and we take advantage of it. So far, we’ve put these funds in a Roth account – this made particular sense when my husband was in residence and on the stock market and our income was probably the lowest it would ever be. Brandon is now a tenured but has yet to graduate as a partner in his practice. Knowing that our income will increase again once he becomes a partner in a few years, we have chosen to continue contributing to the Roth account for the time being.

This means that almost $20,000 of my income, plus my employer’s contributions, grows tax-free for our future needs.

Using the health care plan and contributing to an HSA

Using my employer-sponsored retirement account is a pretty basic first step to reaping the benefits of my job. It is with the health plan and other related benefits that we are really to save money. We pay just over $2,500 a year in health care premiums for our family’s medical, vision, and dental coverage. Although the medical plan has a fairly high deductible, it offers excellent coverage. A comparable plan offered by my husband’s employer would cost us nearly nine times as much, or about $24,000 per year. His private practice has fewer employees and just doesn’t have the bargaining power of my school.

Since we are enrolled in a Qualified High Deductible Health Plan (HDHP), we are also eligible to contribute to a Health Savings Account (HSA). We maximize our contributions to this account with pre-tax contributions from my paycheck. Brandon’s employer also offers an HSA option, but the plan we have access to through my work has better investment options and much lower fees. We occasionally dip into funds for large medical bills, including the delivery of our first son. Generally, however, we invest the money and use this account as additional retirement savings. Thanks to this, an additional $7,200 of my income can be invested tax-free – assuming we used these funds for healthcare expenses at some point, no tax will have been levied on contributions or withdrawals .

Paying into an FSA

My employer also offers employees the option of contributing to a Flexible Spending Account (FSA) for dependent care. Considering our family’s childcare costs, we certainly benefit. I contribute to this account with every paycheque, and we maximize the contribution each year. We submit daycare receipts monthly and then receive regular reimbursements as funds become available. Using this account allows an additional $5,000 of my income to be tax-free. This is particularly valuable as it saves us money on a required expense; even if the FSA was not available, we would still have to pay for daycare. My husband’s private practice does not currently offer an FSA option for its employees, so it’s great that we can take advantage of it through my work.

Education specific benefits

There are also some specific benefits related to my role as a teacher. I am regularly absent from work in the middle of the afternoon, which gives me time to do household chores and errands during the week. And, as it has become especially important since we have children, I am available for daycare pick-up each evening. As I am at home during the summer and during school holidays, we have been able to enroll our children in daycare which operates on a school timetable, which means that we only have to pay for approximately nine months of childcare each year.

benefits of a lower paying job

The private school where I teach also offers a substantial discount on tuition fees for faculty children. Enrollment begins with preschool programs for 3-year-olds, so our eldest son will be eligible for another school year. After the teacher discount, tuition will be significantly less than what we currently pay for daycare, and we are very happy about that. In the long run, this technically won’t save us any money; while the discount makes school enrollment cheaper than daycare for a few years, that comparison no longer applies once our children reach kindergarten age.

If I wasn’t teaching at this school or the discount wasn’t available, we’d probably send our kids to public school, which, of course, would be tuition-free. Nevertheless, the generous discount means that if we choose to enroll our children there, we can take advantage of this educational opportunity at a great price.

Maximize my non-doctor salary

These last points are quite specific to the field of education. Yet our overall strategy of utilizing all relevant employer-sponsored benefits could be applied to a career in any field. When looking directly at the numbers, the benefits of a spouse working in a lower paying job are not always clear. My salary is significantly lower than my husband’s, but participating in these benefits increases the financial value of my work. In addition to my base salary, these benefits save us over $30,000 every year.

After factoring in health care premiums and contributions to my 403(b), HSA, and FSA, almost 75% of my earnings are tax exempt. Of course, I also get a lot of personal satisfaction from my work; knowing that it also makes financial sense for our family only increases that.

If you have (or are) a working non-physician spouse, how do you maximize their (or your) salary and benefits? Have you had discussions about whether you should be a dual income family? What other types of conversations have you had? Comments below!

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