My husband and I have very different financial philosophies. He spends very little and keeps his savings in a bank account. I spend too much but given my income have managed to save quite a bit — and I aggressively invest my savings in index funds, stocks, and alternatives.
Together, we have about $550k in savings, with $443 of that in my investment accounts ($235.5k in retirement included in that), and about $100k in his bank accounts. Over the last few years he has been investing in a Roth IRA, so he probably has about $10k in retirement savings to his name. As a married couple, he’s no longer eligible for an IRA, and he is an independent contractor, so I’ve done some digging into how he can increase his retirement savings, you know, before we retire.
It’s quite possible in 30 years when we’re at retirement age my retirement savings will be enough for both of us, but I’d really like him to start investing in pre-tax retirement accounts as well, especially since our incomes together with the marriage tax penalty are now bumping us into super high brackets — and with a one-bedroom apartment we have no deductions that take us beyond the standard one.
My recommendation to him, upon further research, is to start maxing out a Solo 401(k) each year for the next year or two, to catch up a bit in retirement contributions. At least in his retirement accounts he’s invested in index funds so that money isn’t… losing money every year. I’m not sure if this is really a smart suggestion, though, as having liquid funds is useful for things like buying a house. I’ll, of course, pay for him during retirement if I can afford to – but I figure I need $2M in retirement just for myself, so together we’d probably want at least $3M before we retire.
Apparently self-employed peoples can put $53k a year into a solo 401(k). This is actually a pretty big deal given that us corporate slaves can only put in $18k of our own money per year– making catching up investing really difficult. As a self-employed individual, you can put $18k of your own money in, plus have your “company” add $35k more. I’m not clear if the entire amount is pre-tax, or just the $18k, and then the extra money put in is taxable. In any case, it seems to make sense for him to at least put in $18k next year.
For last year I’m looking into setting him up with a SEP IRA. It looks like he can put in up to 25% of his 2016 income and it’s deductible, plus doing that isn’t due until April 15 so it’s not too late.
I’m a little concerned about pushing him into putting money into retirement accounts, because partially it’s nice to know that he’s the “liquid” portion of our couple hood, in case we need it, but he’s 35 and with $10k saved for retirement, even if he’s probably inherit some money and he’d be able to live really cheaply if needed, I want us to have a comfortable life when we’re old people… you know, travel the world, visit our “kids,” not feel stressed about money.
What do you think? Should I encourage my husband to put money into a SEP IRA or individual 401k? Or should I focus on my own savings and support his liquid fiscal diet?