When couples ask your opinion about whether a spouse should return to the workforce full-time, "It's almost like playing marriage counselor," says Beth Scanlan, a director at Credit Suisse Private Banking in San Francisco. "A marriage counselor is taking both sides and is not going to provide opinions. We're giving guidance."
Beyond running the numbers-calculating costs for child- or elder- care, other household expenses, commuting, new clothes, etc.-planners should also lay out tax advantages and options for the additional income. In addition, it's essential to paint the bigger picture. Couples need to think about each partner's happiness, long-term job prospects and financial security or risk creating conflicts that could poison a marriage.
Benjamin Simiskey, founder of PLS Advisory in Houston, worked on this very issue recently. The husband, an oil and gas engineer earning about $140,000 a year, was worried that any extra income would raise his and his wife's tax bracket.
She expected to earn about $40,000 if she worked full-time as a substitute teacher. She also thought she could pick up extra money tutoring.
Simiskey recommended that she put all of her income from the school district into savings, but spend her cash from tutoring on herself. "They were willing to make the commitment" to saving, Simiskey says. In her first year working full-time, the couple saved $18,000 more than the year before, in a 401(k) and IRA, as well 529 plans for their children. "She's also probably eating out more," Simiskey adds.
Another couple came to him for help meeting their expenses. They had taken out a mortgage on a new larger home not long before the husband, a financial planner, lost his job.
The only position he could find brought in less money, so the couple decided that the wife, a former teacher, would take a part-time administrative position and establish a tutoring business. That allowed her to start putting money in her own retirement plan-and also deduct costs for her home office. She also had the flexibility to be home before their children on some afternoons.
In sorting through the pros and cons, health insurance can make the difference, says Ashley Parks, an associate at Martin Financial Group in Dallas. Parks recently advised a client, a lawyer who brought in about $30,000 a year in temporary work, to buy a few new suits and take on a full-time position paying $120,000.
Her husband was self-employed and the family was paying high health insurance premiums. The law firm offered a less expensive group plan, an advantage that far outweighed the cost of driving to work and parking.
In another case, a new full-time job only netted a family an extra $8,000. But Parks encouraged the move because it would improve her client's earning potential.
Sara Ellefsen, the founder and principal of Golden Gate Personal Financial Planning in San Francisco, says she tells all her female clients to be prepared to support themselves. "It's just a matter of when," she says, because women typically live longer than men and divorces are common.
"This is not just a dollars-and-cents calculation. It's about keeping fresh, keeping current and keeping employable," she says.
Scanlan advises couples to consider if the flexibility of part-time work surpasses "the joy factor, the social prestige and social interaction" that a full-time job offers some. "Those you cannot quantify," Scanlan says. "I try to gently remind clients that they need to look at the total benefit."
Self-employment, which may entail more hours, can make more sense than taking a job if your spouse already has one, says Michael J. Fitzgerald, founder and principal of Fitzgerald Financial Partners in Houston. "Two W-2s is the worst situation for taxes," he says, and the tax advantages and flexibility of self-employment surpass most other financial concerns. Fitzgerald tells couples to consider their cash flow-not just their annual income.
"When you run a company it's all about cash flow and controlling the timing. Business lines of credits may be used to pay for assets that you need also for other parts of your lives," he explains.
He's recommended clients consider a wide variety of opportunities: a laundering business, an insurance brokerage firm selling malpractice coverage to dentists and a seminar management company. He recently advised a woman who'd worked as a speech therapist for a school district to become a consultant. "If all she does is a little research and writes a few papers, she'll come out ahead," he says, even if she doesn't generate much income in the first year.
For some, given the tough economic outlook, it may make sense to take what you can get. Peter Palion, founder and principal of Master Plan Advisory in East Meadow, N.Y., advised one client to accept a job as a director of a community recreation center when her children began attending school, even though she'd had a higher-level position in banking before she left to raise her kids.
"They needed the extra money and that was the only offer on the table," Palion says. When the woman's husband groused about additional taxes, Palion says he used his firmest voice to say, "Welcome to the club. We all pay taxes and we all don't like it."
Some of the trickiest territory with couples comes when they keep money secrets from each other or develop different values over time. Simiskey records the interviews he conducts when first taking clients on, asking them their "true values about money."
The planner says he spends about an hour digging. "The key is having that conversation before any of the stressors come up," he explains. If conflicts arise later, he refers to the first interview to steer the conversation to joint objectives or to address any differences.
When a spouse changes direction, a planner can help the other spouse respond realistically. In one case involving clients of Fitzgerald's, a couple decided that the wife would return to full-time work as a certified public accountant so that they could partly retire within a few years. The husband, an engineer, agreed to scale back on his contract jobs so that they could enjoy more free time.
Nonetheless, he kept showing up in Fitzgerald's office with proposals to accept full-time jobs with even bigger time commitments. The wife was upset.
At first, Fitzgerald reminded the man of their original goals. He later advised the wife to try to earn more and plan on retiring on her own schedule, not her husband's.
When a new client arrived in the New York office of Lauren Prince in the midst of a divorce, she advised him to urge his soon-to-be ex-wife to get some career counseling. The woman had worked part-time for nonprofits, "almost on a pro bono basis," recalls Prince, owner of Prince Financial Advisory.
Ultimately, the woman was able to use her skills in full-time work. "Sometimes people need to get realistic," Prince says.
Miriam Rozen is a staff reporter at Texas Lawyer, in Dallas.