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My Wife Quit Her Job

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Quit quit quit!Yesterday, my wife quit her job of nearly four years in the middle of the worst economic recession in many many decades.

Wait, that’s probably not framed in the best way. How about this:

Yesterday, my wife quit her job of nearly four years to pursue a doctorate at the University of Maryland.

Better? :)

Either way, neither one of us has a “traditional” job. As such, we’ve had to make a few adjustments in our life for the period between when she left her job (yesterday) and when she’ll start graduate school.

Health Insurance

Health insurance is the biggest change, since we were both one her employer provided health insurance.

Fortunately, her employer’s health insurance policy covers us until the end of July. In August, we’ll be using COBRA as a safety net until she starts school. When she starts, we’ll be on her student/staff health insurance. COBRA stands for Consolidated Omnibus Budget Reconciliation Act and gives you the right to get medical insurance under your former plan as long as you pay the full premiums.

What’s nice about COBRA is that you have 60 days to decide whether you want to active it. This gives you a 60 day grace period where you can get coverage but not pay for it. If you do elect it, it’s retroactive and you have to pay premiums for all the time that has passed. People usually only elect COBRA if they need it, otherwise it’s cheaper to find independent health insurance (generally). This will give us a safety net for August. If we need it, we elect COBRA for a month. If we don’t, then we won’t.

Medical Benefits

Regular Checkups. We scheduled some preventative care visits, like regular checkups and dental cleanings, right before she quit so that we could take advantage of the annual allowances included in the medical benefits. It’s always important to take advantage of medical benefits, especially preventative care, because it’s something you’re paying for, even if you don’t know it.

Flexible Spending Account. When you leave your job, voluntarily or involuntarily, you are still entitled to spend the full amount in your flexible spending account. It’s known as the FSA loophole. We spent the remainder of her FSA on some basic medical supplies, new glasses and contact lenses.

401(k)

Since she had to have applied to graduate school in the fall, we had an inkling that she wouldn’t be staying at her employer for the full year. While we weren’t sure she’d accept one of the programs she was accepted into, we figured we might as well plan for it by front-loading her 401(k) contributions. We contributed the full 2009 contribution of $16,500 in the first six months of the year.

This wasn’t a difficult call to make since the stock market was at historic lows and our time horizon is forty years. We’ll know in a few years whether this was a mistake or not, though I am willing to bet about $8,000, pre-tax, that it won’t prove to be.

We’ll be rolling her 401(k) over to Vanguard as soon as possible, in order to simplify our finances.

I think that about covers it on the financial front. Think I missed anything?

(Photo: fuzzcat)

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28 Responses to “My Wife Quit Her Job”

  1. MoneyNing says:

    Wow tell her congratulations! Dr. Wang sounds quite cool :)

    I think most people, when they leave their jobs for either entrepreneurship or study are incorrectly overestimating the risks involved. I applaud you guys for taking the leap!

    Back on the financial front, why don’t you put the money into your SEP IRA and contribute there instead of the 401k? This way you can have it at Vanguard from the get go. (of course, I’m assuming that you aren’t maxing out your SEP IRA).

    As a side note, I find it an “hair-pulling” exercise to keep up with all the investment accounts for Emma and I. With the law not allowing us to combine our retirement accounts, we have like 5-6 IRA accounts (traditional, roth, SEP etc) alone, not to mention the taxable accounts as well.

    • Jim says:

      I have a Single 401(k) at Pacific Life (Vanguard didn’t offer single 401(k)s at the time, they said they would this fall though) and that’s max’d out, so we’re full up on the retirement front.

      It is a lot of IRA accounts to manage, fortunately if you go with one broker it’s not as much of a hassle.

      • MoneyNing says:

        I assume single 401(k) is the same as solo 401(k) in the following response…

        Since you said you are already maxed out, you may want to check your income at year end to see if you can contribute more. I believe solo 401(k) plans allow you to contribute 100% of your profits, up to $16,500 and then 25% of profits thereafter until $46,000 or somewhere close to that number. Maybe by year end, you can add a little more to your 401(k) plan, assuming you haven’t already put in $40k+ for yourself and $16.5k for your wife!

  2. lostAnnfound says:

    Best of luck to your wife! She must be looking forward to continuing her education.

  3. Stefanie says:

    As someone who finally just started her last year of a phd program and is working on her dissertation, I would have recommended that your wife stay at the job until the very last possible minute to keep earning money before graduate school takes over. Even though my school financed me for the last 6 years, either through fellowships or teaching, I was never really able to save money on the money I made, because it was very low (ranging between $16K and $19k a year). Also, enjoy the summer while it lasts, because once the program starts, you’ll likely rarely see each other for anything other than some meals, especially for the years in which she is doing coursework. If I had met my partner while I was still taking classes, instead of right after I had finished them, I don’t think we would have had a chance in hell. Now she’s a grad student too and we’re both looking forward to Spring 2010 when we both graduate.

    • Jim says:

      I wholeheartedly agree and she only has six weeks off, four of which we’ll be spending on a vacation in Europe. So there’s a good reason to take time off. :)

      I appreciate you sharing your experiences. I’ll probably write more about it as things progress and I’m sure my wife would love to get your input on the challenges she’ll be facing.

  4. The Baglady says:

    Congratulations to your wife! It’s nice to be able to do what you want to do.

  5. Congratulations!

    Those (plus a big, fat emergency fund, which I’m sure you have also) were pretty much the same steps I took before quitting my job to go full-time self-employment.

  6. Frugal Dad says:

    The only other thing I’d mention on the financial front would be a disability insurance policy, which is typically offered through an employer.

    At your age you guys are far more likely to become disabled than to die (I know, it sounds morbid). Now that you both have separated from an employer it might make sense to pick up a disability policy that guarantees some level of income should neither of you be able to work. I know the odds are in your favor, but like they say, stuff happens.

    • Jim says:

      A few years ago I met with a CFP and one recommendation he gave, that I still remember, was to get disability insurance and get it separate from my employer (life insurance too). It’s on the list… :)

  7. Ron Hekier says:

    I second Frugal Dad’s advice. A disability policy is essential as is a life insurance policy.

  8. Patrick says:

    Congratulations! It’s great that she is going for her doctoral. That’s also good that you are taking a vacation before she begins. It will be tough to take too many breaks once she starts her classes and writing her dissertation.

  9. That’s very exciting news. If she managed to wangle graduate-student support, that IS awesome: our university has cut so many RA lines, there’s hardly any support available at all.

    If you can get onto the school’s health insurance, that’s excellent, too. At GDU, the insurance for RAs (a student policy) doesn’t cover spouses or partners. Another option is to look at trade groups. Since you’re making a significant income from the blog, you’d undoubtedly qualify for the Writer’s Guild, which has a decent group health insurance policy.

    Disability policy: very smart. If she’s eligible for staff benefits, the university may also offer disability coverage at a good price–at least for her.

  10. CuriousAG says:

    Hey Jim,
    Congratulations & All D Best to your wife :)

    Wanted to point out one thing, I graduated 6 months ago and one thing about PF I observed in the school was most of the students (20 something) are either ignorant or unaware of the PF basics, knowledge, tools and most importantly inspiration.

    If it will be possible it’d be great to involve current students from the school in some PF activities. It bothers me when my friends, like other students, simply ignore PF sphere but you being heard in a wider blogosphere may make a difference.

    I also mentioned this to JD, if possible try to get some students to the weekly radio talk show :)

  11. J. Money says:

    Very cool!!! Esp considering U of MD is in my neck of the woods…perhaps you’ll now have a better reason to meet us for happy hours? ;)

  12. Studenomist says:

    All I have to say is congrats to your wife for getting accepted!

  13. retireby35 says:

    Congratulations! I agree that health insurance is probably the most important thing people need to take care of as soon as they are no longer covered by their employer.

  14. Damon Day says:

    My wife stopped working two years ago when we were getting ready to have our second child. Fortunately since she was self employed, it didn’t really cause a major hiccup with most things. Other then the loss of income, nothing really changed. Now she is home with the boys full time and I wouldn’t have it any other way.

  15. Scott says:

    Good luck to Martha!

    IMHO, I think grad school should be treated like a job and if you manage your time and energy right there’s no reason you can’t have free time and do the things you want to do outside of school/work. Most full-time grad students just get so wrapped up in their studies and caught up in the “grad student lifestyle” that they forget about the rest of life. I think Martha’s got a good head on her shoulders and will balance the load well so I think you’ll still see her plenty. You both having flexible schedules will be pretty sweet too.

  16. dilbert69 says:

    One minor nit to pick re COBRA: It requires you to pay the entire premium (what your employer was paying and what you were paying) plus a 2% administrative fee. Also, the coverage may not be identical to what you had in the group plan, though it should be substantially similar. Of course, one person’s “substantially similar” is another person’s “frighteningly different” or “woefully inadequate,” but that’s America.

  17. Kirk says:

    Jim, I’ve gotta ask… how on earth did you guys manage to save $16.5K over 6 months? I’m here scratching my head trying to figure that out… and how we could possibly do the same. Perhaps another budgeting post with some average numbers is in order.

  18. Mat says:

    I like how you clarified that your proposed bet was pre tax :)

    It made me laugh. Oh my we’re finance nerds. :)

  19. Mike says:

    RE: COBRA

    Jim, double check your COBRA paperwork. It’s my understanding you have 60 days to enroll and than another 30 or 45 days to actually pay the premium…You can essentially hold off for at least 3 months. It’s pretty common for people to do this when switching jobs and they are waiting to get through a 3 month probationary period. At the 60 day mark you send in your forms saying you would like to enroll in COBRA. Wait the additinoal days and see if you have any major claims. If you do, than pay the back premium, otherwise notify the employer you changed your mind and they will terminate the insurance with no monies due.

    I’m not positive if it’s 30 or 45 days to pay so I would double check your forms. Also note this is only if the company you are leaving is indeed COBRA eligible and has at least 20 employees. In NJ they have a program that mirrors COBRA for business with under 20 employees. The insurance is the same but the timeframes for enrollment are different.

    • Jim says:

      Thanks for the tip Mike, we haven’t received the paperwork yet (since she only left a few days ago), but we’ll review it to see exactly how long that hold off period it. Fortunately we’ll have insurance through her new “work” within a month.

  20. Mike–I believe you’re right in what you’re saying about the extra 30-45 days for payment. I’d add that even if you have a claim during the election period that you match it up against the cost of paying the back premiums on COBRA. If the claim is $800 and the COBRA premiums are $1500, better to pay the claim and move on to your next plan.

    One other note on COBRA, based on personal experience. Everyone talks about COBRA almost casually (not so much on this thread, but every where in general)–but COBRA ain’t cheap!

    You’re paying the entire premium your employer paid (no match here!) plus the plan administrator can (and usually does) tack on an admin fee of up to 15% (don’t quote me on that, it does vary).

    So the plan that cost you $400/month out of your paycheck for your portion, adds a $400 employer match (assuming he paid 50%), plus another 15%, so you end up at $920/month–the cost of a small mortgage payment.

    It’s best to take care of your Plan B as soon as possible.

  21. Charity says:

    Congratulations! What an example you’ve set for others to do the emergency fund thingie. It is so important.

    Dave Ramsay’s Financial Peace University (FPU) helped my husband and I to create a 3+ months emergency fund. We are completely debt free and had a really kewl budget going, when he got laid off and we’d just got in a new home. Thankfully, because of the emergency fund, we as not as stressed as we would’ve been. Nevertheless, we need to have something coming in before long.

    Again, congrats!

  22. eric says:

    Congrats to Martha! :)


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