I’ve read plenty of times about the two income trap. Basically, if you make two incomes, you are taxed at a higher level. Then because you’re both working, you need to pay for child care, lawn service, accountant, maid, etc. Of course you don’t “need” to pay for these things, but it becomes more likely if you don’t have someone sitting at home all day.
While we’ve certainly been hit by this trap, we’ve avoided the real trap for a few reasons:
1. We both make almost the same salary, so we’re both heavily contributing to our financial well being. Either of us quitting would still drastically reduce our salaries.
2. We don’t have kids, so no child care costs.
3. We’re planning on drastically reducing our spending in retirement, so we don’t need to save 50% of our salary to retire early. If we had to replace our full salaries, we’d be working for a long time yet.
4. We have pretty good salaries, enough to pay for lawn services/maids/accountants/etc and still come out ahead.
So as things are, the two income trap really hasn’t hit us. I think there are plenty of others in our situation. Young professionals with no kids, where both couples work and make decent salaries. Sure, it would be nice to have one of us at home in charge of maintenance/cleaning/etc, but it just doesn’t make sense.
One Response to “Two income trap narrowly avoided”
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Dave and Katy: I think you miss the point. That being having the children in the household is what prompts the spouse returning to work, thereby incurring all the expenses. The vast majority of these are fixed, unavoidable and increase faster than wage growth over time.