Is Financial Planning Different for Dual-Income Couples?

By Dr. Jim Dahle, WCI Founder

There are many differences that a dual high-earner couple faces in comparison to a single doc, a single-earner couple, and a couple with one high earner and one low earner. Some are advantageous and some are disadvantageous. Let's go through a few of them, and I'm sure readers will add in a few I forgot in the comments section.

Double Medical School Loans Means a Bigger Hole

One of the worst parts about being a dual high-earner couple is that you start out with a much more negative net worth. If the average medical student graduates with $200,000 in loans, the average couple may have $400,000. That might be $600,000 by residency graduation, and that's only the average. If you're above average (which you are likely to be since you had no working spouse to help support you in school), that could be $800,000 or even $1 million. That debt burden alone prevents many couples who would prefer to have one of them stay home with the kids from doing so. They both have to work just to make the loan payments.

Dual Income Means a Bigger Shovel

Luckily, that bigger hole is typically matched by having a bigger shovel. Sure, you might owe $600,000, but you also may earn $600,000. Dual-income couples can throw gobs of money at student loans every month. Imagine living on only one physician income and throwing the rest at the loans. Or living like residents. Or even like A SINGLE resident. A $600,000 loan goes away very quickly when you're throwing $30,000 at it every month.

But here's what's cool. Even after the student loans are gone, that $30,000 can go toward paying off a house or reaching financial independence just as easily. That big shovel doesn't go away when the student loans are gone.

More information here:

Living Our Lives in a Dual-Physician Income Household

You Don't Need 2 Doctor Houses

Doctors like to live in doctor houses, doctors and their spouses like to drive doctor cars, and they like going on doctor vacations. But a two-doctor couple doesn't need two doctor houses or four doctor cars or double doctor vacations. Like any other couple living together, you might get to save almost half of the living expenses.

Higher Childcare and Household Costs

Of course, that all goes away when you have kids. A one-earner couple saves all kinds of money on childcare costs. The stay-at-home parent also likely has more time to shop wisely, prepare food, care for the house and yard, plan vacations, and otherwise maximize the household economy. Two docs working 60+ hours a week will either not do those things well or have to hire them out. Childcare is particularly expensive, and high earners lose out on the tax benefits of paying for it.

More information here:

How to Prepare for Maternity and How It Could Affect Your Family’s Finances

How to Handle Making More Money Than Your Friends

Higher Taxes for Dual-Income Couples

This one is particularly painful. While, for many people, there is a marriage tax bonus when you get married, most dual-high income couples that get married face a marriage tax penalty. Not only does our progressive income tax system penalize higher-earning couples by making the entire income of the second earner taxable at the marginal income tax rate (or higher) of the first earner, but they also have to pay two sets of payroll taxes—for much less than twice the benefits. Upon realizing just how high this penalty is, many dual-income couples decide to have one of them stay home with the kids either full or part-time.

More Retirement Accounts

Another great aspect of having a second earner is the availability of additional tax-protected (and usually asset-protected) retirement accounts. While you only need a spouse—not necessarily a working spouse—to do a spousal Roth IRA and a family contribution to an HSA, other retirement accounts, such as a 401(k), require an actual second earner. This is especially useful if the retirement accounts offered by your employer stink. You can preferentially max out your partner's options and live off your earnings.

Complicated Residency Student Loan Management

Student loan management as an attending can be straightforward. If you're working for a 501(c)(3), go for PSLF. If not, refinance your student loans and pay them off over 2-5 years by living like a resident.

But when you're married to another resident or a high earner, things can get really complicated really quickly. One of the Income Driven Repayment (IDR) programs might be right. Refinancing might be right. Even IBR or PAYE might be right, particularly if you elect to file Married Filing Separately (MFS). If you are in this situation, this is a good time to get some professional student loan management advice.

Working the Benefits

Just like you can take your pick of retirement accounts, you can also take your pick of benefits. For instance, if you are self-employed and your spouse is a university employee, use the university health insurance.

More information here:

Disability Insurance for Physician Couples

Saving on Insurance

A lot of dual-income couples have asked me about their need for term life or disability insurance. While this depends on your individual situation and desires, one possibility is for each of you to serve as the other's life insurance and disability policy. Obviously, that won't help your kids much if you are both killed or disabled in the same accident, but you clearly have less risk than a single-earner couple. At any rate, you could get away with less insurance than a single-earner couple.

As you can see, a dual-income couple has both financial advantages and disadvantages. Try to minimize the impact of the downsides and take advantage of the upsides to improve your financial situation.

What do you think? What did I miss? What advantages and disadvantages do you see for a dual-income couple? Know somebody who could use this information? Make sure to share it with them.

[This updated post was originally published in 2017.]

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