Alessandra Malito at MarketWatch wrote about young families trying to save for retirement while paying for childcare, which now runs an average of $332 a week for daycare and $870 for a nanny, and eats 20% or more of the average parent's income. Nearly a third of parents are dipping into savings to cover it.
My point was that childcare and retirement savings do not have to compete if you automate the retirement piece first. The years you are paying for daycare are usually your highest-earning years too, which is exactly why quitting on retirement now costs more later.
I shared a client example. Both spouses working, paying more for daycare than their mortgage, and ready to stop 401(k) contributions entirely. Instead, we cut the contribution rate to the amount that captured the full employer match and nothing more. Below that threshold, you are leaving free money on the table, and free money is the one thing a young family with childcare bills cannot afford to skip. Above it, during the daycare years, is optional.
The rule I gave readers: automate the number that survives the childcare years. It is temporary. The compounding you give up if you stop entirely is not.
Read the full article at MarketWatch →
