Keep your job to pay costs of day care

At what point does the cost of day care outweigh the benefit of working?

It’s a question many parents must ask, including one who recently posed it on Reddit.

“Pregnant and trying to plan for future,” the Reddit user wrote. “What is the magic day care-to-income ratio?”

She went on to say she makes $55,000 a year and brings home $33,000 after taxes, standard deductions, medical insurance, her 401(k) and subsidized commuter pass for transportation.

Her husband works full time and makes $80,000 a year, and surviving on his salary alone “would be very tight,” she said. She has been working in her current job for 10 years and said there is no way to be promoted in her current career path.

She calculated that if she continued working full time and needed to pay for day care, which she estimated to be around $525 a week for an infant, she would have only $110 left each week in take-home pay. If she didn’t contribute to her 401(k), she said, she could take home about $220.

Financial experts suggest that by age 30, individuals should have about one year’s worth of their current salary saved for retirement. By 35, they should aim to have twice their annual salary saved.

There are other reasons to continue working even if wages don’t exceed child care costs, including employer-sponsored health care plans, said Paula England, a professor of sociology at New York University.

Michael Madowitz, an economist at the Center for American Progress, a progressive research organization, developed his own calculator for parents to make the decision.

For example, the calculator estimates that a 30-year-old woman who began working at age 22, who makes $100,000 a year and plans to take just five years off from work, could lose more than $1.2 million in income going forward, including $500,000 in lost wages, $424,561 in lost wage growth and $340,590 in lost retirement assets and benefits.

Men typically lose more, Madowitz said, because their wages are often higher to begin with. But fewer men take time off to become full-time dads.