Retirement Planning If You Stay Home With Your Kids
When you make the decision to have one parent stay at home with your children, you may be making some financial sacrifices to make it happen. You should not use this as an excuse to stop saving for retirement. Making financial sacrifices means that you may not be eating out anymore and that you may not be going on as many vacations. Also, you may be relying on just one spouse paying into retirement during that time. It can include Social Security, and it is important to have retirement savings in addition to the amount you will receive from Social Security.
However, it is best if you continue to contribute to retirement accounts for both spouses. It will help the stay-at-home parent in the event that the working parent becomes disabled or if there is a divorce or a death. The retirement savings you contribute while you stay at home will make it easier to reach your overall retirement savings goals. Planning for retirement is just one aspect of a solid family financial plan; you may want to consult with a financial planner to make sure everything is on track.
Retirement Savings Options for Stay-at-Home Parents
According to the law, you cannot contribute to an IRA unless you are working. However, if you are married, you are allowed to open a spousal IRA if one person is staying home and not earning an income. The income contribution limits are currently the same as the other IRA options. You can also open either at traditional IRA or a Roth IRA as part of the plan. You can open the IRA at a brokerage house and set up an automatic monthly contribution, or you can set it up at your local bank or credit union.
If you are making a lot of financial sacrifices to be home with your children, you may be struggling to find money to contribute to retirement on a regular basis. If this is the case, you may want to think about ways that you can earn money to put toward retirement. Some women plan on just taking a few years off until all of their children are in school full time and then increasing retirement contributions then, but if you space your children a few years apart and have more than one, you may be out of the workforce for more than 10 years, and that is a lot of time to lose on retirement contributions.
Additionally, you may find that your expenses go up as your children grow, and it may still be difficult to find the extra money you need to put toward retirement. Even if you cannot contribute very much each month, regularly contributing at least $100.00 a month will make it easier to reach your retirement goals.
Working Part Time
One way that you can find extra money is to work a part-time job. Many companies do not offer retirement accounts to employees that do not work more than 25 hours a week. Working allows you to open an IRA, and if you are not married to your partner, you may need to work just enough so that you can open an IRA on your own. If you are going to work part time in retail or for a company, consider looking for one that allows you to make contributions to a 401(k) plan even if you are not working full-time hours.
You may consider working up to the minimum requirement to participate in their retirement plan.
Working from Home
If you are self-employed, work as an independent contractor, or operate your own business, you will need to plan for your retirement on your own. Many stay-at-home moms are also work-at-home moms, and retirement planning is one of the benefits you will need to plan for on your own. There are many retirement accounts you can qualify for if you are self-employed, such as the SEP IRA or a Solo 401(k). If you are working regularly, you will also need to pay your self-employment taxes, which will pay into the Social Security system.
Although you should not count on that money when you are planning for your retirement. If you plan on working from home, you will need to find a way to cover expenses while on maternity leave. It can bring added financial independence and peace of mind.