Last Updated January 30th, 2018

Retirement Planning For Stay At Home Moms And Dads

Retirement Planning for Stay At Home Moms And Dads

When you first plan on staying home with your children, the first thing you do is take a look to see if you can afford it. You cut back on cable TV, buy older cars, lose retirement benefits…

Whoops! Most families forget about what being a stay-at-home mom or dad does for their retirement income. The years spent not working have a huge impact however, when you decide to retire. Retirement planning is very important for stay at home parents.

What Retirement Benefits Do Stay At Home Moms And Dads Lose?

Let’s start by looking at what you’re losing for your retirement. No 401(k) with your employer contributing towards it. No pension, although those are getting scarce anyhow. Less money available to put towards retirement. You aren’t putting money into Social Security, so your benefits will be lower.

According to this article on Fortune, the financial loss for taking a 5 year break from work can cost a mom $467,000 in income, wage growth, and retirement assets on average. A man would lose even more on average.

Ouch. Being a stay-at-home mom or dad means you lose a lot for your retirement, although not every family will lose so much. There are a lot of different factors that go into how much you would lose.

Fortunately, there are steps you can take to prepare for your own retirement. It means more sacrifices, as you’ll have to put more money aside, but better to provide your own retirement than be a burden.

piggy bank

Save For Retirement With A Spousal IRA

If you don’t work at all, you will want to consider having your spouse contribute towards a Spousal IRA. You may want to talk to a professional to determine the best type of IRA. According to the IRS website, up to $5500 as of 2018 (check for each tax year) may be contributed to a spousal IRA in a given year, assuming you are married and filing a joint return. The limit goes to $6500 when you turn 50. See this post on the IRS website for more information on IRAs.

Of course, it’s hard for most families to come up with $5500 a year to be put towards retirement. Saving while working is relatively easy; it can come out of the paycheck before you ever see it. It doesn’t hurt much. Saving deliberately is much harder.

Figure out a monthly dollar amount you can contribute so that it goes throughout the year. Don’t hurt your family doing this, of course, but do what you can to contribute to your retirement savings. The time will come when the money will be important to you.

Don’t Forget Old 401(k) Accounts

If you had a 401(k) account with a previous employer, take advantage of it. Don’t cash it out or leave it sitting. Roll it over into an IRA. Your investment advisor can help you, or you can read up on it.  Rolling over your 401(k) into an IRA will give you a lot more flexibility with the investment.

Retirement planning grow money

There’s No Room In The Budget!

It’s often hard to find room to contribute to a stay at home parent’s retirement fund. Really hard. Living on a single income is financially challenging on its own, even without adding in retirement contributions.

See if you can fit even small contributions into your budget. I’ve seen $100 a month suggested, but for many families, that’s a lot of money. Great if you can do it, but a frustrating number to hear if you can’t.

My personal preference if the budget can’t spare anything is for the stay at home parent to find a way to earn money from home, and put some of that aside for retirement. Not only will this help when you retire, but it keeps your skills up for if you go back to work outside the home someday, as most do.

Working at home also improves your family’s overall financial stability. The fact that I work at home has kept us from financial disaster in the past. Things were still hard, but not completely impossible to deal with.

Get A Remote Job And Contribute To Your Retirement

If all you want to do is be a stay at home parent, you may not want to find a job, whether it be part time or working at home, but it is an option to keep money going towards your retirement. It ensures that some money is going toward Social Security. Once the kids are in school, a highly flexible job can keep your skills sharp, too.

You have a lot of options for remote work these days. If the job involves significant computer use and very little face to face time with people, there’s often a remote option for it somewhere. You can start your hunt on my remote job board.

Some remote jobs offer retirement benefits too. They usually require that you work full time to get benefits, just as with most outside the home jobs.

If your remote job doesn’t offer retirement benefits, you can still set up an IRA for yourself and contribute to that from your income.

Start A Home Business And Use A SEP-IRA Or Individual 401(k)

A home business can be a lot of fun when you’re a stay at home mom. It also gives you more options to contribute to your retirement.

Running a home business means you can start a SEP-IRA or individual 401(k) for yourself. This may allow you to contribute more to your retirement than you could to a Roth IRA, depending on how much your home business earns.

The basic rules are that you cannot contribute more than 25% of compensation or $55,000 a year (as of 2018), whichever is less. The limits are adjusted for cost of living each year. Remember that this includes all contributions to a retirement account.

There are special rules to determine how you contribute to a SEP-IRA if you’re self employed.  It’s on the complicated side, and if this is an issue for you, talk it over with a tax professional.

night sky

Get Life Insurance For Both Of You

Life insurance doesn’t necessarily have to do with retirement, but it’s an important safety net for your family. Get it for both of you.

If the spouse who works outside the home dies, you get some money that will help you get through the financial side of the loss. If the stay at home parent dies, the money helps the family deal with the changes, such as a possible need for childcare that wasn’t there before.

But I Didn’t Have An Income! Why Will I Need One When I Retire?

Many stay at home moms and dads don’t feel a need to have a retirement account in their names. They trust their marriage and their spouse. Life is good. Death, disability, divorce, unemployment… these things don’t scare you.

But they should.

No one goes into a marriage assuming they will later divorce, but it happens to many. If the retirement accounts are all in one spouse’s name, splitting them can be complicated. It’s possible, but it’s not easy and some give up on it.

Never assume that things will remain the same forever. Even beyond the issue of divorce, it’s easier to have money in each spouse’s name in case one has to go into long term care. Life throws curve balls. Be prepared.

This is not a matter of trust. It’s about smart financial planning.

If everything goes well, it’s still good to have retirement accounts in both spouse’s names. You can contribute more to your retirement this way. Having more money available to you and your family in retirement is a very good thing.

If at all possible, don’t neglect the retirement planning just because you’re a stay at home mom or dad. The financial benefits to your family are too good to pass up.

Disclosure: Some of the links in this post may be 'affiliate links.' This means if you click on the link and purchase the item, I will receive an affiliate commission.

Last Updated September 24th, 2012

How Do You Start Your Work at Home Retirement Plan?

When things are going well as you work at home, you may not be thinking that much about retirement. It’s something most people hope to do eventually, and you definitely need to plan for it. This isn’t too easy when you’re self employed or have a work at home job without benefits. You have to figure it out on your own. How will you start your retirement plan when you work at home?

First and foremost, consider consulting a financial professional. That’s not me. I’ll give some general tips here, but for your own situation, a professional can give you better guidance.

The first thing to do is figure out how you’re going to put money aside. What can you take from your income to put away for the future?

If you’re just scraping by, sadly, that may not be a lot. Try to put some money away when you can. If you’re doing better, put aside more. If at all possible, you need to do this. You can’t be certain of where you’ll be at financially at retirement otherwise.

Don’t let your retirement savings mess up your current financial situation, of course. You may want to pay down any credit card debt, for example, as that usually carries a relatively high interest rate.

Now let’s look at some of the retirement plans available to individuals.

SEP IRA

A SEP IRA is a retirement savings account for people who are self employed.  You’re allowed to contribute up to $50,000 or 25% of your income, whichever is less, as of 2012. Tax publication 560 is useful in determining how much of this is deductible. These plans are relatively simple to open, and the high contribution limit makes them appealing. You don’t have to contribute at the same level each year, so you can base it on how well you did that year.

The SEP IRA is more complex, however, if you have employees. Your contribution to your own account could mean you would need to contribute to the SEP IRA accounts of your employees. Talk to your financial professional. You can also get more details from Fit Small Business’ article, SEP IRA Rules, Contribution Limits, & Deadlines.

Solo 401(k)

The Solo 401(k) is another good choice if you don’t have employees. Its contribution limits are
generous, and you don’t have to contribute every year. You can roll old 401(k) accounts into this one if you like.

However, if you have another job and you’re contributing to a 401(k) there, this might not be right for you. Contribution limits are for all 401(k) accounts you have, and the limits for employees are lower than the limits for employers (such as you, if you’re entirely self employed).

SIMPLE IRA

If you’re not looking to put away quite so much, a SIMPLE IRA may be a better choice. It was designed with small businesses in mind and can work well for self employed people with no employees. However, there is a set contribution, which may not be good if you want to vary how much you put in.

I know I’ve said it up above, but it bears repeating. Talk to your financial professional about which plan is right for you. I don’t know which one will work in your situation. A professional can help you figure that out. As soon as possible you should start saving for retirement so that those years are as comfortable as possible.

Disclosure: Some of the links in this post may be 'affiliate links.' This means if you click on the link and purchase the item, I will receive an affiliate commission.

Last Updated July 13th, 2010

How Vulnerable Are You Financially?

Most stay at home moms are proud of their status, and should be. It takes a serious commitment to be there all day for your family and rely on someone else’s income. That doesn’t mean you shouldn’t have plans for the many uncertainties in life.

This is something to discuss with your husband. You should have a plan agreed upon for the many issues that can happen to a family that relies upon a single income, such as the loss of a job, death or injury of either spouse. These aren’t fun things to think about but that means only that it’s all the more important to have a plan in place.

The stay at home mom or dad gives up a lot. It’s years of work lost, which has a major impact on one’s career. It’s less money for retirement. It’s falling behind in the field that you used to work in.

Stay at home parents should take the time to limit their financial vulnerability.

Stay at home parents should take the time to limit their financial vulnerability. It’s not all about finding a work at home job either, although that can help.

Continue Your Education

Keeping up with your field is important if you want to go back to work someday, especially if you worked in an industry that changes a lot. Take classes online, through a community college or technical school.

You don’t have to stick with whatever you have experience with, of course. You can use your time to study for the career you’ve always wanted.

Pick a course that will give you the flexibility to be there for your family. You don’t want your school time to take as much time away from your family as a career would if your goal was to raise your kids on your own.

Set Up a Retirement Account

Your long term well being is important to your family.

You don’t have to rely on an employer to have a retirement account. Include this as one of your needs when you’re a stay at home mom. Your long term well being is important to your family too.

This isn’t easy in many cases. It’s incredibly easy to neglect. Do your best.

Ideally this should be a part of your monthly budget. Have a certain part of your family’s income go into your retirement fund. Your spouse probably has one through work – don’t you deserve one too?

Start Working from Home

Yes, I said it’s not all about working from home, but we’re talking about not being financially vulnerable, not only for your own sake, but for the sake of your family. Even having a small home-based income is protection against bad times.

Even having a small home-based income is protection against bad times.

How dedicated you are to earning money from home depends on your needs. If your family needs the money now, you’re going to have to be very dedicated. If it’s more to keep your work skills up, you may not need to work so very hard at it.

Even if your at home income doesn’t equal what your family needs to get by, it’s going to be a help if times get rough. It’s something you may be able to build upon if your family suddenly needs that income.

If you’re planning on working outside the home as your children get older, take that into consideration when you work at home. Do things that will look good on your future resume.

If you’re planning on staying home longer than that, find something to do that you will love doing from home for the long run. Building a home business can be a lot of fun and you never know if it will take you somewhere.

With any luck at all, you’ll never need your financial backup plans. But wouldn’t you rather have them ready?

Disclosure: Some of the links in this post may be 'affiliate links.' This means if you click on the link and purchase the item, I will receive an affiliate commission.

Last Updated August 7th, 2008

What Financial Traps Await the Unwary Stay at Home Mother?

Most stay at home moms quickly find that they wouldn’t trade what they’re doing for the world. It can be very satisfying raising your family on your own rather than paying for daycare.

stay at home moms money

But it’s not all fun, even when you really enjoy being with your kids all day. And worst of all can be the financial traps that too many stay at home moms fall into.

1. Not saving for retirement.

This is one of the most common failures for stay at home moms, and it can have a tremendous impact on your later years, even if you only stay at home until your kids are all in elementary schools. And it only gets worse if you choose to stay at home the entire time you have kids at home.

There are options for stay at home moms to save for retirement. The first thing to do is to roll over any 401k money into Roth IRAs. This will give you more flexibility with the money. If you can’t afford to take a tax hit, take your time with this one.

You can also contribute to a Spousal IRA. These can be either a traditional or Roth IRA, and you need to have one. Try to contribute the maximum each year if your budget can afford it. You will be grateful in your retirement years.

2. Assuming daycare costs are completely gone.

Sure, once you’re staying at home you probably don’t HAVE to pay for any sort of childcare. But other expenses may take that money right back out of your budget.

How else to pay for swimming lessons, art classes, organized sports and other activities your children may be interested in? It may be difficult to find enough children for your own kids to play with regularly, and these classes can help you to get a bit of a break (even if you’re just sitting and watching them), and your kids get social time.

You may also choose to put your 3 or 4 year old child in a preschool program. I did this with my daughter, and while it was expensive it was very much so worth it. Makes kindergarten quite the relief, financially speaking.

3. What if…?

Many single income families aren’t ready for the big what-ifs in life. Like what if your husband loses his job? I’ve just gone through that one personally, and it’s a pain, even though I earn an income at home.

Do your best to have savings to cover at least 3-6 months of living expenses. This may not get you through the crisis, but it gives you time to figure out how to handle it.

And don’t forget that expenses can increase at such times. When my husband was laid off, rent wasn’t the most painful part financially speaking. Adding in the cost of COBRA coverage to keep our health insurance was.

And don’t forget that even when things are going well financially the car can break down, or the refrigerator, or the plumbing in your house turns out to be a complete mess. Have some money set aside for such emergencies.

4. Too much free time.

Once you’re at home there are a lot of temptations that you could either afford or just didn’t have the time for when you were working. You might decide to start painting in the house. Get seriously into your favorite crafts. Shop just because you have the time.

It’s nice to have time for these things, but if you haven’t planned for them they can seriously mess with your budget. Make sure you reassess your budget if this starts to happen to you. And don’t let it get out of control.

Disclosure: Some of the links in this post may be 'affiliate links.' This means if you click on the link and purchase the item, I will receive an affiliate commission.

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