Retirement Planning for Stay-at-Home Moms

Five million women in the U.S. are stay-at-home moms.1 Some stay out of the workforce for a few years, while others may be at home for decades. But while stay-at-home mothers may not be heading to the office every day, that doesn't mean that they don't need to think about retirement.

Making Retirement Planning a Priority

If you're busy raising kids and running your family's household while your spouse brings home a steady paycheck, you may think that retirement planning isn't really your concern. But that's simply not the case. Retirement costs are rising, and it's important to take steps today to ensure that you, and your family, can enjoy the lifestyle you want in the future. In fact, when families crunch the numbers to determine if mom can stay home, lost retirement contributions, as well as a possibly lower Social Security benefit, should be included in the equation.

Those women who decide that staying home is the best option should also think about what they'll do about saving for retirement. As a stay-at-home mom, you won't get pensions or access to a 401(k) with employer matching contributions but there are still steps you can take to plan for retirement. [Tweet "Just because you're not bringing home a paycheck doesn't mean that you should stop saving for retirement."]

Four Ways to Save for Retirement

  1. Don't forget about existing retirement accounts. If you contributed to a 401(k) or other employer-sponsored retirement plan before you stopped working outside of the home, make sure that you roll over those funds—don't leave the money sitting with your old employer's plan or, worse, just cash out the account (which will result in penalties). While you won't lose your money if you leave it in your previous employer's plan, rolling the funds over into an IRA will give you more control over investments and make it easier to contribute in the future.
  2. Consider a spousal IRA. Spousal IRAs are a tool that allows you to contribute money to a tax-advantaged retirement savings account, even if you don't have earned income. (To contribute to a traditional or Roth IRA, you must have earned income.) As long as you and your spouse file a joint tax return, you can make a deductible contribution of up to $5,000 to a spousal IRA each year (subject to certain income limits and other rules). Spousal IRAs can be an excellent tool to accumulate additional retirement savings, even if your spouse is participating in an employer-sponsored retirement plan.
  3. Set up an individual 401(k) or SEP IRA. Many stay-at-home moms run home-based businesses or freelance on the side. If you have this kind of income, you may be eligible to set up an individual 401(k) or SEP IRA, which will allow you to save some of your earnings for retirement. How much you can contribute to these accounts depends on your income, but it may be as much as $50,000 per year. Saving for retirement by working for yourself can bring other benefits as well. Self-employment can help you keep your skills fresh and build contacts, which can make it easier to find a job if you do decide to re-enter the workforce at some point.
  4. Maximize your spouse's contributions. Is your spouse contributing as much as he can to an employer-sponsored retirement plan? If not, then it may make sense to increase deferrals so that as a couple you are saving as much as possible for retirement.

As a stay-at-home mom, caring for your family is your biggest priority. But don't forget about taking care of yourself, and your retirement. Planning today can help you enjoy the life you want in the future.

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