Retirement Planning for Stay-at-Home Parents

retirement planning
Tips to Ensure You’re Prepared for Your Financial Future – Even if You Don’t Work Outside the Home

The decision for one parent to stay home with the children is a personal one, with your family’s values, lifestyle, and financial goals all playing a part. On the financial side, it’s a decision that often means making sacrifices, such as fewer family vacations or eating out less. While you may be able to build a budget that works for your monthly expenses, however, many couples fail to adequately plan for retirement savings.

Of course, you may choose to rely on one spouse’s retirement contributions, but it’s ideal to contribute to retirement accounts for both spouses. This becomes especially important if the working parent dies suddenly or becomes disabled, or in the event of divorce. Even if you’re planning to have one parent home just until all the kids are in school, it can easily mean 5-10 years out of the workforce, depending on how far apart your children are spaced, which means quite a blow to your retirement savings.

Below, we’ll discuss a retirement savings option for stay-at-home parents, as well as strategies to find the money to bolster your overall retirement security.

The Spousal IRA

IRAs are common tax-advantaged retirement savings vehicles, yet federal law prohibits you from contributing to one unless you have earned income. If you are married, however, you may open a spousal IRA for a spouse who is a stay-at-home parent who is not earning an income. The contribution limits are in line with other types of IRAs and the spousal IRA can be either traditional or a Roth. You have options when it comes to where to open your spousal IRA account, too. You can choose to open one yourself at a brokerage house using auto-contributions each month, or you can open an account at your bank or credit union.


SEE ALSO: Can $1M Give You a Good Retirement?

Finding the Funds to Make it Possible

If you’ve decided one parent should stay home with the children, it’s possible you’re already making many financial sacrifices – and maybe even living paycheck to paycheck. In this scenario, it may seem laughable to think about contributing money to a retirement account. One way to do it is to find a strategy to earn just a bit of income each month that you can earmark for your financial future.

Try these two options to earn a bit of income while staying home to focus on the kids.

Part-Time Work

The working world has changed quite a bit in recent years. While it was once necessary to work full-time to get retirement benefits, many companies will now allow employees to contribute to company 401(k) plans even if they work 25 hours a week or less. You can also open an individual IRA once you’re earning income and contribute that way, even if you’re just working a few hours each week.

The Gig Economy

If the idea of part-time work on someone else’s schedule won’t suit your family’s needs and goals, a stay-at-home parent might explore the so-called gig economy instead. It’s based on temporary, flexible, freelance jobs that you can work into your family’s schedule, doing as little or as much work as you’d like. Sites like Upwork, Fiverr, and Freelancer are great for writers, designers, IT professionals – even landscapers and professional organizers. Companies who use gig workers typically hire them as independent contractors for short periods of time, and you can usually complete the work on your own schedule.

When You Work Full-Time from Home

Sometimes, stay-at-home parents are actually work-from-home parents doing double duty. If you’re self-employed, an independent contractor, or a business owner working from home while also caring for your kids, make sure to prioritize saving for retirement. Although your schedule is likely to be incredibly busy, it’s important to take your retirement planning seriously.

If you’re self-employed, you may find that a SEP IRA or a Solo 401(k) are the right options for you. They were created with self-employed individuals in mind, and both offer distinct advantages, including easy set-ups and generous contribution limits.

Keep in mind that you should also be paying your self-employment taxes if you’re a freelancer or independent contractor. These taxes pay into the Social Security system so that you’ll continue to build benefits there.


SEE ALSO: Money Strategies for the Sandwich Generation

Final Thoughts on Retirement Planning for Stay-at-Home Parents

Having the ability to keep one parent home with the kids can be priceless when it comes to the practicalities of family life. However, it’s important that you don’t lose sight of retirement planning for both spouses. Saving enough for both of you will be a critical element in your overall financial plan, and it will provide you with more peace of mind, too.

If you’d like to make sure your retirement plan is on track, or you need help building one that will suit you and your spouse, contact us today for a complimentary discovery call. At Andersen Wealth Management, helping you meet your financial needs is our first priority. We would be delighted to help you and your family achieve your unique goals.