Being a stay-at-home parent is an incredibly important job. You fill many important roles: caring for your children, keeping up the house, and managing your family’s calendar. Unfortunately, stay-at-home parents are ineligible for many of the same retirement savings vehicles as working parents. It’s hard to get a stay-at-home mom retirement plan and 401(k)s, nor the income to contribute on your own.
The good news is that there are still a handful of steps you can take to save for retirement and prepare for a comfortable financial future.
Steps You Can Take as a Stay-at-Home Parent
Participate in the Budget and Retirement Planning Process of the Family
Just because you aren’t the primary earner in your family doesn’t mean you can’t play an important role in the financial planning process. It’s critical that you have a say in your family’s financial decisions.
Women most often manage the day-to-day spending decisions in their families. As a stay-at-home mom, it’s likely that you’re planning many of the purchases for your children and home. For you to effectively do that, you need to be involved in the budgeting process.
It’s also important to make sure you participate in the retirement planning process. Women tend to live longer than men, meaning wives often outlive their husbands. It’s important to voice your opinion and ensure your retirement plans work in both of your best interests.
Have Your Own Checking or Savings Account
As a stay-at-home parent, there’s a good chance you’re financially dependent on your spouse. You may have a joint bank account where your family’s monthly income is deposited and from which you do all of the spendings.
But you should also consider having your own checking and savings accounts in your name. You and your spouse can discuss a fair amount for you each to get into your personal accounts. As a stay-at-home parent, you’re contributing equally to your household, so you should share the income evenly.
Having your own bank account allows you to spend on yourself without guilt or judgment. And I think we can all agree that it’s especially important for full-time parents to have the chance to treat themselves. But that money can also play other important roles, such as helping you stay afloat in the event of a divorce.
Keep Your Credit History Healthy
It often happens that when one spouse earns the income, their name is the only one on the family’s assets. This includes any financing such as mortgages, auto loans and credit cards.
It might make sense to put those accounts in the name of the spouse with a regular income. But doing so means you’re not able to build your own credit history. A credit score shows lenders how responsibly you handle debt. If you’ve never had credit accounts in your name, you won’t have much credit history to show.
There may come a time in your life when you need a solid credit score. Perhaps it’s divorce or your spouse passing away before you. But there come a time when you can’t rely on your spouse’s income or credit score.
To get started, visit annualcreditreport.com to see your current credit report. You can also use a tool like Credit Karma to see your credit score and get tips for how you can boost it.
Build Long-term Savings for Your Retirement
As a stay-at-home parent, you don’t have access to the savings vehicles that many people rely on to prepare for retirement, such as a 401(k) account, traditional IRA or SEP IRA. The good news is that there are still options. And some are specifically designed for stay-at-home parents.
While you may not be able to contribute to a regular IRA without a job, that doesn’t mean money you’ve already invested can’t continue to earn money. When you leave a job, you have the option of rolling your 401(k) into an individual retirement account. If you’ve contributed to a 401(k) in the past, roll that money into an IRA and watch it grow, thanks to compound interest.
A spousal IRA is an individual retirement account designed to allow non-working spouses to save for retirement as long as their spouses earn an income. It’s identical to any other traditional or Roth IRA except for the various work requirements. Individuals can contribute up to $6,000 annually to a spousal IRA ($7,000 if the spouse is at least age 50). This means that you and your spouse can contribute up to $12,000 to your two IRA accounts.
Know the Retirement Benefits for You as a Stay-at-home Mom
As a stay-at-home parent, it’s important to understand whether you’ll be eligible for retirement benefits through the Social Security program. In most cases, Social Security benefits are based on the income you earned throughout your career.
- To be eligible for benefits, you must have worked for at least 10 years.
- Your benefit amount will be based on the amounts you earn during your 35 highest-earning years.
- As a stay-at-home, there’s still a good chance that you’ll spend at least 10 years in the workforce, thanks to working before and after raising your children. But even if that’s not the case, spouses who either didn’t work or had low earnings can get up to half of a retired worker’s benefits.
- Finally, you may get benefits if your previously working spouse dies — this is known as survivor benefits.
Consider Using an Investment Professional
If you don’t feel confident in your ability to ensure a comfortable retirement for yourself, consider hiring a financial professional. They look at your situation, including your existing retirement accounts and your prospective Social Security benefits. Then they advise you on what other steps you should be taking to prepare for retirement.
Further Reading: Investing for Women
Keep Yourself Busy as a Freelancer or Part-time Employee
As a stay-at-home parent, you still have the opportunity to bring in some income. You may find that you have some downtime, perhaps while your children are napping or in school or after they’ve gone to bed. If you don’t want to return to the workforce full time, you can use your spare hours to work as a freelancer or part-time employee.
There are many benefits to doing this.
- First, you bring in a bit of extra money that you can use to fund your retirement account.
- Next, you accrue Social Security credits, which will help you receive benefits during retirement.
- Finally, when your children grow up and you’re ready to return to work, you can use your freelance or part-time work as a launchpad to start or continue your career.
The Bottom Line
As a stay-at-home parent, you’re focused on raising happy and healthy children. Unfortunately, this often means forgetting to plan for your own future. Additionally, as the non-income-earning spouse, it’s easy to feel as if you aren’t as entitled to your family’s household income.
But remember that as a stay-at-home parent, you’re contributing as much to your household as your working spouse. Your partner should want the best for your future, which includes allocating some of the household income to building a retirement nest egg for you.
It’s never too late to start planning. Even if you haven’t opened a retirement account yet or started saving, now is the time to do it.