How to Save For Retirement as a Stay at Home Mom

There are a lot of benefits to having one parent stay at home. When you make the decision to sacrifice that additional income it doesn’t mean you should stop saving for retirement.

In 2015, Transamerica found 75 percent of homemakers believe that their spouse or partner’s income will be “very” or “extremely” important to them in retirement. Even if you and your partner’s subscribe to the “our money” concept, life happens. Divorce, disability and death can all leave you in an uncomfortable position later on in life.

Taking time out of the workforce to care for children is a big decision that can leave many women at risk of not achieving a financially secure retirement. Many stay at home mom’s end up with fewer lifetime earnings, savings and retirement benefits.

There shouldn’t be a cost for staying home to care for your children. Here are a few ways you can contribute toward retirement as a stay at home mom.

1. Work from home

Find a work at home job that will allow you to earn extra income. Since stay-at-home moms don’t “get” retirement you can become a work at home mom, freelance or even start your own business.

If you’re self-employed you have several options available to you such as an IRA (Traditional or Roth), Solo 401K (Independent 401K), SEP IRA and SIMPLE IRA.

2. Spousal IRA

A spousal IRA is not a joint account, but rather a separate IRA set up in the non-working spouse’s name. If you and your partner file a joint return, you may be able to contribute to an IRA even if you did not have taxable compensation as long as your spouse did. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return.

The working spouse can contribute to an IRA for a non-working spouse, up to the maximum annual limit which as of 2019 is $6,000. This will double your retirement savings and help you save tax efficiently.

3. Health Savings Account (HSA)

The money you put into an HSA is tax deductible. You can contribute up to $3,500 if you have single coverage or up to $7,000 for family coverage. The contributions grow tax-free and can be withdrawn tax-free to pay for qualified medical expenses. If you withdraw money for non-medical expenses before 65 you are subject to income tax plus a 20% penalty. After 65 you’ll no longer be subject to the 20% penalty.

If you’re not planning to use your HSA for medical expenses and are saving it for retirement it’s important to know that not all HSA’s are the same. Some work as a savings account and offer interest. With inflation, you may end up losing money long term. Ideally, they are similar to a 401(k) or IRA and let you invest money in mutual funds. Know what your investment options are and if they require a threshold to start investing.

4. Keep Saving

It’s important to maintain your financial identity no matter how long you plan to stay at home with your kids. Set up monthly automatic contributions to your own savings account. Consider opening a high yield savings account. Having cash savings will give you financial security and the freedom to live life on your terms.

5. Invest in the Market

Set up an automatic contribution to an investment account. No matter how big or small. It all adds up. I started with a Vanguard S&P 500 Index fund. I look at the money I’m investing as money I could have spent on a pair of jeans or shoes. Once I invest it, it’s gone to me. This also means I’m not emotionally tied to the ups and downs of the market.

If you’re new to investing spend some time educating yourself before jumping in. Anyone can invest! Everyone has a different strategy and threshold to risk. Figure out what you’re comfortable with.

6. Invest in Real Estate Rentals

Investing in real estate rentals can be a lucrative way to diversify your retirement income. As rents and the value of your property continue to rise so should your income. Real estate rentals can provide a steady and predictable income along with tax benefits for your retirement. You can create financial security for both you and your partner. If you’re new to investing in real estate boost your knowledge and skills by attending seminars and reading books on investing in real estate.

Whatever methods you choose to save for retirement know that your financial security in retirement is just as important as the value you’re providing your family by staying home.

Do you have any methods you use to save for retirement as a stay at home or work at home mom? Leave your comments below!

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How to save for retirement as a stay at home mom