Retirement Planning…for Moms?

by MoneyBlogNewz

Post by Contributing Writer, Rachael

April 18th was tax day and most of us filed our taxes and moved on doing what we do every year without much thought. However, as a mom that has gone from corporate life to stay at home life I was thinking – about retirement!

There is an entire section when filing taxes that asks you about your retirement accounts and contributions.  As mothers, we often work without pay and don’t think twice about retirement. However, it is imperative for your financial future that you at least know the facts.  So here they are!

Spousal IRA

An IRA is an Individual Retirement Account. Each year the federal government allows a certain amount of money to be contributed to an Individual Retirement Account.  In 2010 that amount was $5000 for people under 50 and $6000 for people over 50. In order to contribute to an IRA an individual has to have income.  But what do you do if you are a stay-at-home parent with only your spouse’s income? Open a Spousal IRA.

A Spousal IRA is the exact same type of account as a regular IRA.  The word “spousal” just designates how the individual is allowed to contribute to the account. The working spouse’s income makes you, the non-income spouse, eligible to contribute to a Spousal IRA. In 2010 the contribution limits for a spousal IRA were the same as a regular IRA ($5000 or $6000, depending on age).

*Side note:  There are two types of IRA’s, Traditional and Roth. One is a pre-tax contribution and one is a post-tax contribution. This is a discussion for another day, but you can consult an accountant or financial planner to determine which account is best for you.

If you are interested in starting a Spousal IRA you can contact almost any brokerage firm to get started. If you need suggestions in your area, talk to an accountant or tax preparer you trust.

by foshie

At Home, But Employed (SEP IRA)

In the age of the internet, a lot of moms are earning their own income at home. There is an account that may be available to you as a self-employed individual: SEP IRA (Simplified Employee Pension IRA).

To be eligible for a SEP IRA you may be a sole proprietorship, partnership, corporation or nonprofit organization. The advantage of a SEP IRA is the possibility of a higher contribution than a Traditional/Roth/Spousal IRA.

For 2010 the maximum contribution to a SEP IRA is $49,000.  The contribution limit is based on a sliding scale and is determined by how you receive your income (W-2 or Compensation as Personal Income).

An accountant or tax adviser can help determine if a SEP IRA would be beneficial based on your income and company type.

At Home, No Spouse

If you are currently staying at home and have no income and no spouse, you still have options to save. You do not qualify for an IRA of any kind but you can still invest in interest-bearing accounts.

Interest-bearing accounts are financial accounts where you deposit funds and they grow at a given interest rate. Banks often offer interest bearing accounts in the form of Certificates of Deposit (CD’s), Savings Accounts, or High Yield Money Market accounts.

Some Interest-Bearing Accounts have a lower interest rate than a retirement account. Do not be discouraged! Saving for retirement should not be left to chance. Some action is always better than no action!

by DanBrady

Spousal Beneficiaries

Being a Spousal Beneficiary does not require you to establish an account.  Every retirement account requires the applicant to provide beneficiary information.  Have a discussion with your spouse and make sure that you are the primary beneficiary on any retirement accounts they may have.

Being a Spousal Beneficiary entitles you to the benefits of your spouse’s retirement account if they were to pass away. Many times a request for beneficiary is not completed when the account is initially opened. It is to your family’s benefit to make sure that all accounts have a primary and secondary beneficiary so that monies being contributed are not lost in the case of death.

Even though our jobs are never done, stay-at-home parents need to plan for their financial future. Take the time to create a financial retirement plan for both you and your spouse that allows for the most contributions now and the greatest benefits during your golden years!


I am currently not a registered financial professional.  There are rules, regulations and tax guidelines for all retirement accounts. Consult your financial provider to determine the best account and tax benefits and consequences for you and your family!

This post is part of Frugal Friday at Life As Mom.

Rachael shares financial tips from her kitchen table surrounded by her two active toddlers and her husband.  God has called her from corporate life into His grace as an at-home wife!  She shares about her passion for motherhood and life five days a week at To Be a Mom…

If you have a financial question or topic you would like us to discuss leave a comment or send us an email!

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7 comments to Retirement Planning…for Moms?

  • Brandy

    Great info, thanks.

    [Reply]

  • Great post! One thing I’d like to add is that an IRA can be opened almost anywhere – not just with a brokerage firm. It can be done at a bank, credit union, mutual fund company and in many types of different vehicles – mutual funds, CDs, bonds, etc.

    I think sometimes people with no financial experience can get scared off from “investing” because they don’lt know what a brokerage frim is or who to call, what the types of investments are, etc. For them, getting started by going to their local bank and opening an IRA in the form of a CD might be a good start. While it may not be the best investment, the first goal of getting people to save for retirement is for them to start putting money away. Once they start doing that, they can work on diversifying their risk, earning greater returns, etc.

    [Reply]

    Michele Reply:

    @Michele, Great tips, Michele. Thanks! :)

    Blessings,
    Michele

    [Reply]

  • For the longest time, I’ve had an IRA and Roth IRA set up for myself. I start a home-based business last year which is building more income this year. I didn’t realize that I could set up an IRA as a sole proprietor – definitely something that I will be checking out!

    [Reply]

  • bobcat

    I’m sorry if this is a stupid question….but why would I need or want a Spousal IRA if my husband has an IRA that he started after our marriage? Aren’t I eventually getting half of the money in that? (This question is also assuming that I am sure that IRA goes to me in the case of his death.) So would the Spousal IRA be in case of divorce or separation? I don’t see any other reason I’d need my own?

    [Reply]

    Rachael Reply:

    This is actually a GREAT question.

    Short Answer: Due to economy/inflation it is less likely that a single IRA will be able to sustain a married couple into their retirement years than it has been in the past.

    Long Answer: Increased life expectancy, depletion of social security and a rapid rate of inflation makes it much more difficult to save enough money to be able to retire at what was once considered “retirement age” (65). In the past (think our grandparents) people worked the same job for 25-30 years and received a pension equal or average of their salary alongside social security benefits. The years of companies offering pensions has passed and the burden of saving for a retirement that creates and equal or average benefit payout now falls to each of us individually.

    By opening a spousal IRA you and your husband can save double the money. This will likely increase the ability for the working spouse to retire before 70 yrs of age and will stabilize the amount of income that can be received during retirement. There may also be tax benefits for having two IRA’s reported on a joint tax return (see a financial advisor on this point).

    Side Note: My personal opinion is that this is a very personal decision and should be looked at based on your family situation. Do some research. What is you and your spouses life expectancy? What will your other savings and benefits be at retirement (401K, IRA’s, Personal Savings, Etc.)? What is your philosophy on retirement? Do you plan to retire at all or do you plan to pursue work to some degree until you are no longer able? This is a great conversation to have with your spouse and a great way to take a look at your long term plan and what your mission is for your life!

    Best wishes!
    -Rachael

    [Reply]

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