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How to Retire as a Stay-at-Home-Mom

Photograph by Twenty20

There’s a lot of talk in the media about the financial impact of taking time off work during your maternity leave, but what if you’ve made the decision to stay home with your kids full time?

There are a number of retirement options for SAHMs, but regardless of which one you choose, it’s best to start as early as possible in order to maximize compound interest. Not only that, you’ll want to make sure that you are protected in the unlikely event of a divorce and to ensure that you’re listed as your husband’s beneficiary on any retirement accounts or life insurance policies.

So, SAHMs, here are a few things to remember when it comes to retirement.

How Much Do You Need?

That depends on a number of factors, but most argue you should aim for 70-100 percent of your current monthly expenditures.

To determine how much you would then need to retire, you can use a number of free tools online. Personally, I found the one at NerdWallet easiest to use.

Traditional Retirement Accounts

I asked Priya Malani, the founder and CEO of Stash Wealth, what her advice for a SAHM would be. Her answer: traditional retirement accounts.

Priya pointed out that technically, your spouse’s retirement account will provide for your retirement, unless there’s a divorce. Just make sure that you are listed as the primary beneficiary on the policies. In case of divorce, you may still be able to receive some benefits, unless there is a prenup or postnup specifying you have no claim to your partner’s assets.

She also mentioned that if you have no earned income, your husband can contribute to a Spousal IRA (either Traditional or Roth) on your behalf, as long as you file your taxes jointly. The benefit is that the policy will be in your name.

If you have a side-hustle or are self-employed, you can open a SEP-IRA. As long as you’re the only employee, it’s pretty straightforward and the benefit is the large contribution limits. You’re able to stash away up to 25 percent of your pre-tax earned income, capped at $55,000 for 2018.

Finally, Priya asks all her clients if there are any old 401(k) plans they might have from previous employers. Those should be combined into a traditional IRA and streamlined to match your retirement plan.

There are a number of retirement options for SAHMs, but regardless of which one you choose, it’s best to start as early as possible in order to maximize compound interest.

What About Social Security?

Most moms are eligible to some Social Security income, but even at its maximum payout—just over $2,500 for those who contributed the maximum amount for 35 years—it may not be enough to cover your living expenses.

The spousal benefit is 50 percent of your husband’s or ex-husband’s income and you can only receive the latter if you were married for more than 10 years and did not remarry prior to 60.

If you had prior contributions, but didn’t work 35 years, all non-working years will be calculated as non-earning, drastically lowering your income level. But you will be able to take both your spouse’s and your own social security income.

Are There Any Other Options?

Of course there are. While writing this article, I ran my own numbers through the retirement calculator and discovered that the rental income from our first house will pay for a big chunk of our living costs. By then, the mortgage will be paid off and the house will have appreciated, so if we need to sell it, we could invest that money.

Others have also recommended investing in a life insurance policy with cash value. While its cash value growth is slower than that of stocks and retirement accounts, it does come with a few benefits. Most policies have a guaranteed 0 percent rate, meaning if the stock market crashes, you won’t lose the value in your account and you can take money out of the account without penalization (unlike retirement accounts). The policies also provide early access to the cash value if you become sick or disabled.

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