Stay-at-home moms devote themselves to their families. They happily take on the roles of nanny, educator, gourmet chef, accountant, maid, gardener and driver driver, without pay. Worries about retirement often bubble over on the back burner. Before you panic, consider how much money you may already have coming your way.
Keep Your Old Retirement Plan
Your old 401K should have been rolled over into an IRA. Leave this long-term retirement fund where it is.
Your Spouse's Retirement Investments
Before committing yourself fully to being a stay-at-home mom, women who are married need discuss retirement with their working spouses or partners. Your spouse should be investing in the company 401K with the intention of supporting both of you during retirement.
Where to Find the Money
- Sock away excess money from a monthly spending account into a savings account until you have enough to invest.
- Audit your family's expenses for a month to see where the money is really going. Cut back where you can and reformulate your budget to include retirement money.
- Check with the Social Security Administration (SSA.gov) to see how much money you are expected to receive upon retirement.
When to Work
Stay-at-home moms find themselves with an ever-evolving schedule, which changes with each child's birthday. During the first two years moms have down time while babies nap time, which enables them to do some quiet part-time work from home. When children are older (three to five), they can either go to daycare or preschool, giving you time to work or go to school. When children are in school full-time (five or six), you have more time to find a part-time or start your own business and earn some money for retirement.
Retirement Plan Options for Stay-At-Home-Moms
Some retirement savings options carry more risk than others, yet the earnings have the potential to be higher.
DRIPs
DRIPs are dividend reinvestment plans are are a long-term retirement option for stay-at-home moms with small amounts of money to invest. The DRIPs may be purchased directly from companies, including many familiar brand-name companies, or through a transfer agent or brokerage firm. The companies pay dividends, which are automatically reinvested into your account, allowing money to accumulate slowly and steadily.
Stock Market Investments
Open an account with a brokerage firm, online or in person. Invest in a combination of bonds, stocks and mutual funds. The more diversified your long-term investment portfolio is, the more stable your retirement fund will be.
Retirement Funds
As the stay-at-home parent, you are giving up the benefits of investing in a pre-tax company-sponsored 401K plan. Instead, you can open an IRA which allows you to make contributions from your earnings and defer taxes until you withdraw it (which should be at a much later date).
Direct Stock Purchase Plans
A number of well-known and large companies have direct stock purchase plans with nominal fees and starting investment amounts of $250.
Sources
IRS, http://www.irs.gov/retirement/participant/article/0,,id=188232,00.html
Social Security Administration, http://www.ssa.gov
IRA.com, http://www.ira.com/faq/faq-02.htm
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