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How to Prepare for Retirement as a Stay-at-Home Spouse

Stay at home parent needs help planning for retirement

6 Retirement Planning Tips

A common misconception is that if you’re not working outside the home, you’re not eligible to save for retirement. In reality, a stay-at-home spouse can have a significant impact on a couple’s retirement savings. Here are six tips to help you prepare for retirement as a stay-at-home spouse.

#1 – Establish a financial plan.

It can be difficult to take action to achieve financial goals without a plan in place.

A comprehensive financial plan is essential to growing your wealth, avoiding potential pitfalls and remaining on track toward achieving your goals. A plan can help increase your level of confidence in making financial decisions and help ensure your family will be provided for in unexpected circumstances. Additionally, a plan puts you in control of all aspects of your finances and provides you with actionable strategies to address the challenges you face, such as saving for retirement as a stay-at-home spouse.

For all these reasons, establishing a financial plan should be the first step you take toward establishing financial goals and a savings strategy.

#2 – Focus on paying off debt.

High-interest debt, such as credit card balances, can make a big impact on your ability to save for the future. Interest charges and late fees can add up and quickly result in debt becoming unmanageable, so it’s important to pay these balances off before taking steps to save.

Two effective strategies for paying off debt include:

  • The snowball method – This method involves paying off your smallest debt balance as quickly as possible, then moving on to the next-smallest debt. The benefit of this approach is it can help you gain a sense of accomplishment as you knock out one loan after another.
  • The avalanche method – Using this method, you begin paying on whatever loan has the highest interest rate. Once that loan is paid off, you move on to the loan with the next-highest interest rate until all loans are paid off. This approach allows you to pick up speed as your go, because as you pay off each balance you’ll reduce your interest payments, which can allow you to pay off your debt in less time.

#3 – Establish an emergency fund.

Often, high-interest debt results from unexpected expenses you’re unable to cover from normal cash flow, such as a job loss, medical expenses or an emergency home repair. In a household with a stay-at-home spouse and only one income, it’s important to have at least three to six months of living expenses saved in a short-term, liquid emergency fund that’s available to cover any unexpected expenses. Having immediate access to funds can help you avoid taking out high-interest debt or tapping into your retirement savings in an emergency.

It can be helpful to keep your emergency fund at an account outside of your primary bank so that you’re less tempted to access the funds for non-emergencies.

#4 – Save in a spousal IRA.

Spousal IRAs are retirement savings vehicles specifically intended for non-working or part-time working spouses who would otherwise not have access to a qualified retirement account. A stay-at-home spouse may have the ability to contribute to a spousal IRA if he or she files a joint tax return with a spouse that has taxable compensation. Both traditional and Roth spousal IRAs are available, and the 2024 annual contribution limits are the same: $7,000 for those under age 50 and $8,000 for those age 50 and older.

If you decide to make spousal IRA contributions, it’s important to confirm you meet income eligibility (for Roth IRAs) or the requirements to deduct your contributions (for traditional IRAs).

#5 – Increase contributions to the working spouse’s 401k.

Although retirement accounts are held in individual spouses’ names, funds contributed during the marriage are considered marital assets, meaning they’re generally considered the property of both spouses. Given this, it’s beneficial for couples with a stay-at-home spouse to maximize contributions to the working spouse’s employer-sponsored retirement plan.

In 2024, individuals who haven’t yet reached age 50 can contribute up to $23,000, and those age 50 and older can make an additional $7,500 catch-up contribution for a total contribution of $30,500. At a minimum, it’s important to contribute at a rate that allows you to qualify for the full employer matching contribution.

If cash flow doesn’t allow you to contribute the maximum to start, consider raising your deferrals by 1% to 2% each year. You probably won’t even feel the impact on your take home pay, yet these small increases can make a big difference in the balance you accumulate over the long run.

#6 – Save in a taxable account.

Once you’ve saved the maximum in your 401k and spousal IRA, consider saving additional funds in a taxable brokerage account. While 401k and IRA assets have limitations on withdrawals prior to retirement, funds in a taxable brokerage account are accessible at any time. In addition, saving in a variety of retirement accounts with different tax treatment (e.g., taxable, tax-deferred and tax-free) provides you with maximum flexibility to structure a tax-efficient withdrawal strategy in retirement.

Your wealth manager can help you invest in a diversified portfolio that meets your needs and is in line with your goals as well as implement proactive tax management strategies to help minimize your tax exposure over time.

Could you use some help preparing for retirement as a stay-at-home spouse? Creative Planning is here for you. Our experienced wealth managers support you with custom strategies specifically designed to help you achieve your retirement goals. To learn more, schedule a call with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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