Stay-at-Home Spouse? 5 Ways To Not Get Left Behind For Retirement

homemakers-are-not-off-the-hookBeing the stay-at-home spouse isn’t easy. When it comes to securing your financial future, it’s too easy to get left behind.

But it doesn’t have to be that way.

Whether the spouse at home is a “he” or a “she” (although over 80% are female), it takes some special knowledge and a little extra effort to make sure your financial needs are addressed.

Why staying at home may mean being left out

More than half of stay-at-home spouses have absolutely no retirement strategy at all, according to a new survey by the Transamerica Center for Retirement Studies and the Aegon Center for Longevity and Retirement.

Stay-at-home spouses are in a particularly vulnerable situation, observes Aegon. They spend their days performing unpaid work at home, and may never return to full-time or formal work in the workplace. By staying at home, they can lose out on valuable government and employer benefits like Social Security or a 401(k). Stay-at-home spouses are financially dependent on their spouses or partners during normal working years, as well as in retirement.

5 ways a stay-at-home spouse can keep up

Take a leading role in your family’s retirement planning. Almost 1/2 of stay-at-home partners don’t know if they’re prepared or not for retirement, so they worry about having enough. Only 11% of homemakers have a written retirement plan. Here’s the worst part; they may be counting on their spouse to plan, and he or she might be equally clueless. Not that long ago, we had a call from an older couple who needed help with their finances. The stay-at-home wife had always left the money details to her husband’s care. When they came in the office to meet, we discovered the sad truth. All the money had been spent down, and they had only $500 between themselves and ruin.

Buff up your financial chops by acting as Family CFO. With many of the couples we work with, the stay-at-home wife is the family Chief Financial Officer (CFO). She’s the one who pays the bills, keeps everyone on track, and makes important spending and investment decisions. That leaves her partner to focus on work outside the home. Even if you’re not interested in taking over the financial reins on a permanent basis, volunteer to handle at least one aspect of the family finances for a couple of months. Personal finance is a language everyone needs to speak for their own protection.

Plan for divorce or widowhood. It’s a sad commentary on modern life, but the non-working spouse needs to have a backup plan in case of divorce or the premature death of the working spouse. You can’t just close your eyes and hope for the best. It’s up to you to make sure your retirement needs are covered; don’t assume anyone else will take care of it for you. Our client Carol (not her real name) was widowed and left with two teenagers to support. At the time of her husband’s death, she wasn’t working outside the home or trained for any particular career. Her husband’s life insurance was minimal. How on earth could Carol support herself and her children up to retirement and beyond? Carol was able to piece it together by combining part-time work, Social Security benefits, and the husband’s workplace 401(k) that we invested for long-term retirement growth. She’s making ends meet, but a little advance planning would have made their lives easier.

Set an example for your own children, especially your daughters. Stay-at-home spouses with no retirement strategy are not just hurting themselves, says Catherine Collinson, who oversaw the Transamerica and Aegon study. “They also risk sending negative messages to the children they are caring for,” she says. Children learn about personal finance by watching their parents. Parents can set a positive example by showing the importance of saving for future goals, teaching value-based spending, and being financially responsible.

Contribute to your own retirement accounts each year. Even non-working spouses can contribute each year to their own Traditional or Roth IRA, as long as the working spouse makes enough to cover the amount of the combined retirement contributions. For example, if a 40-year-old husband earns $75,000 at work, and deducts $10,000 for his workplace 401(k), both he and his spouse can still contribute $5,500 each year to their Roth IRAs. Plus, if the stay-at-home spouse has any kind of business income of her own, she can consider setting up her own retirement plan with even higher contribution limits.

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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