Do Stay-at-Home Parents Need a Retirement Plan?

Whether you are a parent of a child with special needs, have a chronic illness or disability yourself, or simply prefer to stay home and care for your family, deciding to be a stay-at-home parent is a big decision. Financially speaking, it can mean fewer indulgences, like family vacations or eating out, and it may also require a more rigid budget. Because of that, stay-at-home parents must approach retirement planning carefully. Even if you only plan to be out of the workforce until your kids are in school, you’re still looking at approximately 5-10 years of lost income, and if you are caring for a child with special needs, your loss of income could be even greater (add link).

No matter how you came to be a stay-at-home parent, we believe retirement planning is crucial. Here are some strategies that can help you boost your overall retirement security.

The Spousal IRA

One of the most common vehicles for retirement savings is the IRA, which carries significant tax advantages. However, federal law prohibits anyone who doesn’t have earned income from contributing to one. Fortunately, for married couples, working spouses can open spousal IRAs for stay-at-home parents who are not earning income. These IRAs can be either traditional or Roth and the contribution limits are generally in line with other types of IRAs. You also have a variety of options pertaining to where you can open your spousal IRA, whether that’s a brokerage house, a bank, or a credit union.

The Importance of Estate Planning at Any Phase of Adult Life

Special needs planning requires a long-term financial plan that takes into account special needs government benefits, which you can maximize in four ways.

Finding Extra Funding for Retirement Savings

For some stay-at-home parents, the idea of finding extra money to contribute to another IRA may seem impossible with only one parent working. If you’re looking for ways to earn extra income while staying home and focusing on the kids, here are two options you can try:

Part-Time Work

In light of COVID-19, the workforce has changed quite a bit. Now more than ever, working from home has become a very real option for employees who can’t make it into the office for a traditional 9-5 job. Additionally, many companies now allow employees to contribute to a company 401(k) plan even if they’re working fewer than 5 hours a week. Finding a part-time job that allows you to work from home can be a great way to stay home with the kids while also bringing in additional income. Even if the job you find doesn’t offer a 401(k) for part-time employees, once you’re earning the income you can open an individual IRA and contribute that way.

The Gig Economy

Along with growing work-from-home options, the gig economy is also becoming more flexible and a real option for stay-at-home parents with retirement planning needs. Jobs in this industry are temporary, flexible, freelance jobs that you can easily fit into your family’s schedule, working as little or as much as your situation permits. Typically, companies that use gig workers hire them as independent contractors for short periods of time, and you can usually complete the work on your own schedule if you’re meeting overall deadlines. If this is something that sounds promising to you, there are many websites where you can begin looking for freelance work. Consider using any income you make from these gigs to support your retirement planning needs.

The True Cost of Supporting Your Special Needs Child

Raising a special needs child is more expensive than raising a neurotypical child, meaning it’s even more important for you to plan for your financial future.

Working From Home for Stay-at-Home Parents

Some stay-at-home parents are already working in some flexible manner. If you are, or you’re planning to search for flexible work like the options described above, we think it’s crucial that you prioritize retirement planning – no matter how busy or overwhelmed you may feel at times.

If you’re self-employed, you could look into a SEP IRA or Solo 401(k) to see if they’re the right option for you. They both offer distinct advantages, such as easy set-ups and generous contribution limits that can help you boost your retirement savings while you work.

If you’re a freelancer or independent contractor, make sure that you’re paying your self-employment taxes, as they pay into the Social Security system – which you may come to rely on in retirement.

Retirement Planning is for Everyone – Even Stay-at-Home Parents

Having the opportunity to keep one parent at home with the kids can be priceless in terms of the benefits it brings to your family life, especially if you are caring for a child with special needs. However, it’s imperative that both parents are making efforts toward retirement planning. Saving enough to support yourselves in your golden years is foundational to your overall financial plans.

At Aviance Capital Partners, offer personalized wealth advice and investment solutions for you and your family and we also offer customized life-planning services for families with special needs. If you’d like professional guidance in strengthening your retirement plans for your family’s unique situation, please contact us today for a complimentary discovery call.

 Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser located in Naples, Florida. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. The effectiveness and potential success of the retirement planning strategies discussed depends on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client’s other engaged professionals, and market conditions. The information provided is general in nature, which should not be construed as specific advice tailored to an individual reader. ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific financial, legal or tax situation. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level. Additional information about ACP, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and its Form CRS is available upon request and at https://adviserinfo.sec.gov/firm/summary/146597.