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Moms and Retirement Planning

How to balance work, kids and retirement savings


Why would moms need to think differently about retirement? Because moms are so used to taking care of everyone else, they can sometimes neglect themselves. When a sacrifice is necessary, mom is usually the first to volunteer her share. We aren't going to think about our futures until we're sure the futures of our sons and daughters is secure, or at least on the right track.

To be sure, dads do a lot of the same. The difference is that moms more often give up work (or full-time-plus-benefits type work) for some period of time to tend to their young children. Those moms who do go back to work may cut back on the 401(k) to make room in budget for the family. I'll admit to putting my own 401(k) contributions on pause during maternity leave. I just didn't know what the future would bring and wanted to save every penny. That's how moms think. And it can cost us.

But it doesn't have to. Stay-at-home moms, work-at-home moms, single moms, corporate professional moms, and all sorts of other moms can all have a dream retirement without moving in with the kids.

Future Moms: Start Saving for Retirement While You Are Working

You know you want to have kids one day, and would like to stay at home mom with them when the time comes. If that's the case, there is extra urgency to fund your 401(k) now. The best time to start is while you are young, and even if you stop contributing in the future, the money that's in there will continue to grow over time. Even if you plan to continue working after you have kids, putting money away today is a first step to taking care of yourself when you are a grandmother. 

Stay-at-Home Moms: You Deserve an IRA, Too

Even if you don't earn income for the hard work you do, you should still have a retirement plan. Nonworking spouses can collect Social Security on the working spouse's benefits, even if you are divorced or widowed. But since none of us knows the fate of Social Security, it's best to have a back-up plan. Have your spouse contribute to a Spousal IRA on your behalf. Contributions grow tax-deferred until retirement, and you may even qualify for a tax deduction on the money that's put into your IRA.

Work-at-Home Moms: Get a Self-Employed IRA

How to balance kids, work and retirement savings.
(c) Getty Images

In an attempt to balance kids and career, you have started a business that allows you to work at home. It's feels good to be your own boss, and even better if your company offers a small business or self-employed retirement plan. 

The great thing about self-employed retirement plans is that some offer higher contribution limits than traditional IRAs and 401(k)s, especially if you, the employer, give you, the employee, a matching contribution. Plus, in most cases, you can deduct the full amount you contribute from your next income tax return. In other words, you don't have to pay taxes on the income that you save. Anyone who has paid self-employment taxes can understand the benefit of this type of deduction. 

Working Moms: Don't Sacrifice Retirement Savings for College

If you continue to work outside of the home at a job that comes with a retirement plan and an employer matches, don't forgo those 401(k) contributions to save a little more in junior's college fund. Of course, the education of your children is important, and you can and should create an educational savings goal. But your retirement comes first. Take care of your (pre-tax!) 401(k) contribution before you make a contribution to that 529 plan or other college savings fund.

When the time comes to your kids to head to school, remember: the retirement funds are off limits to pay for college. Your kids will have long careers ahead of them, with plenty of time and opportunity to pay off student loans. But sacrifice your retirement money and you'll have to work extra diligently to replenish those funds before you retire.

Moms of Adult Children: Time to Add a Roth IRA

Your kids are grown and on their own? It's time to really take care of yourself by contributing above and beyond what you are already saving for retirement. If you qualify, a Roth IRA is a great place to save. There's no upfront tax deduction, Roth IRA contributions are made after the money has been taxed. But the money is invested tax-free, and it's tax-free even when you take it out (you just have to meet the Roth IRA withdrawal rules).

Bottom line: We all invest a lot of time and money in our children. But if you think that investment will pay off big and put you on Easy Street one day, don't bank on it. Your kids may get good jobs and find tremendous success. But while some people become so successful they can set mom up in a mansion, most do not. You may not even get a "Thank you." But you don't mind, you'll happily do it anyway. You're a mom.

The content on this site is provided for information and discussion purposes only. It is not intended to be professional financial advice and should not be the sole basis for your investment or tax planning decisions. Under no circumstances does this information represent a recommendation to buy or sell securities.

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