Retirement for a stay at home mom

SaveTheWorld2014 · June 2014

If this has already been discussed or is pinned somewhere, please let me know! And sorry. So I am a stay at home mom, I am also on disability so theoretically, I will always have that income. We are not legally married and therefore I am concerned about protection for myself (albeit I would be concerned even if we were married since we are both divorced). I will probably never be able to go back into the work force and I am just wondering about independent options versus through an employer. Truthfully, they all seem to suck and are overwhelming. Thank you for any thoughts!

Xstatic3333 · June 2014

I don't have any employer sponsored plan, and I contribute to a Roth IRA with Fidelity. Would that be an option for you? Also, do you and your SO have joint finances? If so, perhaps SO would be willing to help contribute to the account in addition to what you can contribute from your disability.

If you feel overwhelmed, go into the office and talk to someone when you sign up. They have good recommendations for where to get started and what to invest in. I'd look for a fund where the expense ratio is less than 1% and there are no yearly fees or anything like that.

Either way, whatever your budget is, I'd put away 15% into various retirement accounts. Whether it's 15% of your disability payment, for 15% of your household income spread between accounts for both of you. If that seems too high at first, start with what's comfortable and commit to going up a percent every few months.

I think it's really smart that you're looking into this! Since I've gotten into living more MM, the importance of retirement savings is my #1 takeaway.

Sisugal · June 2014

If you were married you could do a spousal Roth IRA.
I am not understanding what your divorced status has to do with anything - unless you are concerned about another failed relationship.
You do not qualify for a Traditional IRA as a single individual (non married) as the income must be earned

Xstatic3333 · June 2014

Sisugal said:
If you were married you could do a spousal Roth IRA.
I am not understanding what your divorced status has to do with anything - unless you are concerned about another failed relationship.
You do not qualify for a Traditional IRA as a single individual (non married) as the income must be earned

I *believe* disability is earned income.

http://www.irs.gov/Individuals/Disability-and-Earned-Income-Tax-Credit

I know she wasn't asking about the tax credit, but I assume earned income counts across the board. Correct me if I'm missing something.

hoffse · June 2014

I have no idea why this is underlined... sorry!

I think Xstatic is correct about disability, but you'd need to talk to an investment person to be sure. I think some (maybe all?) forms of disability are considered income. But most unemployment benefits are not considered income.

If you qualify, the Roth is by and large the best option. But the contribution limits are pretty low if it's your only source of retirement (just $5,500/year). I would also consider outside investments as well that you just mentally designate as "cannot liquidate until retirement for any reason." You'll end up paying capital gains taxes at the end, but the tax rates are actually lower than what you'd end up paying with a traditional 401(k), assuming the rates stay about the same. There are no contribution limits for general investments, so you can save however much you need that way.

brij2006 · June 2014

If I'm thinking correctly, disability is not taxable income. So you would not be able to do an Individual Roth IRA since there's technically no income to claim.

You would be better off trying to invest in a traditional IRA.

However, if your thinking about getting married, you would have a lot more options then.

hoffse · June 2014

^^Truth about getting married. Obviously it's not something to take lightly, but you get all sorts of perks with it.

A spousal Roth would be the easiest thing because your H's income will count as yours for the sake of the contribution restrictions.

CuriousKiddosMama · June 2014

I SAHM as well and we are able to contribute to an IRA for me based on DH's income. I don't know about any other options that would work for you other than like a money market account at a local bank or something like that. Otherwise 401Ks and anything that come out pre-tax you obviously have to be earning an income.

BlueBirdMB · June 2014

I would suggest getting married if you are worried about retirement. You can collect social security. My parents are just starting to figure this out and my mom was a a SAHM. She can collect social security herself at 62. At 67 when my dad can get full social security, she can collect half of his because they are married.

Yes, I believe disability is earned income, therefore you can have a traditional IRA, which I would suggest you start looking into. There are plenty of other retirement plans though, so call an insurance broker to discuss the options.

vlagrl29 · June 2014

A SAHM can also collect social security. My mom will be doing that when they decide to retire.

smerka · June 2014

The link above specifically says that SSI is not earned income. This article details the ways you can contribute to an IRA without a job, but Im guessing you don't qualify for any of these. http://www.forbes.com/sites/advisor/2011/05/31/4-ways-to-make-ira-contributions-without-a-job/ Your only other choice as a single person is to just start saving. There won't be any tax savings, because you probably aren't paying taxes now (assuming you are on SSI) anyway. I would talk to a financial professional about your options.

BlueBirdMB · June 2014

vlagrl29 said:

A SAHM can also collect social security. My mom will be doing that when they decide to retire.

Yes based on their own past income, but with her not working all these years, it probably won't be a lot. If she gets married, then she can collect half of her husband's at a certain age.

vlagrl29 · June 2014

My mom hasn't worked in years, but she can qualify for around $600/month in social security. It's not a ton, but better than nothing and my dad can still collect his too as well.

smerka · June 2014

You have to work 40 quarters or 10 years in order to collect your own social security. If you are married you can collect half of your spouse's. I think the OP might be eligible to collect some based on her first marriage, but there are rules. http://www.ssa.gov/retire2/divspouse.htm

Retirement for a stay at home mom

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