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The Most Forgotten Financial Advice for Military Spouses

The Most Forgotten Financial Advice For Military SpousesToday, I stumbled across this article at CreditCards.com, 6 personal finance tips for military spouses.   While these are important, they're missing my most important financial advice for military spouses:

Military spouses must build their own retirement savings.

Well, to be more accurate, everyone needs to build his or her own retirement savings.  Male or female, civilian or military, employed or not, young or old, every person must be building some sort of retirement assets in their own name.

The "in your own name" part is the key.  My husband has served in the military a long time, and so his military pension is going to be relatively significant.  In theory, that will benefit me in retirement.  However, I can't rely on that. It is essential that I also have some retirement funds that are just mine.

If You Are Working

If you have a job working for someone else, you have two options:  an Individual Retirement Arrangement (IRA) or your employer's plan.  In a perfect world, you'll contribute to both. You should choose your employer's plan if the company matches a portion of your contributions.  No company match? An IRA may be a simpler choice, especially if you anticipate changing jobs frequently.

If You're Self-Employed

Self-employed individuals can open a SEP IRA, Simple IRA, or Individual 401(k) in addition to a regular IRA.  A small business is a great idea for anyone who is trying to maximize their savings in tax-advantaged retirement accounts.  You can open a self-employed account even if you have a job that allows you to contribute to a 401(k) or 403(b).

If You're Not Working

Non-working spouses can open IRAs.   If the person opening the IRA does not have earned income, but their spouse does, the IRS calls a spousal IRA, but most people just call it an IRA.  Spousal IRAs are subject to the same contribution limits as other IRAs, and the working spouse must earn enough income to cover the IRA contributions of both partners.

I often meet with couples who, purposefully or accidentally, are prioritizing one partner's retirement savings over the other partner's retirement savings. It's a bad idea. Creating retirement savings for each partner is financially smart, plus it sets a positive tone for your whole relationship.  It's a win-win choice.

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