It is common these days to build your own retirement if you are unemployed or self-employed. That’s great news for the stay-at-home spouse or work-from-home spouse (this includes parents).
I received some great information from USAA spokesman and financial planner Joseph Montanaro about investing.
Retirement savings is something that is under utilized, especially by women, and can have a positive impact on your financial life as you approach age 60.
In his experience, Montanaro confirms what I suspected. Stay-At-Home moms may assume that there isn’t an option for them when it comes to retirement. Some may feel that they haven’t earned one. There is an option and it’s called a spousal IRA.
From Montanaro's perspective:
“For young or even seasoned military families, too often building any sort of retirement nest egg is an afterthought. In my experience very few have delved into the rules with respect to spousal IRAs. Military retirement in its present form is a great benefit, but it can lull folks in the military into a false sense of security. Will I serve long enough to take advantage of it? And if so, can you live on half a paycheck? For most, the answer is no and that should lead to more IRAs, higher TSP participation, and the like!”
So life can be good and life can deliver some unexpected, mouth gaping junk. What happens if there’s a divorce or major life change? The money you accumulate over the years can be used for emergent purposes.
Knowing that some military families are on a tight budget, I asked Montanaro what would be the least amount of money needed to make this happen. He explains:
“The key is to just get the ball rolling — get started! Even if it’s only $25 per pay period or a 1 percent TSP contribution, you’re getting the framework of systematic saving in place. Once it’s set up then every pay raise or promotion becomes an opportunity to increase that saving (without feeling it from a quality of life standpoint a 2 percent pay raise= 1 percent increase in retirement saving).”
He used the example of a 22 year-old spouse saving $50 a month over the next 38 years at a return of 8 percent. What would that spouse have at the age of 60? About $150,000! Take that amount and hold it next to the empty plate some currently have for the future and that’s an amazing figure. What’s even sweeter? That’s at a minimum investment rate.
In order for there to even be something to help out down the line, saving has to start yesterday and has to stay consistent.
Montanaro shared the personal financial philosophy he and his wife share. At times she was an at home spouse, a student, and a nurse. Their finances as a couple were as important as the one who was consistently on a W-2 (read: full-time working spouse).
Both members of a couple contribute to their family in different ways. Retirement income for the non-working spouse should be a consideration. We need to get talking to our partners and our financial representatives. Montanaro summed it up this way:
“It’s critical that both spouses be involved in both day-to-day finances (budgeting, cash flow, etc.) as well as longer-range financial planning (college, home purchase, retirement). While, it’s ok to delegate, never abdicate responsibility for what’s happening in your financial lives. Be involved!”