How to Plan a Sonoma County Retirement as a Stay-at-Home Parent

How to Plan a Sonoma County Retirement as a Stay-at-Home Parent

If you weren’t a stay-at-home parent before, the COVID-19 pandemic may have changed that.

Regardless of how you got there, in addition to coping with the day-to-day stresses of keeping the family healthy, maintaining productivity at home and playing tutor to school-aged children, couples must also cope with longer-term issues and objectives like planning for their retirement.

For families where one spouse has chosen to stay home, it can be easy to forget that this person must plan for the future just like their working spouse. Retirement planning is one priority that can easily (and often) fall through the cracks while driving the children to and from school and balancing extracurricular activities with household errands.

Whether you’re a corporate executive or a stay-at-home mom, retirement planning should be a top priority. (Especially a Sonoma County retirement, which can include extra expenses.) If you don’t know where to start, the team at Montgomery Taylor Wealth Management has compiled the following checklist to consider. If you have a concern that is not addressed below, contact us. Montgomery Taylor Wealth Management is a Santa Rosa-based financial planning firm serving the greater Sonoma County area since 2002.


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Consider a Spousal IRA 

The lack of an office job should not be a roadblock to retirement savings. Investors must usually demonstrate earned income to qualify to contribute to an Individual Retirement Account (IRA), but a spousal IRA bypasses this requirement.

A spousal IRA allows the working parent to contribute to an account opened in the name of the stay-at-home parent if they file a joint tax return. A spousal IRA can be established as either a Traditional or Roth IRA and maintains the same tax treatment on contributions and appreciation until the money is withdrawn during retirement.

Couples can contribute up to $6,000 per year to a spousal IRA or a total of $12,000 per year for both parents if the working parent also has an IRA. If one or both parents are age 50 or older, catch-up provisions raise the annual contribution limit to $7,000 for the qualifying account. As with all IRAs, spousal IRAs are subject to income limitations. Contribution limits vary and phase out depending on whether the contributing spouse is covered by a workplace retirement plan.

At Montgomery Taylor Wealth Management, we offer both retirement planning and tax services and can answer any questions you may have about income limitations and other aspects of spousal IRAs. Schedule a complimentary conversation to see how we can help.

Prioritize Communicating with Your Spouse about Retirement

A working parent may be focused on his or her own retirement savings through a workplace 401(k) plan and other accounts, but may forget to share that information with their stay-at-home spouse. This can cause confusion, prevent coordinated planning and create added stress if something was to happen to the working spouse.

Talking about your retirement goals accomplishes several important objectives. These discussions can ensure you are both in agreement on the goals and expectations for your retirement. If you learn those goals are out of alignment with current savings, this can serve as the spark to make a joint effort to get on track. Involve your financial advisor and discuss things like whether your current budget allows for the maxing out of a spousal IRA, whether you can take on more responsibilities for retirement planning to free up your spouse to pick up extra hours at their job, or whether it’s time for you to start seeking a work-from-home position to help contribute to the family’s retirement savings.

The Coronavirus pandemic has caused many of us to juggle new responsibilities and adjust to a new way of living. Having regular and frank discussions about what this means to your family’s retirement plans can identify opportunities for additional savings and could lead you to consider flexible working options that may have not been on the table before the pandemic.

Stay Involved in Your Household Finances

A sure way to stay on track for retirement is to spend below your means and direct the monthly surplus to future goals. Being a parent with a lot of expenses to manage, it can be easy to lose track of where all the money goes and what if any surplus exists. Establishing and sticking to a budget can turn this problem into an advantage.

You may be aware of the grocery bills and clothing expenses, but what about the mortgage, car payments and credit card bills? By collaborating and communicating on your day-to-day finances, you may discover some expenses that you can live without or identify areas to save on the same services. Being aware of your household’s monthly cashflow can also help you direct some money to more productive uses like retirement savings.

Understand Your Budget and Taxes

One of the benefits of being able to contribute to a spousal IRA is that it can lower your household’s taxable income. The more you can direct toward those IRA contributions, the more tax savings you’ll have, and a greater amount of money will be working toward building a retirement nest egg.

At Montgomery Taylor Wealth Management, we see tax planning as part of a consolidated financial approach that can help minimize your household tax liability and bring greater simplicity to your life. We can help you get started on a budget or analyze your household cashflows to identify ways to make more efficient use of your hard-earned money. We can also provide guidance on the tax and overall financial planning pros and cons of starting your own at-home business.

Discuss Your Concerns with Your Financial Advisor 

Maybe you have had frank discussions with your working spouse about your finances and retirement goals. Maybe you have formulated a reasonable plan to make it to your Golden Years and even opened additional retirement accounts to maximize your savings. If you have taken all these actions yet still worry about your future, it may be time to seek a helping hand.

Just as you would hire a plumber to fix a leak and see a doctor when you are sick, there’s no reason to feel guilty in seeking financial help from your financial advisor when it comes to planning for retirement, in or out of Sonoma County.

At Montgomery Taylor Wealth Management, we have a team of financial advisors, accountants and estate planning attorneys dedicated to helping you retire comfortably and achieve your financial goals. We have been working with families like yours since 2002 and understand that being a stay-at-home parent is often an underappreciated role but one critical to your family’s success today and in the future.

Our comprehensive retirement planning approach can help identify any gaps in your existing strategy and determine solutions to make up for projected shortfalls. We’ll work with you to get organized, find ways to enhance your ability to save, and help build your confidence in maintaining an enjoyable lifestyle when you arrive at retirement.

Get the conversation started.

Montgomery Taylor Realistic Financial Planning