My husband and I made a serious miscalculation four years ago when it came to our retirement savings. Instead of socking all our extra cash into a 401k with a dollar-for-dollar employer match, we diversified into stocks and real estate a year ahead of the market crash. Now, rather than being 25% richer, we’re about 50% poorer which is not a good place to be with retirement just around the corner.
As a work-at-home, stay-at-home mom who also happens to be the family bookkeeper, the task of making up for a late start to retirement savings is something I’ll be tackling in the years ahead. Am I worried? Not at all. With my aggressive savings program and debt reduction plan, I don’t anticipate that retiring comfortably will be a problem. And, for other stay-at-home Moms caught in the same predicament as me, be assured that level thinking and teeth-baring tenacity are all it takes to make up for lost time when it comes to retirement savings.
Steps for increasing your retirement savings
Increasing your retirement savings is a five step process that utilizes budgeting skills that most stay-at-home moms have mastered of the years. Here’s the countdown of how to boost your contributions into a retirement plan.
1. Drastically cut back on spending. For those of us over 50 and starting late on our retirement plans, 20-30% of the household income should be going into an retirement savings plan of some type. This kind of percentage calls for drastic cost cutting on all fronts, including the possibility of downsizing once the kids leave home. There’s all sorts of tips for saving money on the web which you should tap into if you’ve haven’t already since thrifty living from here on out is a must.
2. Pay down your debt. With the money saved, pay down all your household debt as quickly as possible. With credit cards, store charge cards, and auto loans paid off, the monthly income needed during retirement will be much less. My retirement plan also includes making double mortgage payments so our home will be paid off in eight years instead of 30.
3. Increasing your income. Stay-at-home moms have all sorts of options for increasing the household income through a second job. For those of us over 50 with limited job experience, sewing customized clothing, raising veggies for a Farmer’s Market, teaching art or sewing out of your home, or even writing are all great ways to increase household income. Up to $6000 a year of this extra income can then be diverted into a Roth IRA.
4. Delay drawing benefits as long as possible. If you’ve ever stopped to examine your pension statement or social security earned before becoming a stay-at-home mom, the report notes what kind of pay out to expect at you hit different age brackets. Delaying those benefits a couple of years usually means a higher monthly income. Taking on a part-time job while retired will also boost your retirement income.
5. Invest. Investment planners recommend different investment programs depending on when you plan on retiring. If hubby is five years away from retirement, this is not the time to be risky with investments. Low risk mutual funds, treasury bonds, or high yield utility stocks are a few examples of low risk investing. If retirement is closer to 10 -15 years, large cap stocks, real estate, and corporation bonds of BBB rating or higher may be recommended.
It’s not the end of the world if you and your husband have waited until the age of 50 to start planning for retirement. But by changing your spending habits, lowering the debt, and getting help from a qualified financial planner, you’ll be able to make up from that late start with no problem at all.
Buzzle.com,”Retirement Planning Tips for Late Starters”
About.com, “Late Start Retirement Planning.