If you’re a non working spouse, it’s dangerous to rely on your husband or wife to carry the load into retirement. How do you prepare for retirement even though you’re not working?
First of all, just because you’re not going out into the workforce, that doesn’t mean you’re not working. In reality, you’re working VERY hard. Unfortunately, you can’t earn your Social Security credits or other retirement benefits in the same way as the working spouse or family member.
If you take nothing else from this article, here’s what you need to remember: Retirement is a big deal and you can’t put it off until later. Most people don’t reach retirement with enough to live comfortably let alone also their spouse so let’s look at a few ways to build your personal retirement kingdom.
To make contributions to an IRA, the account has to have earned income but a spousal IRA is different. Even if you don’t have earned income, you can use family funds to contribute to the IRA. You can add up to $5,500 per year or $6,500 if you’re over the age of 50.
Here’s the issue with life insurance. You really do need it but there are a lot of different types out there–many of them you should stay far away from. I spoke to a CFP for an article I wrote for another client. He said that the working spouse should care $1 million per $50,000 of salary. Until I can write on this subject, here’s what I want you to know.
Insurance is designed to protect you from major loss. Investing is about making money with your money. Don’t get into life insurance policies that also try to be investments. Any time you hear something about cash value life insurance, run as fast as you can. Dave Ramsey wrote a good article on this.
Get a Part Time Job
Staying at home with your kids, caring for an aging loved one, or the many other reasons to stay at home are noble but you’re not amassing your Social Security credits. You only need 40 credits (as of 2015) to qualify for full benefits. All you need to earn each year is $4,880 to get your maximum of 4 credits per year. Some people do that with a seasonal job, work at home job, or 1099 independent contractor work.
It’s true that you are entitled to a portion of your spouse’s Social Security benefits at retirement and survivor benefits if they pass away but at least while you’re both alive, you will have double the income at retirement. Check out this page from Social Security to learn more.
Check the Beneficiaries
Make sure that all family financial accounts will go to the other spouse when one of you passes away. If beneficiary information isn’t set up correctly, it could take longer to get to the money at a time when you need access to it right away.
If you’re a non working spouse, you still have to think about retirement. Although the news media talks a lot about Social Security shutting down, that’s not likely to happen any time soon. For a non-working spouse, focusing on earning those benefits is best because it takes a relatively small amount of work.
Have a question about retirement or something else going on with your money? Click below to ask me. I respond to all questions.