Posted May 26, 2013 by Michael J. Kora in Family

How stay-at-home moms can prepare for retirement

When females select to leave the workplace in order to keep at house and raise their young youngsters, they make certain trade-offs. For instance, they typically give up the opportunity to earn a lot more income in exchange for the chance to commit more time with their young children in the course of their formative years.

&ldquoSacrificing this income can make it a lot more tough for keep-at-residence moms to save for retirement – but it doesn&rsquot make it impossible,&rdquo says David Lerner Associates Senior Vice President Christina Nash. &ldquoIt&rsquos just as critical for keep-at-home moms to strategy for their retirement as it is for operating moms.&rdquo

Nash offers the following guidelines to help stay-at-home moms prepare for retirement:

* Rollover your 401(k) from your previous employer into an IRA. &ldquoIf you participated in a 401(k) strategy at your final job, don&rsquot leave the money behind – or worse, cash it out,&rdquo says Nash. If you cash it out, you may possibly be subject to early withdrawal penalties, and you&rsquoll possibly have to spend earnings taxes at your current ordinary income tax price.

A far better option may be to rollover the funds into an IRA. &ldquoThis might provide the most flexibility and manage in terms of investing the cash in accordance with your long-term retirement objectives,&rdquo says Nash.

The process is basic: Inform the custodian of your former employer&rsquos program that you wish to move your account balance into a rollover IRA. The custodian will either transfer the funds straight to your IRA (this is recognized as a trustee-to-trustee transfer) or concern a verify to you in the amount of your account balance. If you acquire a verify, be certain to request that the check be created payable to the custodian of your IRA for benefit of (or FBO) your name.

* Open a spousal IRA. With this option, your husband can contribute up to $ 5,500 per year (or $ six,500 if you&rsquore age 50 or over) to either a classic or Roth IRA in your name. Note that you and your husband need to file a joint tax return to be eligible for a spousal IRA.

* Have your husband enhance contributions to his retirement strategy. Will your household price range permit increasing (or even maxing out) contributions to your husband&rsquos retirement plan? The maximum annual contribution to a standard or Roth IRA in 2013 is $ five,500 (or $ six,500 if your husband is age 50 or over), although the maximum annual contribution to a 401(k) strategy in 2013 is $ 17,500 (or $ 23,000 if your husband is age 50 or over).

&ldquoKeep in mind, nonetheless, that this income technically belongs to your husband,&rdquo Nash points out. &ldquoIf you divorce before retirement, you might have some rights to a portion of his retirement savings, based on your state. But exercising those rights may be challenging.&rdquo

* Open a solo 401(k) or SEP IRA. This could be an alternative if you operate a property-primarily based organization or have any other variety of self-employment income. Solo 401(k)s can be established as either classic or Roth. Every of these kinds of retirement plans has unique prospective positive aspects, drawbacks and annual contribution limits, so study them cautiously to figure out which may be ideal for your scenario. Download the slide deck at www.slideshare.net/davidlernerassociates/how-stay-at-property-moms-can-plan-for-retirement.

Material contained in this report is offered for info purposes only and is not intended to be utilised in connection with the evaluation of any investments presented by David Lerner Associates, Inc. (DLA). This material does not constitute an offer you or recommendation to get or sell securities and need to not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC.

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Michael J. Kora