28 Apr 18 Ways a Single Mother Can Plan for Retirement
For many single moms, retirement tends to be at the bottom of their priorities. Typically, you
are thinking mostly about the needs of your children. However, this isn’t always the best decision because when you’re no longer able to work, you’ll struggle to find ways to survive financially. Retirement planning provides a peace of mind in knowing that your finances will be in order when you’re older. Here are 18 ways to prepare for retirement as a single mom.
1. Don’t Coddle Your Kids Financially
It can be hard to plan for retirement if you spoil your kids and go into debt while doing it. Focus on primarily buying things that the kids need, and then use any surplus funds to purchase things they enjoy. Kids need to understand that they’re not entitled to their favorite snacks or video games. Talk to them about why you’re not buying certain things, and discuss your budget. If you have teens, encourage them to get a job in order to buy what they want.
2. Rent Instead of Buy a Home
If you’re a new single mom, you might think that home ownership is the key to financial success in the long run. However, the costs associated with home ownership often outweigh the benefits if you’re a single mother. Retirement planning can be easier if you rent a home. When you rent, you’re able to put more of your money toward a retirement plan.
3. Open a 401(k) Account
If your employer offers a 401(k) plan, take advantage of it. For each contribution you make to the account, your employer matches it, doubling the amount of money that’s going toward your retirement. Depending on your employer, you may have to work with the company a certain number of years before they match your contributions. There is also a $19,000 limit on your contributions, but this doesn’t apply to employers’ contributions.
4. Get a Side Hustle
The job market has never been the same since the 2008 recession. Because of this, single moms can no longer have just one stream of income if they want to plan for retirement. It’s important to have one or two profitable side hustles that boost your income. These include:
- Home health care
- Selling goods online
- Babysitting
- Freelancing for online job sites
- Graphic design
- Print on demand business
When you have multiple streams of income, you’re in a better place to plan for retirement.
5. Pay down Debt
You don’t want to begin your retirement years in debt, so while you’re still working, pay down as much debt as possible. Start by obtaining credit reports from the three credit bureaus: TransUnion, Equifax, and Experian. Contact creditors and request a payment plan that would work the best for you. When you have less debt, your retirement is more secure.
6. Keep Health Insurance
Your health matters during retirement, and high medical bills suck up the savings that you worked so hard to build. You need good health insurance to assist you in the event of a medical emergency. To keep insurance costs stable, do everything you can to stay healthy. Exercise regularly, eat the right foods, and get regular checkups to detect early signs of certain illnesses. It also helps to choose doctors within your insurer’s network to avoid extra fees.
7. Live off Half of Your Income
You may think this is impossible to do as a single mom, but with careful planning, it’s possible. Focus on your rent, groceries, insurance, and retirement savings as your expenses. With each check, put aside at least 20 to 30% of your money in savings. If you do this regularly, you’re on your way to living off half of your income. Look for cheap ways to buy clothes and toys, as well as free activities that you can do with your kids. Freeze the credit cards so that you’ll be less tempted to use them for impulse purchases.
8. Invest
Investing might scare you, but there are several options available. One option is the Dividend Reinvestment Plan, or DRIP. With this investment account, you can purchase shares from an online brokerage company, and you have the opportunity to let the company reinvest your earnings so that you’ll earn more money. There is also the website called Acorns. This investment site lets you add as much money as possible into your account either as a one-time payment or on a recurring basis. Building passive income is another way to invest financially. Examples of this include starting a blog or YouTube channel, publishing an e-book, or selling things online.
9. Obtain Life Insurance
As you enter your retirement years, your chances of mortality increase. You don’t want to leave your loved ones behind with massive funeral expenses after you die. Moreover, if you leave younger children behind after your death, you want to leave the caregiver with as many financial resources as possible. Many life insurance experts recommend term life insurance because it’s cheaper and your premiums are set at a fixed rate.
10. Open a Self-employment Retirement Fund
If you’re self-employed, you can open a self-employment retirement fund. The benefit is that you can contribute as much as you want to the account. This is ideal for those whose businesses get significant profits each year.
11. Don’t Depend Solely on Social Security
While Social Security benefits are great for your retirement years, these should not be your main source of retirement income. You should diversify post-retirement income sources so that you won’t struggle financially once you stop working.
12. Set up an Emergency Fund
Even you’ve prepared well for retirement, you’ll need to set up an emergency fund. Hard times happen, and you don’t want to go into debt to solve financial emergencies. Your adult child might suddenly get sick or pass away, making you your grandchildren’s primary caregiver; or your investments might take a bad turn, and you’ll need extra funds to help you survive financially.
13. Take a Look at Retirement Expenses
It’s also important that you understand your retirement expenses so that you’ll know how much to save while you’re still employed. These expenses might include medications, your mortgage, credit card debt, costs of caring for elderly parents, utilities, travel, and miscellaneous expenses. When you estimate those expenses, you should have a better idea of how much money you’ll need to retire comfortably on.
14. Reeducate Yourself on Personal Finance
You’re never too old to learn new concepts about financial literacy. When retirement comes, you want to have an even better understanding of finances than you did in your younger years. You can attend local seminars or read personal finance books from credible authors such as Dave Ramsey. It can also help to talk to friends who have recently retired.
15. Determine Needs vs. Wants
This is vital if you want to save up for retirement wisely. Do you really need to max out your credit card in order to pay for expensive concert tickets? Is it necessary to buy the latest version of a smartphone every few years if your current phone works just fine? Having control over these spending options helps you save for retirement better.
16. Meet with a Financial Planner
Talk with a certified financial planner to discuss your retirement strategy. A financial planner can take a look at your current situation and suggest strategies that you never thought about. Make sure you’re honest and detailed about your retirement plan, and be open to ideas concerning your finances.
17. Do Fun Stuff
Now that you’re getting ready to retire, enjoy yourself! Spend plenty of time with the grandchildren, visit out-of-town friends, start that home-based business, or redecorate your house.
18. Plan for Your Children and Grandchildren
You can do this by preparing your will. State clearly how your assets will be used upon your death, and assign someone as the executor of your will. By doing this, you’re leaving a good inheritance for your children and grandchildren.
In conclusion, with the right preparation, you can have a successful retirement.
