How to plan for a secure retirement as an unpaid caregiver
According to the latest statistics, more than 65 million American women provide unpaid care in the form of child care, family care and elder care. And a majority of these women do so while working full-time or part-time, the National Partnership for Women and Families reported. For those who work part-time – or not at all – saving for retirement during this time can be a challenge. In today’s ‘Financally Savvy Female’ column, we talk with Shelly-Ann Eweka, CFP, ChFC, Senior Director of Advisory Strategy at TIAA, about the options these women have to ensure they don’t fall behind on retirement savings while providing unpaid care.
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Having a plan is key
Unpaid carers need to have a plan in place for how they will fund their retirement, although saving for it can be difficult during this time.
“That’s where you start – working with someone or working with a digital [tool] to make a financial plan, and that starts with understanding how you spend your money,” Eweka said.
Look for ways to spend less and earn more
Once you have a clear idea of how much you are spending, you can see how much you can set aside each month for your retirement. If this amount is nil or nominal, you may need to make some temporary adjustments to your expenses.
“Be careful what you’re spending and see if there are ways to reduce that,” Eweka said. “With very limited income, because you’re not really getting a full salary, now is the time to really cut your expenses as much as possible.”
You should also look for ways to increase your income outside of your care commitments, if possible.
“Caring is a huge responsibility, but if you can get a part-time job or a few extra hours of work, that will help you have some extra cash to help you put some money aside,” said Eweka.
Important: A Woman’s Guide to Collecting Social Security
Consider opening a simplified pension plan for employees
If you are self-employed, you can contribute to a Simplified Employee Retirement Plan, or SEP IRA.
“It’s really an IRA for business owners,” Eweka said. “You can contribute $61,000 or 25% of your earned income, whichever is lower.”
That’s significantly higher than the annual limits of a traditional or Roth IRA, which is $6,000 or $7,000 if you’re 50 or older. If you are able to save more than a traditional or Roth IRA would allow, a SEP IRA can be an invaluable retirement savings tool for an independent unpaid caregiver.
Or, open a joint IRA
If you’re married and don’t earn an income because you provide full-time caregiving, consider opening a spousal IRA.
According to the IRS, “If you file a joint return, you may be able to contribute to an IRA even if you haven’t had taxable earnings until your spouse has. Each spouse can contribute up to the ceiling in force; however, your total combined contributions cannot exceed the taxable earnings reported on your joint return.
Make contributions automatic
When you’re a full-time employee, maintaining your retirement savings is easy because many companies offer the option of automatically contributing a percentage of your salary to an employer-sponsored plan. If you work part-time or not at all, you’ll have to put in more effort to save for retirement, but you can make it as easy as possible by automating contributions to the IRA of your choice.
“Try to make automatic savings, even if it’s a little a month,” Eweka said. “When it comes out automatically, it’s the first thing that comes out every month, so that’s one way to do it.”
Put any financial windfall into retirement savings
When working as an unpaid caregiver, it’s essential to make sure you’re always contributing as much as possible to your retirement savings. Take advantage of any financial windfalls you may receive to stay on track with your retirement goals.
“We’re approaching tax time, so if you get a refund, use a good chunk of that refund to set aside in your account,” Eweka said. “Look for these types of opportunities.”
GOBankingRates wants to empower women to take control of their finances. According to the latest statistics, women hold $72 billion in private wealth – but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to invest and are more likely to have debt, and women are still paid less than men overall. Our “Financially Savvy Female” column will explore the reasons for these inequalities and provide solutions to change them. We believe financial equality starts with financial literacy, which is why we provide tools and guidance for women, by women, to take control of their money and help them live richer lives.
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This article originally appeared on GOBankingRates.com: How to Plan for a Secure Retirement as an Unpaid Caregiver