Spouses who don’t work or who earn a very minimal amount are at risk of being unable to maintain their standard of living in retirement. Less than half of non-working spouses say they are saving for retirement habitually or even occasionally, compared to 62 percent of full-time workers, according to a new Transamerica Center for Retirement Studies and Aegon Center for Longevity and Retirement survey of 1,600 people in 15 countries who call themselves “homemakers”. And 48 percent of homemakers say they are not confident they will be able to have a comfortable lifestyle in retirement.
The homemakers in the survey were typically women between ages 18 and 44 who have children, but some men also qualified. “Because their work is unpaid and comes without employer or retirement benefits, homemakers face even greater retirement risks than workers due to their reliance on others for income,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “Homemakers also need to plan and prepare for financial security in old age.”
While 58 percent of workers say they have a plan for retirement, just 41 percent of homemakers do. However, more homemakers aspire to save for retirement (27 percent) than workers (22 percent).
There are some retirement benefits specifically for non-working spouses, including spousal IRAs and Social Security spousal payments. Here’s how to prepare for retirement when your family is living on one income.
Spousal IRA. If only one spouse works and you file a joint tax return, the working spouse can contribute to an IRA on behalf of the non-working spouse in addition to contributing to his or her own IRA. In 2015, a worker can contribute $5,500 to an IRA in each spouse’s name, for a total contribution of $11,000. You can also contribute an extra $1,000 to an IRA if one spouse is 50 or older and $2,000 if both spouses have turned 50. An IRA cannot be opened with both of your names on it, but one spouse can designate the other as the beneficiary of the account. Spouses who inherit an IRA are able to roll it into their own retirement account, which is an option other beneficiaries don’t have.
Social Security spousal payments. Non-working spouses are eligible for up to 50 percent of the working spouse’s Social Security payments. The non-working spouse must sign up for Social Security payments at his or her full retirement age, which is 66 for most baby boomers and 67 for people born in 1960 or later, to receive payments equal to half of the working spouse’s benefit. If you claim spousal payments before your full retirement age, they will be reduced depending on how much earlier you sign up. For example, you will receive 32.5 percent of the higher earner’s payment if you claim payments at age 62.
Prepare for the worst. Non-working spouses are less optimistic about their retirement prospects than their employed counterparts. Workers are more likely than homemakers to have positive associations with retirement, such as leisure, freedom, enjoyment and opportunity. Homemakers were more likely than the overall population to have concerns about retirement, such as insecurity, poverty, ill health and dependence on others, Transamerica found. “For everyone, and especially homemakers, a separation, divorce or loss of a spouse or partner can be devastating both emotionally and financially,” Collinson says. When your family relies on one income, it is particularly important to have life and disability insurance so your family can continue to pay its bills if something happens to the primary earner.
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How Non-Working Spouses Can Prepare for Retirement originally appeared on usnews.com
