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How to Plan for Retirement on One Income

I decided to do some crowd sourcing this week on a topic that’s been on my mind recently. Many of my personal acquaintances have a double income with both partners working full-time. However, I also know many families with one stay-at-home parent, managing on a single income. I had a burning question for those folks, and wanted to know more. One of the major benefits of a dual income is taking advantage of retirement benefits and matching through both employers. How are single income families planning for retirement? Here’s what I learned.

Doubling Down

One of the top ways people offset an amortized loss in retirement savings is by contributing double their standard allocation to a spouse’s 401(k) plan. Granted, this doesn’t account for the loss of a second employer match, especially since most companies only match up to a certain percent. Also, there are often contribution caps in place, which can be limiting. This brings me to my next point.

Roth Options

Some are opting to take out a separate Roth IRA or Money Market Account. This can be a wonderful option if the employer doesn’t offer 401(k), or if there’s no match benefit. What’s nice about the Roth is anyone can set up an account as long as they are making an income under a specified bracket. Withdrawals are tax free after the age of 59 and-a-half, and an employed spouse can make a contribution for a non-employed spouse’s existing account up to $11,000. Compound balance growth is also tax-deferred, so it’s a very attractive option.

Traditional Savings

This is a modern take on previous generations that hid money under the mattress or buried in the backyard. Luckily, now we have accounts that can help us keep track of savings in an effective and safe way. Although setting some money aside each month is never discouraged, for retirement purposes, an account that gains interest over time makes your money work harder. This method, however, is the easiest way for some people to save each month.

What seems to be the ‘holy grail’ approach is a combination of the first two methods. Contributing a max to one partner’s 401(k) and maxing out one or more Roth accounts. While this is an ideal approach for retirement planning, it’s understandably difficult for families with one income to contribute this much each month.

After hearing these responses, I’m encouraged that people are taking responsibility for their future in a variety of ways. One major theme I heard is people are relying on a trusted financial advisor to help them make decisions. Many think you must be wealthy to seek the help of a professional, but that’s not the case. If you’re interested but not sure where to turn, start with your financial institution and set up an appointment to discuss your options, or ask for a referral if they don’t offer planning services.


Kat’s Money Corner is posted in the Kansas City Star every week. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, follow us on Twitter @CommunityAmerCU.

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