Keep Your Options Open as a Stay-at-Home Mom

When taking time off from the workforce, it’s important to preserve your earning power and plan for retirement.

A woman of African descent is at home with her baby boy. She is working from home on her laptop. Her son is playing with a pencil and toy car beside her.
(Image credit: Getty Images)

When I first met Variny Yim, she had just had her second child and moved across the country to California. But she was still commuting to Washington, D.C., as part of her job as director of a nonprofit association. She was considering leaving that job, and the cross-country commute, to spend more time with her children, and she asked me for advice on balancing work and family. I completely understood her desire not to work full-time (I had followed the same path myself), but I advised her to “keep one foot in the door.”

Those six little words ended up making a big impact. “I have literally lived your advice,” Variny told me recently. She quit her D.C. job, but over the years she has taken a series of part-time and consulting positions—and even managed to write a novel (The Immigrant Princess). That path, she says, “has enabled me to keep my skill set current while also giving me flexibility to be a full-time mother.”

Taking time off from the workforce is emotionally satisfying and can make economic sense (no child care expenses), but it comes at a cost—not only in current income but also in future earning power and retirement savings. Before you make the move, “understand what’s at stake financially for you and be proactive about planning for it,” says Adrienne Penta, executive director of the Center for Women & Wealth at Brown Brothers Harriman. “It’s important to preserve your earning power to the extent you can.”

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That doesn’t necessarily mean working part-time. It can also mean staying in touch with your network or hiring a babysitter so you can attend an industry seminar or event. And don’t sell short any activities unrelated to your former career. “Women don’t give themselves enough credit for volunteer activities they’re involved in,” says Penta.

Smart money moves. At-home parents tend to take on the role of family CFO, but that means more than just paying the bills. “Stay-at-home moms need to have access to money they can spend on whatever they want,” says Judy Rubin, a partner with Plaza Advisory Group, in St. Louis. That could be a monthly amount you and your spouse agree on or even your own account.

You and your family are now dependent on the income of one earner, so to protect that income, you need disability and life insurance coverage for your spouse—one rule of thumb is to buy term life insurance equal to seven to 10 times your family income—and insurance on your own life to cover child care and other expenses if anything were to happen to you. And make sure that you (and your children) are the beneficiaries of your spouse’s life insurance and retirement accounts.

One key way to provide for your financial security is to have a spousal IRA. Assuming your spouse is working, he (or she) can contribute up to $6,000 to a spousal IRA in 2019, or $7,000 if you’re 50 or older. Spousal IRAs pack a triple wallop: They help you make up for years out of the workforce, they provide an independent pot of money that belongs to you should anything happen to your spouse (or your marriage), and they give you an opportunity to manage your own retirement assets.

And if, like Variny, you earn money on the side (she subs as a certified spinning instructor), you can save a portion of that for retirement in an IRA or a solo 401(k)—or as seed capital to build your side gig into a real business.

The bottom line, says Variny, is that “you cannot turn a blind eye to finances”—a truth that hit home when she later divorced and became a single parent. Tracking her finances online has been a godsend, and she also works with a financial planner. “As painful as it can sometimes be, I absolutely love visiting my dentist, my auto mechanic and my financial planner,” she says. “It’s all about prevention and long-term maintenance.”

Janet Bodnar

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.