"Two can live as cheaply as one" is a common saying with some truth behind it—a single parent can pay just as much in housing and tuition costs as someone who is partnered with children.1 This means that single parents need to navigate the retirement planning process even more carefully, as it can be tough to balance today's needs with the possibility of retirement security. Below, we discuss a few ways that single parents can increase their odds of retirement goals.
Investigate Side Hustles
If your full-time job and being a full-time parent still leaves you with some free time, or if you need a quick influx of cash to cover a large expense, consider whether a side hustle could help you earn a few extra bucks each month. For those who work on-call jobs, working a flexible side hustle during on-call hours can help increase your income without increasing the number of hours you spend working.
Leave Your Retirement Funds Alone
Certain retirement accounts allow for penalty-free withdrawals under certain circumstances. Others may allow you to withdraw your contributions in exchange for a penalty and income taxes. But these withdrawals can cost more than just the fees and penalties that are imposed—they can also rob you of future growth. Taking out retirement funds to help pay for a child's college, purchase a house, or pay off credit card debt may not be the appropriate use of funds that are intended to help support you once you leave the workforce.
After all, you can take out a loan for a house or for college tuition—but you can't take out a loan to help you fund your own retirement.
Consider a Financial Professional
When you're a single parent, you have limited room for error when it comes to choosing retirement investments. You also don't have unlimited free time in which to research and analyze potential investments. A financial professional can work with you to identify your goals and choose strategies to help you pursue them.
Your relationship with a financial professional can be flexible, according to your needs—depending on your situation, you may want a full annual financial review, ongoing advice on a retainer basis, or a one-time portfolio checkup to make sure you're on track to work toward your goals.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.
Variable Annuities are suitable for long-term investing, such as retirement investing. Withdrawals prior to age 59 ½ may be subject to tax penalties and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess
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1 http://evolvingpf.com/2012/04/the-truth-and-fallacy-behind-two-live-as-cheaply-as-one