Help Me Retire

July 11, 2020, 4:10 p.m. EDT

I have student debt, a mortgage, a growing family and I’m relocating for work — how do I save for retirement?

Do you have questions on planning for retirement? Email HelpMeRetire@marketwatch.com

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

By Alessandra Malito, MarketWatch

Continued from page 1
Page 1 Page 2

There are a lot of questions surrounding your relocation and potential new job, and some of them you may not even know the answers to yet. You should consider factors such as: what your current home will sell for, how much your future home will cost, the fees associated with both of those transactions and the unexpected costs during and after the move. This is yet another reason why you should focus on building up your liquid cash reserve, Palion said.

Also, when you make that job switch, remember to look through employee benefits. Higher salaries are great, but you should also dive into health care coverage and retirement account benefits, Storjohann said.

Staying at home to take care of the family is a hard job, and that transition will also affect your finances. If you ended up earning $130,000 but your wife stopped working for now, you’d actually see a loss of income around $10,000 a year. You and your wife should talk through that possibility and the finances that will come along with that scenario. The first few conversations should be around the logistics of these changes, Storjohann said. “From there, once you shape your goals, it’s like building your own financial plan,” she said. Plan to meet on a monthly or biweekly basis to understand the household’s spending and saving as you pursue these goals and then eventually achieve them. Create a financial spreadsheet or statement where you can update your numbers every six months, so that you clearly understand where your money is going, how it’s working for you and where you can go from there.

And even while your wife is staying at home with the kids, she can still be contributing to a retirement plan through a spousal IRA. A recent study found families don’t often account for the nonworking spouse when relying on one income for retirement savings. What one does with old employer-sponsored plans is usually a personal preference, but she may want to consolidate her old 401(k) plan into her current plan or eventually roll them over into an IRA. The key in this particular situation however is to ensure she is getting the same high quality fund options (if not better) and low management fees.

Also see: I’m a 32-year-old stay-at-home mom, and my husband earns $150,000 a year. Will I ever be able to enjoy a retirement?

Saving for college is important for families, but it probably shouldn’t be prioritized before retirement.

“Yes, they should be thinking about college funds but not at the expense of their retirement,” said Juan Ros, a financial adviser at Forum Financial Management. For retirement, “there are no loans you can get, no scholarships — it is just whatever you have.” If you want to dedicate some of your extra cash flow to college savings, though, a 529 plan would be a good start. And it doesn’t hurt if you are expecting a second child soon. “With one child, it is going to be expensive,” Palion said. “With two, it is going to be twice as expensive.” If you start with $50 a month, you’ll have a “pretty sum of money” in 18 years, Palion said. Comparatively, if you started saving farther down the road, you’d have to hike up your contributions substantially to make up for the lost time. There are also other types of accounts, including Coverdell, custodial accounts and savings bonds. Here’s a breakdown of some of the pros and cons of each avenue.

There are a few tasks you should also consider, though you didn’t mention them here, Ros said. Because you have a young family, and there is the possibility that they will rely on you for their major source of income, you should look into an estate plan, such as a will or trust depending on your state’s rules. You and your wife should also get powers of attorney, so that you can dictate who your children’s guardians are. And while you may have group life insurance through your employer, you should consider some type of term life insurance with a policy of at least $1 million, Ros said. At your age, that policy should be relatively cheap. Although it will cost a few thousand dollars most likely, getting these affairs in order would protect your family in the event something happened.

As for your question regarding how to save for retirement: Having a pension through your public education job is a huge win, advisers said. You may also have access to a 403(b) plan, and if you do, you should consider contributing to it — especially if there is some sort of employer match. Your wife won’t be able to participate in her 401(k) plans once she stops working at those jobs, but you both can work on investing in IRAs. There are traditional IRAs, which are funded with pretax dollars, and Roth IRAs, which are funded with after-tax dollars. There are advantages to both types of accounts, though it also doesn’t hurt to diversify so that you have options in retirement to save on taxes.

You definitely have a lot going on but you’re on the right path.

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com.

Alessandra Malito is a retirement reporter based in New York. You can follow her on Twitter @malito_ali.

Page 1 Page 2
This Story has 0 Comments
Be the first to comment
More News In
Retirement

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.