A single parent’s retirement plan

The diligent and consistent effort at saving towards retirement is critical for everyone, but especially so for single parents. Even with child support or expense contributions coming in from the ex-spouse, putting money aside for your own retirement can be a challenge. What’s a single parent to do?

Start with emergency savings

Whether it’s paying for a new set of tires for the car or a new dryer to replace the one that gave up the ghost last week, having emergency savings is the key to staying afloat. Experts recommend putting away 3-6 months’ worth of living expenses into a savings accounts that’s untouched except for financial emergencies. Having a cushion of funds to draw upon will guard against having to tap your retirement savings (which can result in hefty penalties and additional tax expenses). If the emergency does not arise and the account balance floats at a comfortable level, you will have additional funds to contribute to your IRA!

Use automated tools as much as you can

You are already managing school and activity schedules, medical appointments, and homework. Save yourself the trouble and automate good financial habits so that you don’t have to think about them. If your employer gives you access to a 401k plan (or something similar), make sure you participate, especially if your employer offers matching contributions. For additional savings, use a platform like Betterment or Acorns to schedule periodic automated withdrawals. Even a small amount saved consistently every week can add up to a sizable balance over time.

Don’t overlook cash flow planning

Cash flow monitoring isn’t just for large companies that are required to submit cash flow statements to the SEC! Make sure that your budgeting exercise includes a look at the timing of money coming in and out. This is especially important for the streams of money that will eventually go away, such as child support. Cash flow analysis is the easiest way to identify whether you are living within your means. If your outflows are larger than your inflows, the slush usually ends up on credit cards, so it’s a good idea to monitor those carefully.

Explore life insurance and disability coverage

Single parents are under a lot of pressure to stretch every dollar and invest as much as they can into their kids. However, it’s important to not do this at the expense of maintaining adequate life insurance and disability coverage. When you are healthy, it’s easy to dismiss those premium payments as an unnecessary luxury. However, if something were to happen to you, policy payouts could be the lifeline that your kids need. By all means, shop around and consult with a financial planner to ensure that you have the right policies with the right coverage, but don’t just close your eyes and hope for the best.

On that note, make sure that you have taken the formal step of naming the guardian for your minor children. This will allow you to have maximum influence over the environment and the people who will step in to take care of your kids in the event you cannot do it yourself.

Retirement savings or education savings?

Managing family finances is all about making choices. Should you contribute extra money to your retirement fund or to your kids’ 529 plan? Think about your retirement timeline and needs and consider prioritizing your retirement savings (unless they are already maxed out, and your financial planner tells you that you are well on track to meet your goals). After all, your kids have more than one option when it comes to paying for their education, but you only have one chance to save up for your future financial independence.

If your children are old enough to handle a frank conversation, consider sitting down with them and going over their choices for going to college. Talk about your financial situation, as well as what they can and cannot count on after high school graduation. Encourage them to explore scholarships, grants, tuition loans, and other ways of funding college expenses. By setting expectations and helping them navigate possible funding sources, you have the best chance of balancing their education and your own need for financial security.

A single parent’s retirement plan

Saving for retirement as a single parent can be tough, but it is possible. Begin with a budget and a plan to build up your emergency savings. Automate your savings, explore life insurance and disability coverage, and make an effort to prioritize your retirement over education plan contributions. Finally, remember to create an estate plan. Keep beneficiary designations updated, and work with a professional team that will help you check progress and take action when needed.