Financial Focus
Financial moves to help stay-at-home spouses
Not all households have two
wage earners. By choice or cir- cumstance, either you or your spouse may be out of the work force for an extended period of time. But that doesn’t mean you can’t make progress toward your joint financial goals, such as a comfortable retirement. It does mean, however, that you need to carefully review your situation and make the right fi- nancial moves. For starters, consider one of
the best retirement-savings ve- hicles you have available: an Individual Retirement Account, or IRA. Even if your spouse isn’t earning income, he or she can open a “spousal IRA” to which you, as the income-earning spouse, can contribute. (Keep in mind, though, that you must file a joint tax return if you contrib- ute to a spousal IRA.) Depend- ing on your income level, you can designate a spousal IRA as
either a traditional IRA, which grows on a tax-advantaged ba- sis, or a Roth IRA, which can grow tax-free, provided your spouse has held the account for at least five years and is at least age 59½ before taking distribu- tions. And a spousal IRA has the same contribution limits — $5,000 in 2010, or $6,000 if your spouse is 50 or older — as a traditional or Roth IRA. Clearly, if you want to increase
the cumulative opportunities for building tax-advantaged resources for both your retire- ments, a spousal IRA can be an attractive option. Furthermore, if your spouse allocates his or her IRA funds to investments that complement — rather than duplicate — those investments inside your IRA, the spousal IRA can prove to be a valuable tool for diversifying your over- all holdings. While diversifica- tion, by itself, cannot guarantee
a profit or protect against loss, it can help reduce the effects of volatility on your portfolio. To help achieve this diversifi- cation between your IRA and the spousal IRA, you may want to work with a financial advi- sor.
Another move you can
make to help your stay-at-home spouse is easy to accomplish but also easy to overlook — namely, updating your beneficiary des- ignations on your 401(k), IRA, other investment accounts, life insurance policies and all finan- cial and legal documents. This step is particularly important if you’ve been divorced or wid- owed, and you want to be sure your stay-at-home spouse comes into possession of all the assets you had intended for him or her. Of course, in this day and
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age, “stay-at-home” status can change quickly. If your spouse enters or re-enters the work force, you as a couple should consider adjusting your finan- cial plans. Your spouse can con- tinue contributing to the spou- sal IRA you’ve established, but he or she may now have other opportunities in which to save for retirement, such as a 401(k) or similar employer-sponsored retirement plan. And if your spouse has been out of the work force for a while, it will be im- portant for him or her to con- tribute as much as possible to a retirement plan. In any case, whether your
spouse stays at home or returns to the work force, you’ll want to be proactive in making sure he or she doesn’t get left behind on the road to financial security.
This article was written by
Edward Jones for use by Bill Boughton, Weaverville’s local Edward Jones Financial Advi- sor.
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