Here's How Single Parents Can Plan Their Savings for Retirement
Retirement planning can be daunting for anyone, but it's especially difficult when you're a single parent. Here are some tips to help you get started.
Step 1: Determine your priorities
Everyone, including single parents, has to set priorities when it comes to their finances. One crucial factor to consider is how much money you can realistically afford to save each month for retirement.
If you can set aside a small amount each month, you'll have a bigger pool of money available when you need it. However, suppose your income is low, and you're struggling to cover your basic expenses. In that case, your priority might instead revolve around first getting rid of debt. If that's the case, you might consider using a personal loan calculator to help consolidate your debt and free up more money quickly. After clearing your debt, you will have more to put toward retirement savings.
Another critical factor to consider is your long-term goals. Setting aside money now, no matter how young you are, could help ensure that you can live comfortably in retirement. It could mean you get to travel or buy your dream home or even retire sooner.
Step 2: Determine your retirement fund needs
Once you have an idea of what you can and can't afford to save each month, it's time to figure out how much money you'll need to save throughout your lifetime to achieve your retirement dreams.
One key factor is how long you plan on working. If you're hoping to retire in your early 50s and you’re just entering the job market in your 20s, for example, you might need to save about 80% of your income every year for the next 30 years to have enough saved up by the time you reach age 50. If you’re supporting your children on a single income, that can be tricky. However, if you're content with retiring in your 70s, saving a smaller portion of your income each year should be enough to ensure your family has enough money now to get the things they need.
Here are some other questions to consider when figuring out your retirement fund needs:
How long will it take you to reach retirement age?
What kind of income will you receive in retirement?
How much do you owe in taxes each year?
What are the expected inflation rates throughout your lifetime?
What is the cost of living likely to be when you retire?
Does your employer offer any sort of retirement contribution matching program that can help you put aside more money?
Step 3: Add automated contributions
Adding automated contributions to your retirement savings plan can help you save for the future without thinking about it every month. Automated contributions are a great way to get started on your retirement savings, but you should still review them regularly to ensure you’re not going over budget.
Step 4: Review and adjust as necessary so that your child is taken care of
The biggest challenge single parents face is ensuring all expenses are taken care of for their child's needs. When you're making retirement a priority, it can be challenging to keep a plan in place, especially as your child grows and their costs change. It's always a good rule to review your budget regularly to ensure you're on track while still providing your child with everything they need for extracurricular programs, education, and other expenses.
The bottom line
As a single parent, it's important to have a savings plan in place and to make retirement a priority as best you can. These tips will help you get started on the right foot.
