Saving for retirement while raising a family

You can save for retirement and raise a family at the same time. Yes, you.

Judy Kuschel calls herself a “retirement junkie.” A long-time Community Corrections Specialist at the Washington State Department of Corrections (DOC), you could say she’s learned a few things about making wise retirement planning choices as her life unfolded.

She enjoys learning as much as she can about retirement, whether it’s reading the latest books or listening to a growing list of her favorite podcasts, but Judy says she wasn’t always as knowledgeable.

“I started out not knowing anything about retirement. I was young. I didn’t think I needed retirement,” she says. She started her state career in her late 30s and thought retirement was for older people. That changed when she started a family and learned how Social Security credits work.

“I left work to have my son and to care for him for a few years. When I got my Social Security statement, I was shocked to see dollar signs next to ‘zero, zero, zero,’ across the chart for the years I didn’t work!”

The Social Security Administration’s website says you need 40 credits to qualify for a benefit when you reach retirement age (you can only earn up to four credits per year). Most people qualify, but the benefit calculations are based on 35 years of earnings. If you work fewer than 35 years because you’re raising a family, providing caregiving assistance to an elderly parent, or you’re off work for any reason, it will reduce your benefit. And that means you won’t be getting as much of that Social Security check you assumed was an automatic part of your retirement income.

DOC is a participant in Washington state’s Deferred Compensation Program, but Judy became curious about other ways to make up for her missing Social Security credits. “I basically learned about DCP through word of mouth at work, but I wondered about what other types of things I could do. Were there other ways I could save? It wasn’t like I could ‘buy back’ the credits. I needed to get educated.”

Studying savings options didn’t make it easy to take action. It was intimidating and felt too difficult to start. How do you save while you’re raising a family?

“I had to learn to take small steps so I wouldn’t get overwhelmed. Using your raise is a great way to add to your retirement resources a little at a time. I set a goal of 10% of my income and worked up to that by starting with 1%. When you use your raise, you don’t miss the money because it wasn’t in your paycheck to start with.”

Judy encourages parents to start planning for retirement now even if it seems impossible. She says things like setting up a spousal IRA is something you can do while you’re not working that will help you down the line.

“You don’t want to wait until the kids are out of the house. Remember that you don’t want to be a burden to them as you age. They’ll thank you! If you plan and save while you’re still raising a family, you will ease their minds when the tough decisions come,” she says.

You might not want to think about it now, but some of those tough decisions can include long-term care or other living arrangements and unexpected catastrophic medical expenses. Saving for a retirement that supports you will go a long way toward improving the outcomes for your adult children who won’t then need to rely on their own savings to help you if you can no longer help yourself.

Retirement education never ends

Judy listens to retirement podcasts and has introduced her now adult son to the topic. They listen to them together and talk about what they’ve learned. She also meets a friend each January to talk about their retirement goals, what’s working, what’s not and what’s on the horizon.

She’s a grandmother now with a daughter-in-law who is following the path she took while raising her son. “I’m thinking about her future all the time and I want her to benefit from what I learned years ago.”

We can all learn from Judy’s experience and become better savers and planners. Why not start today?

DCP know how

If your employer participates in the Deferred Compensation Program, you have a powerful tool for creating retirement wealth. Even if you’re already saving, there are some creative ways to use DCP you might not have considered.

• Do you know when you’ll be off work and for how long before you adopt or have your baby? Plan ahead by increasing your DCP contributions while you’re still working.
• Finally having that knee surgery you’ve been putting off, or you know you will be out for an extended time? Increase your DCP contributions before you temporarily leave work to cover your missing Social Security credits (remember, you can only earn four credits per year). If you retire with fewer than 40 Social Security credits, you won’t receive the benefits.
• Do you want to replace all the lost retirement income or just a part? Increase your contributions accordingly.