The new trend among would-be parents: Waiting. We’re putting children off longer than ever before. Women in the US are becoming first-time mothers at an average age of 25, four years older than we were in 1970. And it seems celebrities are leading the charge – witness Halle Berry, pregnant at age 46.
For many of us, having a child later in life comes with special financial considerations. Berry may not have to worry about how she’s going to fund retirement and college at the same time, but you do, and so did Elly, who had her child at age 44. Here, financial moves for older parents:
Focus. When you’re younger and you have kids, there is a bit of a progression through various stages – you go from young kids, to college, to retirement, to carrying for your own elderly parents. When you have kids at Elly’s age, that succession is shaken up a bit. And if you don’t have enough money to fill every bucket completely, you have to focus. Where? Retirement. I’ll get some pushback here – this isn’t my first time having this discussion – but we all know that there is a lot of financial aid (as well as scholarship and grant money) for college. No one is going to fund your retirement but you.
Okay, split the difference. I just told you to focus. But I also know some of you will not listen to me. You won’t be able to bear putting your needs before those of your children. To that, I say: Open a Roth IRA if it works for your situation1. Fund it. If, when college rolls around, you want to use your contributions for that, you can. If you don’t, you can leave the account be and use it for retirement.
Consider whether you want to stay home. Elly did, and calls herself a “very expensive stay-at-home mom.” She’s right – it is more expensive to stay at home when you have kids later in life, because you’re missing out on peak earning years. Your role in the home, and as a parent, has equal (and some would argue greater) value, of course. But the financial impact must be stated: Miss a few years in your 20s? Not as big of a deal as taking time off in your 30s or 40s. According to the most recent Survey of Consumer Finances, households in the 35 and under age range had a mean income of $47,700. In the 35 – 44 age bracket, that jumped to $81,000.
Get your protection plan in place. All parents need legal documents – a will that names guardians is a great place to start. They also generally need life insurance. Unfortunately, that kind of coverage is going to be more expensive later in life, but it’s necessary if you have someone – in other words, a child or partner — who depends on your income.
1Qualified Roth IRA distributions are not subject to state and local taxation in most states. Qualified Roth IRA distributions are also federally tax-free provided a Roth account has been open for at least five years and the owner has reached age 59 or meet other requirements. Withdrawals may be subject to a 10% Federal tax penalty if distributions are taken prior to age 59.