6 rules for homemakers

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Homemaker. It’s a term that sounds quaint these days.

Transamerica Center for Retirement Studies surveyed Americans ages 18 to 44 — 81% of them women — who self-identified as homemakers.

It turns out they aren’t what you might expect. They aren’t the privileged spouses of high-earners who choose to stay home to raise the children. Only 9% said their household income was more than $100,000, and 58% said their household income was less than $50,000, according to Catherine Collinson, president of Transamerica Center for Retirement Studies. 90% are married or cohabiting, but only 55% have financially dependent children, she says.

It all sounds risky to me. What happens to those homemakers as they age? What if the breadwinner can’t work any longer or dies or the relationship dissolves?

Relying on others for their retirement

Some 75% believe that income from their spouse or significant other is going to be very important to them in retirement. 26% expect to need financial assistance in retirement from some other family member besides their spouse or partner.

“Given how many things can change along the road of life, we don’t want to expect bad things, but they happen, and it is important to have a backup plan,” says Collinson.

If you choose the homemaker route, here are some suggestions from Collinson and Transamerica for increasing the likelihood that you’ll have a financially secure retirement.

  • Marry and stay married for 10 years. Social Security requires 10 years of marriage for an ex-spouse to receive benefits on the ex-spouse’s record. A widow or widower has more lenient restrictions. She or he must have been married to the deceased spouse at the time of his or her death for at least 9 months immediately prior to the date of death.
  • Consider a prenuptial agreement. If you’re choosing this lifestyle, put the agreement in writing so the homemaker is protected in case of divorce or separation.
  • Get a job. Even the income from a part-time job can buy a homemaker some independence, help with living expenses and be available for retirement savings. It also will help that person build a Social Security work record of her own, which can protect her by increasing benefits in retirement and in case of disability. And as Collinson points out, should unemployment befall the breadwinner and the homemaker has to step up, “It is much easier to find a job if you have a job.”
  • Be involved in the family finances. Don’t just turn over control to the working spouse and hope it turns out all right.
  • Have a financial plan. It is particularly important if one spouse chooses not to work to have a “risk-management plan,” as Collinson calls it, that includes life and disability insurance.
  • Commit to savings and retirement plans. A working spouse can contribute to a spousal IRA for the homemaker.

Women live longer than men. A nonworking wife with no resources of her own could spend a long time in poverty if she’s not careful.

Here’s some more financial guidance for nonworking spouses.