Should Single Parents Worry About Funding Retirement Plans?

As a single parent, your finances are more than likely tight. You keep hearing that you must put aside money for retirement. You may have even tried one of those financial calculators on the web that showed you that you will need millions of dollars to retire with the same income as you have today. Should you be worried about funding retirement plans for your future retirement?

First, if you work for an employer that matches a percentage of money that you put into a 401K or other retirement plans, you should fund the account enough to get the match. Usually the match is 50 to 100 percent of the money you put in which is a higher return on your investment than paying off high-interest credit card debt. The money you invest will also more than likely generate a positive return over time. If at all possible, you should be saving at least this much toward retirement.

You may have heard advice to fund your 401K or other retirement plans to the maximum which could be close to 20% of your salary. This is nice to do if you have money left after paying your expenses, but chances are, you don't have that much. Definitely, if you have credit cards and consumer debt such as car loans, these debts should be paid off before sending more money to a retirement plan. Also, you should have an emergency fund established with at least several months worth of your monthly salary set aside. If you are self-employed or have an unstable employment situation such as seasonal work, you should have even more money in your emergency fund.

Maybe you're scared that you will be homeless when you retire because you have little to nothing saved right now. Remember, your kids will be grown by then and should be self-supporting unless you have a special circumstance. So, you should not need as much money to live on when you retire. Also, you may be able to save money by moving into a smaller home or apartment. And, retirement from your primary job does not mean that you won't be working at all. Many retirees work part time to raise their living standard during retirement. You can also step up your retirement savings once the kids are out of your home.

Although funding retirement plans is a good financial move, don't contribute to your retirement beyond your company's match unless you have paid off your consumer debt and saved an adequate amount in your emergency fund. You will find a way to fund your life in retirement. You may not have a luxury lifestyle, but you shouldn't have to be homeless either.