What is the best way to save for retirement if I am a stay at home mom. What is a spousal IRA?

I quit my job to stay home with my daughter. But i may go back to work some day and would like to use my 401K money to continue saving for retirement in the mean time. What is the best option?

Public Comments

1. If your husband works, his earnings can be used to fund both his retirement account and yours (a spousal IRA is one that is in your name, but funded from his earnings).
2. WRT your 401K You can keep the 401K if you are happy where it is (and if your former plan lets you keep it there). But if the plan charges you fees of more than $30 a year, or the available mutual funds all have management fees over over 1.5%, you should definitely *not* be happy where it is. Note that 401K plans are allowed to charge higher fees for ex-employers than for current employees, so you should check your statements. Another option is to roll it over into a rollover IRA. The tax treatment of 401K and rollover IRA is virtually identical. If you want to move the money, just sign up with a major brokerage like Fidelity, Vanguard, or Schwab, sign up for an account and request them to get the entire account from the old trustee. You do *not* want the old trustee to send you a check. The third option is to close your 401K, take the money and spend it. Do **not** do this. You would pay a penalty and you won't have the money for retirement. WRT the future You can contribute new money to an IRA (even if you have no income this year) based on your husband's wages -- this is called a spousal IRA. Heck, right now there is still time to make a 2007 contribution for an IRA for you. Here's one little feature of the tax code -- even if your husband has a 401K at work, and he makes too much to make a deductible contribution to a traditional IRA, he can contribute to a Roth IRA and *you* can make a deductible contribution to your own traditional IRA -- which would be deducted from your joint income. It seemed kinda odd when I discovered this -- you can deduct a contribution for a nonworking spouse even if they have no wages.