Financial moves when you have a child later in life

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.

Jean Chatzky

About Jean Chatzky

Jean Chatzky, the financial editor for NBC’s TODAY show, is an award-winning personal finance journalist, AARP’s personal finance ambassador, and a contributing editor for Fortune magazine. Jean is a best-selling author; her eighth and most recent book is Money Rules: The Simple Path to Lifelong Security. She believes knowing how to manage our money is one of the most important life skills for people at every age and has made it her mission to help simplify money matters, increasing financial literacy both now and for the future. In April 2013 Jean launched Jean Chatzky's Money School , a series of college-style, interactive online personal finance courses that give men and women across the country the opportunity to learn from and interact directly with her. Jean lives with her family in Westchester County, New York.
This entry was posted in Budgeting & organization, Financial info, Retirement planning and tagged , , , , , , , , . Bookmark the permalink.
Beyond Today Blog

Leave a comment

Your email address will not be published.

Your questions and comments really matter to us! We're glad you want to join the conversation and connect with other readers. All we ask is that you keep some simple guidelines in mind:

  • Stay on-topic. Only comments that are related to the subject of the blog entry will be posted.
  • Be respectful. It's okay if you disagree with a post or comment, but please, no personal attacks or offensive language.
  • Maintain your privacy and confidentiality.Please do not provide any of your specific account details or other personal information! If you have immediate service needs, please contact your bank representative or Customer Service.
  • Wells Fargo team members: In the interest of full disclosure, if you are a current employee of or are associated with Wells Fargo, please make note of your affiliation.