You need to save for retirement even if you're not generating income. One of the best ways is by opening a spousal Individual Retirement Account (IRA), an investment specifically tailored to nonworking spouses.
Typically, the IRS requires you to have earned income to open an IRA, but the spousal IRA is designed to allow full-time parents to keep retirement accounts funded by their partners' incomes. Each person can set aside up to $5,000 a year in an IRA (if you're 50 or older, the maximum contribution is $6,000).
The Roth IRA is an incredible deal. If you just invest $4,000 a year for the next 20 years and earn an average of 8 percent annually, your Roth will be worth nearly $200,000. Keep it up for 30 years, and you'll have almost $500,000. You won't owe a penny in taxes because Uncle Sam already took his share from the money you invested. This is the opposite of most retirement accounts, such as a 401(k), in which your original investment isn't taxed but your withdrawals are.
Another nice feature is that your investment can be withdrawn at any time without penalty. Only the earnings on your contributions have to stay put for at least five years and until you're 59. Otherwise you'll get hit with taxes and penalties. The best move is to leave the money invested for as long as possible. But it sure is nice to know that in an emergency, you have easy access to your contributions.
Updated September 23, 2008