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How to Save For Retirement When You're Raising Kids Alone

Whether you are divorced, widowed or a single parent by choice, raising kids alone can be financially challenging. There is typically no second income to rely on, and tax breaks for singles can be less generous than those for married couples.

It's tempting to think there is no way to save for retirement in this stage of life. "I understand because there was a time in my life when I felt the same way," says Shelly Church, senior vice president of investments for Raymond James in Naples, Florida. After a divorce, she found herself raising two children, then ages 10 and 13, on her own.

However, Church and other finance experts say it's crucial for single parents to begin saving for retirement immediately. A retirement plan will benefit parents in the long run and their kids as well. Here's how to save for retirement as a single parent.

[See: How to Max Out Your 401(k) in 2017.]

Stop overcompensating. Lavishing children with presents and outings to compensate for a perceived loss in their life is a normal response to an emotional situation. "Every parent wants to give the world to their child," says Bill Morse, a certified financial planner and senior vice president with Ziegler Wealth Management in Chicago.

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It's a feeling Church says she struggled with for the first year after her divorce. "I tell parents to be a little careful," she says. The desire to heap on presents can compound the problems of a tight budget or, in some cases, lead to high credit card bills. Single parents will have more money to save for retirement if they can avoid the temptation to make up for a missing parent with gifts and other goodies.

Create a realistic budget. Newly single parents should sit down and list all their expenses in two categories: mandatory expenses and discretionary ones. Then, they need to draw up a budget that ensures they are, at the very least, able to pay their mandatory expenses on one income while still putting aside a minimal amount into a retirement account each month.

Consider downsizing your lifestyle. Sometimes it's not possible to maintain a certain lifestyle after a divorce or the death of a spouse. If the budget numbers don't add up or if there is no money left over for retirement savings, it's time to consider making serious changes. "Downsizing your home is a tough conversation to have, and it is even more difficult when a single parent doesn't want to disrupt the child's life by moving," says Jack Cooney, principal of Bleakley Financial Group in Fairfield, New Jersey. However, making that tough call can lead to less stress and greater financial security, both of which are beneficial for everyone. Other difficult decisions to consider include changing a child's school, downsizing vehicles or giving up annual vacations.

[See: How to Save for Retirement on Less Than $40,000 Per Year.]

Start with whatever you can afford. Ken Moraif, a certified financial planner and host of the radio show "Money Matters," says single parents need to consider their money in terms of buckets. There is one bucket for short-term needs and everyday expenses like food and clothes. Then there is a bucket for mid-term goals like college. Finally, the third bucket is for long-term goals, including retirement.

"The biggest mistake they could make is thinking putting a little bit into that [last] bucket isn't going to get me anywhere," Moraif says. Even as little as $10 a week can get people into the habit of retirement savings. Plus, since single parents might have decades before they retire, there is plenty of time for that money to grow from an insignificant amount to something more substantial.

Prioritize retirement over college. When it comes to long-term savings goals, many single parents place themselves last. "We all too commonly see single parents readily willing to allocate their money towards college costs at the expense of retirement savings," Cooney says. However, college students have plenty of options -- from going to community college to working through school to pursing financial aid -- when it comes to paying for school. Retirees, on the other hand, have few ways to make up for a lifetime of neglected savings.

Make the most of tax-favored accounts. Single parents who have a 401(k) account should start their retirement savings there. Many employers will match a certain percentage of contributions, further boosting the balance. If a 401(k) is not an option, those with earned income can open an IRA. Contributions to a traditional IRA are tax deductible, which could increase your refund. "It might be tight on a monthly basis, but there may be money at the end of the year," Church says.

[See: 10 Tips to Boost Your IRA Balance.]

You're not being selfish. Morse stresses single parents should not feel guilty for putting retirement savings first. "The number one thing you can do for your child is to be secure in retirement," he says. "You're helping your children because they won't have to take care of you in your old age."

Moraif says it can be a tall order for single parents to cover all the costs associated with kids and save for retirement at the same time. However, he strikes a philosophical tone when explaining how he's seen parents balance these obligations. "The universe conspires to help you succeed once you've made a commitment," he says. "I don't know how it works, but it works."