When a nanny asks about retirement benefits, it’s a meaningful sign of their long-term commitment. While not required by law, offering retirement support can be a powerful retention tool and a way to show your caregiver you truly care about their well-being. Luckily, there are lots of retirement options for your nanny, allowing you to pick the one that works best for your family and caregiver. Here’s what families should know and how you can move forward.

1) Retirement Options to Consider

a) Roth or Traditional IRA

A Roth or traditional IRA can be set up by your nanny independently while you contribute through payroll. A Roth IRA grows tax-free (contributions are post-tax), whereas a Traditional IRA offers pre-tax contributions with taxes applied upon withdrawal. Contribution limits range up to $7,000 annually (or $8,000 if age 50+). A Roth IRA may be a great option for nannies who are earlier in their careers, while a traditional IRA may be a great option for more seasoned nannies who have spent more time in the workforce.

b) SIMPLE IRA

A SIMPLE IRA is an employer-established plan where both you and your nanny contribute. It’s typically structured as a dollar-for-dollar match up to 3% of wages, with a contribution cap of around $16,500 per year ($20,000 if over 50). This is a great option for families who want to offer a formal retirement plan without the complexity of a full 401(k), and nannies who want steady, matched contributions.

c) SEP IRA

A SEP IRA is fully funded by the employer, and contributions can go up to 25% of wages or $70,000 annually. Contributions are tax-deductible for you and tax-deferred for your nanny. This is a good option for higher-income families who want a straightforward, tax-advantaged way to provide generous retirement contributions.

d) SIMPLE 401(k) via GTM/NHEA

A SIMPLE IRA is a high-impact option offering pre-tax deferrals up to $16,500 (plus a $3,500 catch-up if 50+), mandatory matching (up to 3%), full immediate vesting, and investment flexibility. Contributions remain portable if your nanny moves between families. This is a great option for families who want to provide a benefit closer to what corporate employees receive and who may employ multiple staff members.

2) Why It Matters

When you offer retirement options for your nanny, you’re offering more than just a gesture of good faith. Here are just some of the benefits of offering retirement options:

• Enhances your reputation as a supportive, long-term employer.
• Helps attract and retain top-tier childcare professionals.
• Provides real financial peace of mind for your nanny’s future.

Being a household employee doesn’t come with many of the traditional benefits of an office job. When you offer your nanny retirement options, you are helping to bridge that gap, allowing for your caregiver to commit to what they love long-term, and they are, in turn, able to fully commit themselves to their work. You’re acknowledging that it’s not just a job; it’s their career. Retirement benefits are more than a financial perk. They’re an investment in your nanny’s future, your family’s peace of mind, and the stability of a trusted working relationship.

Something else to consider: for families in California, starting December 31, 2025, household employers with a W-2 employee must offer a qualified retirement plan or register for CalSavers, a Roth IRA program via payroll deductions.

3) Simplifying the Process with HomePay

Handling taxes, payroll, and compliance across these plans can be daunting without help. Our partner, HomePay, offers streamlined services (i.e., processing legal pay, payroll deductions, and tax filings), making it easier for families to include retirement contributions securely and accurately.

Supporting your nanny’s retirement isn’t just a financial decision. It’s a reflection of the value your family places on their dedication and service. Whether through an IRA, SIMPLE IRA, SEP IRA, or SIMPLE 401(k), thoughtful planning today can build long-term security and loyalty for tomorrow.