Financial Challenges for Women Who Take Time Off for Caregiving
Women who take time out of the workforce for family caregiving needs face a number of financial obstacles and face an increased likelihood of having to return to work after retirement due to lack of sufficient funds.
Study Findings
- 30% of women who had taken time out of the workforce returned to work after retirement
- 14% of men who had taken time out of the workforce also returned to work after retirement
Reasons for Returning to Work
According to Susan Hirshman, director of wealth management for Schwab Wealth Advisory and the Schwab Center for Financial Research, women returning to work after retirement likely didn’t have enough money and may have had smaller Social Security payments due to stepping out of the workforce and having lower earning years because of caregiving.
Women were twice as likely as men to take time out of the workforce while employed, largely driven by family and health needs.
Those who took time out of the workforce were also more likely to have started saving for retirement relatively later, between the ages of 30 to 39, compared to those who didn’t take time out of the workforce.
The Importance of Financial Planning
When women take time out of the workforce, they not only lose their salary but also their contributions to their 401(k) plan, their company’s contributions to that plan, as well as other benefits their company may offer.
It’s crucial for women to be purposeful and focused with their financial life. They should fund their 401(k) plans to the maximum amount allowed each year that they work.
Being an Active Participant in the Wealth Plan
Women who take time off from work should stress the need to be an active participant in the household finances. They should be engaged and ask about savings and goals.
It’s important not to neglect financial matters and regret not paying attention sooner. Women should look at their tax returns, attend meetings with their financial adviser, and remember that the wealth coming in is still part theirs even when they’re not working outside the home.
About the Study
The Schwab study was conducted through a survey of 1,000 American investors between the ages of 22 and 88 with investable assets between $50,000 and $5 million or more.
