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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.
That’s one takeaway from a recent Schwab study that found that 30% of women who had taken time out of the workforce returned to work after having retired, compared to 14% of men who also had taken time out of the workforce.
Women returning to work after retirement likely didn’t have enough money and may have had smaller Social Security payments because they stepped out of the workforce and had lower earning years due to caregiving, according to Susan Hirshman, director of wealth management for Schwab Wealth Advisory and the Schwab Center for Financial Research.
Women were twice as likely as men to take time out of the workforce while employed, largely driven by family and health needs, Schwab found. Those who took time out of the workforce also were 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.
“It’s a fact of life that we as women have to be more purposeful with our financial life,” Hirshman said. “Taking time off to raise a family or care for aging parents – which tends to fall on the adult daughter’s shoulders – has a financial impact on our lives. So we have to be more purposeful and focused.”
When you take time out of the workforce, you’re losing not just your salary, but your contributions to your 401(k) plan, your company’s contributions to that plan, as well as other benefits your company may offer, Hirshman said.
“It’s not about the cashflow coming in. It’s about retirement savings,” said Hirshman, who urged women to fund their 401(k) plans to the maximum amount allowed each year that they work.
“Women who take time out of their work life don’t have the luxury of making big mistakes. Be focused, disciplined, purposeful and goal-based,” Hirshman said.
“When you take time off, stress that you need to be an active participant in the wealth plan,” Hirschman said. “Stay-at-home moms sometimes don’t take an active role in the household finances. But be engaged. Ask ‘What are we saving? What are our goals?’”
“There are so many times I hear, ‘If only I had paid attention sooner.’ Don’t become an ‘if only,’” Hirschman said. “Look at your tax return. Go to the meetings with your financial adviser. When you’re not working outside the home, that wealth coming in is still part yours.”
The Schwab study came from 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.
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