Financial tips for women facing a career pause
Taking time off from your career can be a golden opportunity to raise children or travel. But while you’re on leave, you may give up earnings, benefits and promotions. With careful planning and preparation, you can make the most of your time away and return to your career ready to move forward. Here are seven tips so you can keep your finances secure before, during and after your time away from the workplace.
1. Track your finances before your career break
Before taking time away from work, examine your current finances and budget. Try to pay down debt, understand your spending and rethink what your budget looks like without a steady income stream. Consider living on a reduced budget before the change occurs and saving the difference in an emergency savings fund.
of women have taken a significant amount of time off to care for family.
Source: Pew, 2013
2. Start saving for retirement early on
An early and aggressive start to your retirement savings can help make up for a lack of contributions during a career break. Before you leave your job, invest as much as you can in an employer-sponsored retirement plan, such as a 401(k) or 403(b) account, or an individual retirement account (IRA). The sooner you start, the more time your contributions have to grow, and the more you benefit from the power of compound interest.
Power of saving early
Waiting 5 years to start saving could mean you have $75,000 less at age 65.
*Assumes investment of $250 per month with 6% rate of return
3. Keep saving while you’re away
Even if you can no longer contribute to a workplace plan, you can stay on track for retirement by taking advantage of other tax-deferred accounts. For instance, if you are married and your spouse works, you may be eligible to contribute to a spousal IRA. If you earn income from freelancing or consulting, you may be able to contribute to a traditional or Roth IRA, an SEP IRA, a SIMPLE IRA or an Individual 401(k). Women often face greater retirement challenges, so try to make saving and investing a priority.
4. Stay engaged during your break
If you plan to return to your career, one smart strategy is to remain engaged professionally. Depending on your industry, part-time freelancing or consulting could help you keep a foot in the door while also giving you a flexible schedule. You also stay in touch with professional contacts, which is helpful when you return to the workforce full time.
5. Make a new budget before returning to work
While returning to work boosts your income, it can also trigger additional costs such as child care, commuting and clothing expenses. So before going back to the office, take a fresh look at your budget to make sure it reflects your new reality. Also, find out whether your employer offers benefits such as a Flexible Spending Account for dependent care, workplace-funded child care or tax-free commuter funds.
What happens to your earnings after you have a child?
Source: Third Way, 2014
6. Address practical workplace concerns
If you are returning from maternity leave, you may need to ask your supervisor about concerns such as whether there is a place to pump if you’re breast-feeding. You also may need a plan to accommodate taking time off to care for a sick child or other dependent family member. Find out if your employer has a flexible work policy or if you can work from home when necessary.
7. Make the most of your time away
Despite the financial challenges a career break can bring, taking time away from work to care for family or pursue a passion can be rewarding. With careful planning and preparation, you can make the most of this time and return to your career ready to move forward. If you’re starting a new job, learn more about how to make the most of your employee benefits.
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