Nearly 4 in 10 women are considering either scaling back their work hours or leaving the workforce due to increased caregiving responsibilities during the Covid-19 pandemic, according to data from a recent survey of 1,902 adults conducted by Fidelity, 951 of whom were women.
Of those women, 42% said they are considering stepping back from the workforce due to homeschooling needs.
At the same time, more women are engaged with their finances than they were before the pandemic, Fidelity finds. There was a 41% increase in women who sought out financial advisory services on their own (not through their employers) compared to the previous year.
When women take time off from working, they’re not just losing their take-home pay. They also stop contributing to employer-sponsored 401(k) plans and lose any employer match, which could potentially put them behind on saving for retirement.
Fidelity calculated how much women’s retirement savings would be impacted by taking just one year off from work. The calculations assume you were saving 9% of your salary per year and earning a 3% employer match.
Here’s what taking a year off would mean to your retirement savings:
- If your salary is $50,000 a year and you decide to take one year off, your retirement savings would be reduced by $106,469.
- If your salary is $75,000 a year and you decide to take one year off, your retirement savings would be reduced by $159,702.
- If your salary is $100,000 a year and you decide to take one year off, your retirement savings would be reduced by $212,936.
If you have a choice in whether or not to take time off of work, it can be worth considering how it would impact your finances long-term. It’s important to understand what you are walking away from when you leave the workforce.
Another factor to consider is career growth. If you choose to go back to work after taking a break, it can be difficult to find employment at the same level and the same compensation.
Of course, for many women it’s not a choice. The Covid-19 pandemic has disproportionately impacted women and forced many families to make tough decisions.
Saving for Retirement
About 70% of women told Fidelity that they are stressed about their long-term savings and investments. For those who are still able to work, experts say it’s important to start saving for retirement as early as possible.
If your company offers a 401(k) plan and an employer match, you should consider enrolling. It’s an easy way to get started saving. To have enough money in retirement, we recommend saving between 10 - 15% of your salary over the course of your career.
If that number seems too high or out of reach, you can start with smaller increments, even 1% or 2% of your salary, and increase your contribution bit by bit. If your employer offers a match, you should try to contribute enough to qualify for that match, which is essentially free money.
If your finances are not where you would like them to be, what are you going to do about it?
April is Financial Literacy Month. This is a great time to start picking up the pieces and learn how to rebuild with confidence. After all, a little careful preparation could go a long way.
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Gowdy Financial Group, LLC., is a Fee-Only, Financial Advisory firm dedicated to helping women, from all backgrounds and income levels, get out of debt, save toward your goals and enjoy the freedom that comes with being in control of your money. "We don't sell products; we provide solutions. Your Goals. Our Solutions." Serving Clients Nationwide. Schedule An Appointment.