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Can you afford to be a stay-at-home parent?

Here are a few issues to consider—plus some strategies that could help you manage your finances during your career break

EVERY WORKING PARENT HAS PROBABLY EXPERIENCED that push-pull between parenthood and career. You can’t help but feel it every time you clock in to your job—whether you’re working from home or at an outside workplace. There’s always that moment, especially when your kids are little, when you wonder, “Is working worth it?”

On the one hand, few things compare with the sense of fulfillment you get when you’re present with your child full-time. According to the 2016 National Parent Survey published by Zero to Three, 91% of all parents say parenting is their greatest joy.1 On the other hand, you can derive great personal satisfaction, as well as income, from your career.

The good news is that more and more employers are creating programs to smooth the return to work for stay-at-home parents.

That’s why mothers and, to an increasing degree, fathers will always wrestle with the question of whether to continue working or focus exclusively on their children. It’s a choice that can be difficult and very personal—and if you’re going from two incomes to one, that can have a profound effect on your daily life. While mothers and fathers are both likely to make shifts in their work life, women take 10 times as much time away from work than men do. 2 The decision doesn’t come lightly for fathers, either. Seven in 10 people say it’s important for new babies to have equal time to bond with their mothers and fathers.3 And 59% of fathers say they took less time off than they needed or wanted to.4 Beyond the immediate concern of living on just one income are broader concerns such as: How would a career break affect our family’s long-term financial security? What about our ability to save for our children’s education—or our own retirement? Will I lose career momentum if I take a few years off?

“The reality is, there are trade-offs and stresses either way,” says Stephanie Coontz, director of research and public education at the Council on Contemporary Families. Here are some insights that may help.

Will taking time off to raise my children hurt my earning power later?

That’s a legitimate concern. According to a study conducted by Bright Horizons, 72% of working parents agree that women are penalized in their careers for starting families, and 31% of moms report being held back from leadership roles due to negative attitudes. Also, nearly half of employed Americans perceive working moms to be overall less devoted to their work. 5 A 2018 report by Katherine Weisshaar of the University of North Carolina discovered that women applying for new positions after voluntarily leaving the workforce were granted interviews half as often as women applicants who were unemployed. Employed women got callbacks more than three times as often as those returning from time off.6

Both men and women should consider what the job market will look like when they are ready to return to work. The good news is that more and more employers are creating programs to smooth that return for stay-at-home parents. It also helps to continue networking. And don’t rule out the option of telecommuting at least some of the time—that can give you a foot in the door when you’re ready to return.

Are there any financial advantages to taking a career break?

“If you're not able to contribute to a
401(k), your spouse should try to maximize their contributions, to save for both of you.”—Debra Greenberg, Director, Retirement and Personal Wealth Solutions, Bank of America

You’ll save on commuting costs, and your clothing budget will probably go down. But there’s one huge advantage: You won’t be on the hook for childcare expenses. In 2018, according to the advocacy group Child Care Aware of America, the average annual cost of having an infant in day care exceeded annual tuition and fees at a four-year public college in 28 states and the District of Columbia. Every little bit helps. Based off of 2015 research and adjusting for inflation, the USDA estimated that in 2020 it cost $284,570 to raise a child through age 17.7

Could my career break affect our retirement saving plans?

According to “Women and Financial Wellness: Beyond the Bottom Line,” a 2017 Merrill/Age Wave study, parenting poses challenges for career trajectories and finances, particularly for women, who are more likely to make trade-offs for family than men are. The study also found that mothers often experience a “mommy penalty,” a pay gap that is three times that of non-mothers due to lost income and missed opportunities for promotions caused by breaks from the workforce.

Plus if you’re earning less while spending more, you are likely contributing less to your retirement fund. And if you have stepped back from the workforce, you are forgoing any matching contributions to a 401(k) that might otherwise be provided by your employer.

Still, “if you’re not able to contribute to a 401(k), your spouse should try to maximize their contributions if possible, to save for both of you,” says Debra Greenberg, director, Retirement and Personal Wealth Solutions, Bank of America. Once you each turn 50, you can take advantage of a catch-up provision that allows you to contribute greater amounts to your 401(k)s or IRAs.

Your spouse can also contribute to a spousal IRA for you. And if you do some work while at home, you may be entitled to contribute to a SEP IRA for small business owners.

What about Social Security? Will my benefits be reduced if I don't work for a few years?

“Social Security benefits are calculated based on your 35 highest earning years, so if you only left for a few years, that should not have a great impact on your benefits earned at retirement,” says Ben Storey, director, Retirement Thought Leadership, Bank of America. Bear in mind, though, that if you lose earning power on your return to work and don’t catch up over time, you could begin to feel some impact.

With only one income, can we still save for our kids' college education?

In most cases, you can catch up on college savings when you go back to work. “While priorities may vary from one person to another, it may be prudent to save for retirement first,” Storey says. After all, you are responsible for your own retirement, and there may be options available to help you when paying for college.

In the end, your heart is going to have a big say in this, but understanding how the choice can affect you financially will help you make a more clear-eyed decision. “In my experience, people who acknowledge and embrace the trade-offs—on either side—tend to be the most content with whatever they decide,” Storey says.

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1 “National Parent Survey Overview and Key Insights,” Zero to Three, 2016.

Pew Research Center, 2019.

Pew Research Center, 2017.

Pew Research Center, 2017.

Modern Family Index 2018, Bright Horizons, 2019.

From “Opt Out to Blocked Out: The Challenges for Labor Market Re-entry after Family-Related Employment Lapses,” American Sociological Review, January 10, 2018.

“The Cost of Raising a Child,” U.S. Department of Agriculture, February 18, 2020.

“Bank of America” is a marketing name for the Retirement Services business of Bank of America Corporation.


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