A recent study by Schwab has shed light on the financial obstacles faced by women who take time out of the workforce for family caregiving needs. These women are more likely to face financial difficulties and have to return to work after retirement due to insufficient funds.
The study found that 30% of women who had taken time off from work ended up returning to work after retiring. In comparison, only 14% of men who had also taken time off from work faced the same situation. This indicates that women, in particular, are more affected by the financial consequences of leaving the workforce.
According to Susan Hirshman, director of wealth management for Schwab Wealth Advisory and the Schwab Center for Financial Research, women who return to work after retirement often find themselves with inadequate funds and smaller Social Security payments. This is because their time away from the workforce and lower earning years due to caregiving result in lower overall savings.
The study also revealed that women are twice as likely as men to take time off from work while employed. The primary motivations behind this decision are family and health needs. Moreover, those who took time off were more likely to start saving for retirement between the ages of 30 to 39, which is relatively late compared to those who did not take time off from work.
Hirshman emphasizes the need for women to be more purposeful and focused when it comes to their financial lives. The responsibilities of raising a family or caring for aging parents often fall on adult daughters, and these caregiving duties have a significant financial impact. As a result, women should approach their finances with intentionality and plan accordingly.
In conclusion, the study by Schwab highlights the challenges faced by women who leave the workforce for family caregiving needs. It is crucial for women to acknowledge and address these financial obstacles by adopting a more proactive approach towards their financial well-being.
Women and Retirement Savings
When women take time off from the workforce, they not only lose their salary, but also their contributions to their 401(k) plan and their company's contributions to that plan, along with other benefits. It's important to recognize that this can have a significant impact on retirement savings.
Maximizing 401(k) Contributions
According to experts like Hirshman, women should strive to fund their 401(k) plans to the maximum amount allowed each year while they are working. By doing so, they can take proactive steps towards securing their financial future.
Being an Active Participant in Wealth Planning
Taking time off from work doesn't mean that women should disengage from their household finances. It's crucial to remain involved, be an active participant, and have open discussions about savings goals and financial planning.
Avoiding Regret and Taking Control
Many women express regret for not paying closer attention to their finances earlier on. To avoid becoming another "if only" story, it's important to take action now. Review your tax returns, attend meetings with your financial advisor, and remember that the wealth coming into the household is still part of your financial picture.
The findings of the Schwab study are based on a survey of 1,000 American investors ranging from 22 to 88 years old, with investable assets between $50,000 and $5 million or more.