Every day, women leave their jobs to support family needs, often unaware of the long-term effects this can have on their careers and finances.

Countless women step away from their careers annually, whether for maternity leave or to care for family. Although these breaks can be fulfilling, they often come with hidden financial repercussions. It’s not just about losing a paycheck; it also involves missed career advancements, retirement savings, and more.

Have you thought about the financial implications of taking a year off? Research indicates that a 35-year-old woman earning $100,000 annually could forfeit $212,936 in salary and retirement contributions by age 67. For a 50-year-old woman, the projected loss for a year off could be around $80,000. Remember, this analysis is based on a single year away, and many find themselves out for three to five years, amplifying these financial effects.

“If you’re thinking about a career hiatus, consider how it fits into your overall career path. It’s more than just salary; it’s about potential promotions and bonuses,” explains a financial expert. “Don’t overlook the impact on retirement benefits. You could miss out on employer contributions and the benefits of compounding over time.”

Women have historically taken on caregiving roles, a trend worsened by the COVID-19 pandemic. A recent survey revealed many women have taken on more household responsibilities than their partners since the pandemic, with nearly 40% contemplating leaving their jobs or reducing hours due to caregiving challenges.

BE PREPARED

Financial advisors recommend approaching a work break with full awareness. Assess the long-term costs, including how it will affect your career and your partner. “I often see women rush into a break, then realize they need to plan for a smooth transition. I advise them to pause and consider their choices carefully,” the expert says.

To gauge the real cost of stepping away from work, examine your current salary and projected future earnings. Factor in potential raises, bonuses, and promotions. Think about where your salary might be in one, two, or three years to determine the true financial impact. Then, evaluate your retirement contributions, including employer matches, and consider how much you might miss out on Social Security contributions and increased healthcare costs due to losing employer insurance.

CREATE A STRATEGY FOR YOUR TIME OFF

Before leaving your job, it’s essential to devise a plan. Avoid relying on savings or your 401(k) to make ends meet, as this could lead to a significant financial shortfall before retirement. “Planning ahead is crucial,” advises a financial advisor.

Experts suggest building an emergency fund that covers three to six months of expenses before your break. If your partner is still employed, leverage any benefits offered by their employer. Companies have been enhancing caregiving benefits, such as flexible schedules and childcare reimbursements. Under the Family and Medical Leave Act, eligible employees can take up to 12 weeks of unpaid leave while maintaining health benefits. “Before you leave, discuss potential flexibility with your manager. Talent decisions are complex, and it’s vital to have that conversation,” the expert highlights.

DON’T NEGLECT RETIREMENT SAVINGS

Keep your retirement savings a priority during your work hiatus. If married, you can contribute to a spousal IRA, and your spouse might boost their 401(k) or 403(b) contributions to cover any gaps. If you’re single and working part-time or freelancing, consider saving in your own IRA or Solo 401(k).

Decide whether to roll over your existing 401(k) or maintain it with your previous employer. Consulting a financial expert can clarify the implications of your break and the best strategies for ongoing retirement savings. The aim is to minimize the financial impact of your temporary absence from work.

“The key is not to ignore the situation and hope it resolves itself. Prepare for the best but also plan for potential challenges,” the advisor stresses. “This way, you’ll have a safety net that protects you from overspending or making poor financial decisions.”