Connect Motherhood

How Much Will Your Break From Work Really Cost You? (And How To Bridge The Gaps) 

HerMoney Staff  |  May 2, 2021

Everyday, women leave the workforce to care for a loved one without a clear idea of the impact even a year will have on their career and financial future.

Millions of women step out of the workforce every year in order to have a baby or care for a loved one. While that break from work can be rewarding, it can also be costly to your financial future. Because it’s not just a paycheck you lose when you temporarily leave the workforce — it’s also career growth, retirement savings, and so much more. 

Have you ever considered how much a year off might impact your bottom line? Fidelity Investments crunched the numbers on the cost of a one-year break, and found that a 35-year-old woman earning $100,000 per year would lose $212,936 in retirement contributions and salary by the time she hit age 67. For a 50-year-old woman who takes a year-long break, the estimated loss would total approximately $80,000. And keep in mind these numbers are based on a break of a single year. We know that one year can often turn into three to five years, which can have an enormous impact on your financial future.

“If you’re considering a career break, think of your overall career trajectory. It’s not just your paycheck, it’s your promotion potential and the bonus you would get,” says Sangeeta Moorjani, Head of Employer Engagement and Retirement Solutions at Fidelity Investments. “Next, think about retirement benefits. You could lose the free money your employer contributes, and the compounding effect over time.”

Women have long carried the burden of caring for loved ones. The COVID-19 pandemic has made it worse. A recent Fidelity survey found about 45% of women say they’ve taken on a bigger share of household responsibilities compared to their significant others since the pandemic started. Nearly 4 in 10 are considering leaving the workforce or reducing their hours because of remote schooling and caregiving responsibilities.


To lessen the impact of a work break, financial experts say to go into it with your eyes wide open. You have to calculate the long-term cost, taking into account the impact it will have on your career and your significant other. “What I often see women doing is jumping in and taking a break, then they start to think of all the steps they need to take in order to ensure a smooth transition. I always tell them to stop and think through the decision,” says Moorjani. 

To calculate the true cost of leaving the workforce, you first have to look at your salary and wages now, and what you expect them to be in future. That includes potential raises, bonuses, and promotions. Ask yourself where your salary would be in one, two, or three years, in order to estimate the true cost. Next comes your retirement. Calculate your lost retirement contributions including your employers’ match. Add growth to that figure to get a more accurate picture of your potential loss. You also have to take into consideration the contributions that won’t be made to Social Security on your behalf, and any increased healthcare costs you might incur when you lose your company insurance.  


Before you step out of the workforce, you need to have a plan. You don’t want to end up tapping into your savings or your 401(k) in order to get by. These more extreme options could result in a substantial savings deficit that could be almost impossible to make up before retirement. “The biggest thing you can do is look forward a little bit and start planning for it,” says Carol Fabbri, principal at Fair Advisors. 

Before you make your move, experts recommend amassing three to six months’ worth of emergency savings. If your partner is still working during this time, make sure to take advantage of any benefits their employer offers. Even before the pandemic, companies had been adding new and improved caregiving benefits, including enhanced childcare reimbursement, flexible schedules, work shares, and family and medical leave benefits. Under the Family and Medical Leave Act or (FMLA) some employees are eligible for up to 12 weeks of unpaid protected leave each year — and your health benefits remain in place during that time. “Before you leave, reach out to your manager and see if they are able to offer you flexibility,” says Moorjani. “Talent decisions are not simple. Replacements are not simple, which is why having that conversation as you plan is so important.” 


Retirement savings shouldn’t be placed on the backburner during your break from work. If you’re married and your spouse is employed, you can contribute to a spousal IRA. Your spouse can also increase contributions to a 401(k) or 403(b) plan to make up for any shortfalls. If you’re single and are consulting or working part-time, you can save in your own IRA or Solo 401(k).  

You also have to decide if you’ll roll over your existing 401(k) or keep it with your former employer. Talking to a financial professional can help you understand the impact of leaving the workforce and the best ways to continue to save for retirement. The goal is to lessen the effect a temporary work stoppage has as much as possible.

“The biggest thing is don’t bury your head in the sand and hope it gets better. You have to hope for the best, but plan for the alternative scenarios,” says Fabbri. “That way you will have a buffer to protect yourself without blowing up your credit card or making bad financial choices.” 

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