Many women, at some point in their careers, consider leaving the workforce to care for someone they love — 75% of all caregivers are women. In this week’s episode, we’ll be talking about what happens when we take a step back to give care to those closest to us. How do we do it? How do we make a plan to eventually get back to work? How do we compensate for the lost income and the savings opportunity while still ensuring that our parents, kids and spouses get the care that we want so much for them to have?
That lost savings opportunity can be very, very real. According to new analysis from Fidelity, even a one year career break could potentially mean almost $160,000 less by the time we hit retirement. Because when we do leave the workforce, it’s never just the salary we’re losing. We’re also losing out on career growth, opportunities to network, social security credits, retirement contributions, and so much more.
With COVID in our lives, 45% of women now say they have taken on an even larger share of household responsibilities compared to their significant other, and 23% of women say they’ve had to put in more hours working from home than they did in the office. Perhaps it comes as no surprise, then, that nearly four out of 10 working women are actively considering leaving the workforce or reducing their hours due to increased caregiving responsibilities, according to the research from Fidelity. Frankly, it’s just too difficult right now to juggle work, childcare, homeschooling and responsibilities with aging parents along with everything else that life is throwing at us. Kathy Murphy, President of Personal Investing at Fidelity Investments, joins us this week to sort through all of this data, and discuss what a career break might mean for you.
“Women are not only leaving the workforce at a higher rate, but they’re also feeling the impact of everything that’s going on more intensely. 60% of women say they’re feeling much more stressed, worrying about the obvious health concerns about COVID, but also the emotional wellbeing of their families, job security, financial stress, their parents, the upcoming holidays, it’s all weighing on people,” Murphy explains.
Listen in as Kathy gets personal with Jean and shares details on her own family journey with a son who is doing remote learning, and a mom with Alzheimer’s. The pair also then break down the costs associated with stepping out of the workforce, and how to factor in that number when you’re making your “Should I stay, or should I go?” decision.
“There’s no right or wrong choice. It’s not necessarily just one path forward,” Murphy says. “A financial advisor or a financial planner can help people put those pros and cons on paper, help you understand the financial consequences of different decisions, and maybe give you some peace of mind and control over the path you want to take.”
Murphy highlights ways that you can still save for retirement even if you elect to leave the workforce — for example, there is a spousal IRA, there’s an option to add more into the savings of your spouse’s 401(k) or 403(b) if they are still working (max out if you can!), and there’s also the option to shift to a part-time schedule if it’s something you’re able to swing, and something your employer will agree to.
Jean and Kathy also dive into some positive data — despite women shouldering a greater burden during COVID, 67% of them have become more active in managing their money since the beginning of the pandemic, according to the survey from Fidelity.
“What are women doing over the last six months to get more engaged? They’re building up emergency savings, taking steps to create or update a financial plan, and they’re looking to better educate themselves on different investments that they can take on,” Murphy says.
Kathy also shares what Fidelity is doing right now to help women of all ages, and discusses the new online educational resources that Fidelity has created for their female clients. (You can find it at www.Fidelity.com/WTM! )
In Mailbag, we hear from a listener who says she’s terrible at keeping an emergency fund (she puts any excess cash she has toward her debt) and she needs advice on how to ramp up those savings. We also hear from a woman who is considering a “second act” career, but is nervous to make the leap. Lastly, Jean advises a woman who is helping set her mom up for a financially healthy retirement. In Thrive, Jean dishes on how to ask your boss to be reimbursed for essential work-from-home expenses.
This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416
Kathy Murphy: (00:01)
In this pandemic, I think employers have seen the importance and the benefit of being more flexible, of helping their employees more. And so, call your employer and say, hey, if I do want to continue to work, but I can’t do it at the pace I’m doing it, are there more flexible arrangements? Is there a part-time schedule that can work for me? Is there job sharing? And what about other benefits that can help me manage through the situation?
Jean Chatzky: (00:38)
HerMoney is supported by Fidelity Investments. Whether you’re celebrating a milestone or adjusting to the unexpected, Fidelity’s there to help you navigate life’s important moments with confidence. Visit Fidelity.com/HerMoney to learn more.
Jean Chatzky: (00:57)
Hey everybody. I’m Jean Chatzky. Thank you so much for joining me today on HerMoney. I am quite excited actually for today’s episode, because we’re going to be talking about something that I think every single working woman has done or has considered, or has struggled with, myself included. We’re going to be talking about what happens when we leave the workforce to care for the people that we love most. Because 75% of all caregivers are women. And that was before the pandemic hit. When those closest to us need us to give the care they require, or when budgets dictate that there is simply no other option. What do we do? How do we do it? How do we make a plan to eventually get back to work? How can we compensate for the income and savings opportunity we’ve lost, while still ensuring that our parents, our kids, our spouses, our siblings, our friends, get the care we want so much for them to have. Because, let me tell you, that last savings opportunity can be very, very real. According to new analysis from our sponsor, Fidelity, even a one-year career break could potentially mean almost $160,000 less by the time we hit retirement. We’re going to dig into that number. Because although, when we step out of the workforce, we may say, it’s just one year. Or it’s just three years or five years or whatever. It’s never just the salary we’re losing. We’re also losing out on career growth and opportunities to network and social security credits and retirement contributions. The list goes on and on. Here’s a hard stat to keep in mind. Between August and September of this year, mid-pandemic, 1.1 million workers dropped out of the labor force. 80% of them were women according to the study from the National Women’s Law Center. And that number may continue to grow. The Fidelity research also found that nearly four in 10 working women are actively considering leaving the workforce or reducing their hours due to increased caregiving responsibilities. Why? Well, frankly, we are just exhausted. We cannot keep up this pace anymore. It’s too difficult right now to juggle work and childcare and homeschooling and parents, along with everything else that life is throwing at us. And that seems to be growing exponentially as COVID goes on. 45% of women say they have taken on an even larger share of household responsibilities compared to their significant others since the onset of the pandemic. Don’t get me started on that. And 23% of women say they’ve had to put in more hours working from home than they did in the office. We’re going to unpack all of that and discuss what a career break might mean for us. And I am so excited to be joined once again by Kathy Murphy, President of Personal Investing at Fidelity Investments. You all know her. She’s been here before. And she is a terrific person to just sort it all out with. Hi, Kathy. Nice to see you.
Kathy Murphy: (04:25)
Nice to see you and to be back on HerMoney. I have to say I’m a little exhausted and stressed, just listening to you. And we’ve gotta figure out how to turn the corner and help everyone.
Jean Chatzky: (04:34)
Yeah, no question. I mean these stats, they are shocking. But at the same time, I think for our listeners, who are in the same boat that we’re in, I think they’re not all that surprising. So, tell me about this new survey and what you’re hearing from women at Fidelity.
Kathy Murphy: (04:53)
Yeah, you know, we did this survey because of everything you just talked about. And we’ve seen it with our millions of clients, as well as with our associates that are women. Women who identify as caregivers are being impacted in so many different ways, whether it’s managing work and family and trying to figure out their finances, or helping with remote learning or older parents. And so, in addition to the staggering numbers you talked about, and the fact that four and 10 are still actively considering stepping back due to increased caregiving responsibilities, they’re also looking at, what are the other burdens that they have to assume. Women are not only just leaving the workforce at a higher rate, but they’re also feeling the impact of everything that’s going on more intensely. 60% of women say they’re feeling much more stressed, worrying about the obvious health concerns about COVID, but also the emotional well-being of their families, job security, financial stress, their parents, upcoming holidays. You know, it’s all sort of weighing on people. And so many people are feeling challenged in different ways right now. Now, I will say that the pandemic has caused women to focus more on their finances. 67% of women say the pandemic has served as a catalyst to prioritize their finances and become more engaged. And Jean, you and I both know that that has been a historical issue with women, in terms of really learning more and trying to take control. As we talk to millions of women across this country at Fidelity, we see that they’re being more engaged. They’re calling us more. Engaging with us digitally. They want help. They want advice. They want somebody to talk to, to help them get on the best path for them, which of course is different for each person.
Jean Chatzky: (06:47)
Of course. And I have to say, I think that is a thread that we’re seeing with the letters that we’re getting in our mailbag segment. That women are digging in, in a more intense way than perhaps we’ve heard in the past. I was hoping that you wouldn’t mind getting personal with me for a bit. I know you have your own experience with caregiving in your family. Can you tell us a little bit about your struggles and how you put it all together?
Kathy Murphy: (07:16)
Yeah. So, thanks for asking it. I don’t want to make this a therapy session for me, but I think this has hit me more from the perspective of older parents. So, my son is 18. Remote learning. He can figure that out largely for himself. The college application process has been a different experience. But on the caregiving side, my mom has Alzheimer’s. She’s in an assisted living center. She was rushed to the hospital, unrelated to COVID. But then contracted COVID while in the hospital. And that began a journey over a couple of months of getting into a rehab center and then trying to get her back to her assisted living place. And in the meantime, the assisted living place kind of was falling apart. And it’s so hard for our parents, elderly people, whether they’ve got strong cognitive ability or not, this has been an isolating experience for them. And particularly for people who are confused and need extra help. And I’ll just say, Jean, even more recently, my mother-in-law has earlier stages of dementia. She broke a bone in her back and we’ve been in and out of the hospital with her over the last two months. And a lot of the care has fallen to her 83 year old husband. And we could have a whole session just on how to deal with elderly in this type of environment. But that’s my personal story.
Jean Chatzky: (08:36)
Yeah, it is so frightening. My stepfather has been in and out of the hospital with a couple of issues, unrelated to COVID, but during this time. And it’s just, I mean, you just hold your breath when they have to go to the hospital. For anything, because you can’t go with them and you can’t be there. And it’s yes, we could go down this rabbit hole and we could land there a long time. But let’s not do that. Let’s talk about the cost of stepping out of the workforce. When you are trying to figure out that, should I stay or should I go, decision it seems like 40% of women are right now. How do you do that?
Kathy Murphy: (09:12)
It’s a very emotional decision. And it’s one that’s not made lightly for anyone, both for financial reasons and for career reasons. Women have made so much progress in the workforce. We’ve got a ways to go still. But people don’t want to step out of the workforce again, for personal, career and financial reasons. And so, when they’re feeling sort of the walls closing in and stress elevating, whether it’s because of a job change, a job loss, the decision to step back is really tough. So, how can people like us help? I told you my story and it’s one where, again, you can find yourself making knee-jerk reactions based on the more emotional and stressful concerns. A financial advisor can help provide you with that objective viewpoint, about pros and cons of different options, knowing that there are options. It’s not necessarily just one path forward. And so, some of the things that you have to think about more objectively as you decide which path you want to be on, and knowing that there are different paths, are your take-home salary. People think, well, if I just step out of the workforce for a year, my take-home salary is what I lose. No, you mentioned career trajectory. I think more on the financial side, planning for retirement. A lot of companies provide what you and I call free money to their employees in terms of the match of a 401k. That goes off the table. The loss of investment growth – the compound effect of your investments over time – that becomes a challenge. And then social security – how much you will get from social security. So, a financial advisor or a financial planner can help people put those pros and cons on paper, help you understand the financial consequences of different decisions, and maybe give you some peace of mind and control over the path you want to take.
Jean Chatzky: (11:05)
Yeah. I threw a big number out there when I was introducing the show. $160,000. And I just want to explain where that came from. So, you, in doing this research, put together this hypothetical scenario, Fidelity did, and this was a 35 year old woman making $75,000 a year who was thinking of leaving her job, and taking into account those factors that you just mentioned. I mean, it assumed that this employee was putting about 9% a year into a 401k, getting a 3% match, which is typical. Salary growing at a little over 1% a year. I mean, this is possible. And I think we think, well, it is, it’s just a little bit of time. But that little bit of time, particularly when you’re young, can be really additive. But, putting numbers to the side for a second, I mean, sometimes a career break is necessary, right? So, sometimes we just have to do this in order to keep everything going at home or with our parents. So, what can we do, if we are taking that break, to keep ourselves on track with our savings goals for the future?
Kathy Murphy: (12:17)
Yep. As you were talking, I was thinking, I’m one of six kids. And so, I see both my sisters and my sisters-in-law dealing with this. And they they’ve made different choices. There’s no right or wrong choice. It’s just, again, what can you do to help you and your family. So, number one is, if you or your partner decide to leave the workforce, you can still save for retirement even without that 401k, for example, with what we call spousal IRA – an individual retirement account, not connected to your employer – to continue saving where you can. So, that’s one. If your spouse is working and has access, or your partner has access to a 401k or 403B, you can consider adding more to that savings because of the compound effect of those savings over time, and making sure at least that your partner has maxed out their contribution, so they’re getting all the employer money that they possibly can. A third thing that, you know, I think people overlook, but in this period of time, I think more employers are open to it, and that’s what about shifting to a part-time status? You know, where you can, for example, continue to contribute to your 401k. Another area that’s often overlooked is retaining healthcare benefits. Because if you have to go and pay for those, if you get out of the workforce, that’s even more money. And so, again, Jean, I’d say having a financial advisor like Fidelity that can help you think through these various options and go through a financial plan. Break it down so that you can see, here’s my budget. Here’s my debts. Here’s where I possibly could save. Particularly in this COVID environment where we can’t get out as much, that might be helpful.
Jean Chatzky: (13:57)
I was listening to you talk about being one of six kids and mentioning your sisters and your sisters-in-law, but not your brothers. Why is this always on women? I mean, why is it that in 2020, because I’m thinking about it in terms of my family, right? I’m the only girl. I have two brothers. They are lovely responsible men. And yet, I know this is on me.
Kathy Murphy: (14:24)
Yeah. It’s cultural I guess, if it’s not specific to the US. But there is no question that women assume a broader range of responsibilities. And so, that includes, not just pressure about how to deal with the kids and not this remote learning. You know, one of the reasons there’s been such an Exodus of women in the workforce to the point you were making it at the top of the podcast, when kids have to be home full-time, someone’s got to help them through that process. And women feel more compelled. They’re caregiving with the elder parents. There’s no doubt the statistics and all the data show that the older daughters take care of the parents when they need them. And even, ironically, the financial planning. So, in any event, it’s something that hopefully, Jean, as we move through this pandemic and see the effects of this, and as women get more engaged in their finances, we can have broader conversations with our spouses and partners about that sheer responsibility.
Jean Chatzky: (15:24)
Yeah. From your mouth, right? I hope so. I want to get back to the importance of planning in and to touch a little more on the importance of taking care of ourselves, so that we can continue to do all of these additional things that we’ve taken on. But before I do that, let me just remind everyone, HerMoney is proudly sponsored by Fidelity Investments. Some of life’s important moments are planned for way in advance, while others, we don’t see coming. And, as always, Fidelity is here to help you navigate both the joyous and the unexpected events with confidence. Their resources, their guides, their tools can help guide you through important financial decisions when you need it most. You can visit Fidelity.com/HerMoney to learn more. And Kathy Murphy, President of Personal Investing at Fidelity is my guest. While I have you here, we are coming up on almost five years of this podcast. And I just want to say, thank you. Because you guys have really stepped up, and we hear gratitude from our listeners every single day, but I want to make sure you know that too.
Kathy Murphy: (16:31)
Well, Jean, I appreciate that. As you know, we share a passion for helping women reach their full potential, including their full financial potential, by helping them get engaged. And so, you and I have talked a lot about this. Women have been underserved by the financial services industry and myself and Fidelity are committed, passionate about changing that.
Jean Chatzky: (16:55)
Yeah. Well, we are right there with you. So, let’s help these women take care of themselves. According to the survey that we were talking about earlier, and, nearly 50% of women say they have cut back on self care since the start of the pandemic. Nobody can see me right now, but if they could, they could see my unmanaged cured nails. And they could see the fact that my hair is about four different colors. But that’s just the way it is in a pandemic. About the same number say that they’re feeling cut off from friends and family, while more than 40% say they’re now sleeping less. Does all of this mean in your estimation that this Exodus from the workforce is inevitable or are there things that we can do to step up on the self care?
Kathy Murphy: (17:44)
Look, I think it’s really important to continue to step up on the self care. I’m mentor for a global program and a woman that I mentored from another country, and executive, her husband died early. And she said to me, I finally understood what they really mean when you take off on a plane and they go through that little security briefing and say, put the mask on yourself before you can help others. The same principle applies here. And, you know, Jean, I think you and I agree, there’s no judgment in terms of what decisions that people make. You’ve got to do what’s right for you and your family, that gives you peace of mind. And so, if you are thinking about taking a career break, again, I want to underscore the importance of having a partner that can walk you through some of the different considerations. First and foremost is with your employer. I mentioned that, you know, in this pandemic, I think employers have seen the importance and the benefit of being more flexible, of helping their employees more. And so, call your employer and say, hey, if I do want to continue to work, but I can’t do it at the pace I’m doing it, are there more flexible arrangements? Is there a part-time schedule that can work for me? Is there a job sharing? And what about other benefits that can help me manage through this situation? I’ll tell you at Fidelity, since March, we’ve really expanded the range of things we’re doing to try and help our associates. So, much more part-time opportunities, even with the areas where we’re really, really busy. It’s better to have part-time workers than to lose them all together. We’ve got relief days. So, take some time for yourselves. And no judgment again there. We’ve got childcare coordinators to help people through the myriad of issues, whether it’s remote learning for school or toddlers, as well as another area that’s probably not talked about enough, is access to mental health services in this environment.
Jean Chatzky: (19:44)
Yeah. I’ve had the opportunity to hear from a number of HR professionals at large corporations. And those are the two words I keep hearing over and over again – that mental health benefits are becoming more accessible and more of a focus, which I think is really fantastic. That number that you threw out earlier, the 67% of women who’ve become more active in managing their money since the beginning of the pandemic, that actually has put a smile on my face. So, what does that look like?
Kathy Murphy: (20:14)
Women have engaged in a lot of different ways. And a lot of this is about women feeling more confident, more aware of their options and ultimately more in control of their situation and how they can move forward. So, what are women doing in the last six months to get more engaged? One is building up that emergency savings. And if you’ve have emergency savings, turning your savings into investments. A lot of people, 42% of women, are taking steps to create or update a financial plan. That plan is sort of your navigation. That is your control in terms of how you feel about your situation. 36% of them are looking to better educate themselves on different options or different investments that they can take on. And then, becoming more comfortable talking about money. This is why we do this. 35% have gotten more comfortable. And as women’s share with each other their concerns, as well as their approaches, again, it gets people, women on a better path. So, we’re seeing, Jean, at Fidelity, a huge increase in the number of women that are calling us, whether it’s because they have a 401k with us or a 403B. Or they’re an individual investor with us as part of their family. So many women calling to say, can I just talk with you? Can I check in on my plan? Can you help me create a plan? And then the other thing that we’re doing is, we’re putting a lot more resources online, at Fidelity.com, to make sure that women specifically, so these are efforts for women specifically, to see videos, to get educational materials. I personally love checklists. So, I’ve made sure at every life stage, for every life event, women have specific checklists. And we also have online events, a specific series called Women Talk Money, that is done weekly, where women just come together and for an hour with our financial advisors, just in a community, talk about different money and financial events.
Jean Chatzky: (22:12)
That’s fantastic. And we can find all of those at Fidelity.com.
Kathy Murphy: (22:16)
At Fidelity.com/WTM. And if you just go to Fidelity.com, you’ll be able to find it. But we’re trying to do as much as possible to help women in whatever way is useful to them. Women learn in different ways. So, we’ve tried to really do a lot of different things that might be useful to segments.
Jean Chatzky: (22:33)
The other thing you’re doing, and this has just been striking to me in the midst of a pandemic, is hiring like crazy. We get emails and letters from listeners who say, you know, I think I’d like to be a financial advisor. I think I’d like to work in this industry. Well, you guys are hiring 4,000 people.
Kathy Murphy: (22:53)
More and more people have turned to Fidelity this year. We’ve had a 50% increase in the number of new clients joining Fidelity this year. And that has caused us to say, we’ve got to make sure we’re there for them. And so, in the midst of a pandemic, we decided very quickly, we need to continue to hire more and more professionals to help more and more people. And so, to your point, we would love any of your listeners that want a career in financial services to call us, because we’re hiring across the country, in our branches, as well as in our regional centers, in order to help more people. And we have a specific focus on women and people of color as we’re continuing to hire.
Jean Chatzky: (23:34)
Well, I love that. We’re going to get some people some jobs. This is fantastic. Kathy, this was a great conversation. Is there anything else that I missed in this research? I think we got it.
Kathy Murphy: (23:43)
We definitely got it. I guess I would just say, Jean, you know, in the midst of this pandemic, and we’re heading into a period here in November, December, January, where despite some good news on the vaccine front, it looks like it might get a little more challenging before it gets easier. And so, I would just say to all the women that are listening, call us at Fidelity. 1-800-Fidelity. We can help you feel better engaged, more in control, get you the plan that will help serve you and your family in the best possible way. We’re here to help you. And I want to make sure people know that there are ways that they can take steps to feel less stressed and hopefully even less exhausted.
Jean Chatzky: (24:27)
Oh, love it. Kathy Murphy. Thank you so much. Happy holidays to you.
Kathy Murphy: (24:31)
And to you as well, Jean. And to all your listeners.
Jean Chatzky: (24:34)
Thanks. And we’ll be right back with Kathryn and your mailbag.
Jean Chatzky: (24:41)
And HerMoney’s Kathryn Tuggle has joined me now. Hi Kathryn.
Kathryn Tuggle: (24:47)
Hey Jean. That was a great episode. I always love Kathy’s insight. I do too. I think, she’s not just really smart, which she is of course, but she’s really candid. And she gets what it’s like to work your way up. She gets what it’s like to struggle. She gets what it’s like to be a wife, and a mother, and a daughter, and a sister, and a colleague, and a boss, and a friend. And so, I just think she brings a lot of really incredible viewpoints to a single conversation. I had that same thought when she was talking, particularly when she was sharing that situation about her in-laws that she gets it. She gets what it is like. The daily juggle, the daily struggle, and what it’s like to be a woman with a career that you love and a family that you love.
Jean Chatzky: (25:41)
Yeah. And I know that she keeps herself on top of it. She may have talked about this on the show before, but for years now, she has just made it a habit to listen to hours of tapes of client calls every month. So, much like we get a sense of what people are thinking about and struggling with, via the letters that we get into the mailbag, and we use that to curate what topics we’re going to do on our shows, she keeps on top of what customers are feeling and thinking, by really listening to them. Listening to their voices, listening to their emotions, listening to their situations. I think it gives her a lot of perspective.
Kathryn Tuggle: (26:28)
I agree. A hundred percent. She’s amazing.
Jean Chatzky: (26:31)
Agreed. All right, let’s help some folks. We’re talking all about our emails and we’ve got a bunch today.
Kathryn Tuggle: (26:36)
Absolutely. Our first note comes to us from Megan. She writes, I love your show. I’ve been listening since you started in 2016. Back when I lived in NYC and I look forward to new episodes every week. I have a dilemma. I’m terrible at keeping an emergency fund. This is not because I struggle to save. I actually save quite a bit every month in my 401k and HSA, 22%, to make up for lost time during very low earning years in my twenties. What I struggle with is having cash sitting in a savings account doing nothing. I’m aggressively tackling student loan debt, even more so now that it’s 0% interest. So, every time I get my emergency fund up, I stare at that cash and then at my huge loan balances and I have this intense need to put all the cash towards my loans. I know intellectually why I need an emergency fund, but I rationalize putting the money towards debt instead. What emergency could possibly happen? Medical, covered with my HSA. Home repair, I’ll just get a 0% interest loan. Lose my job, that’s what unemployment is for. I’ve tried hiding it from myself, hiding my student loans from myself, automating it from my paycheck. But none of it works, because even though I don’t see it, I know it’s there. Help. Are there any methods, tricks, hacks, or brainwashing I can use to get over this? If it helps. I’m 33, healthy, single, no kids, own my condo. And I’m employed full-time with no layoffs insight. Thank you.
Jean Chatzky: (27:59)
I love this question. I got to say. I just Megan, Megan, I just love how well you know yourself. You are onto yourself. You know exactly why you’re doing what you’re doing and you can stop doing it anyway. And this is what the whole field of behavioral finance is about. And you make it kind of hard for me to answer your question, because you’ve tried a lot of the tricks and the mind games that I would ordinarily suggest. I do want to point out one thing that I think maybe you’re not thinking about. So, when you lay out all of those what ifs. Home repair, I could get a 0%. Loan lose my job, that’s what unemployment is for. Yes and no. You have that home repair at the same time that you lose your job, you can’t get that loan, right? We know from people who are thinking, hey, maybe I should go get a home equity line of credit in case, at some point, I need to pull money out of my home. We tell them all the time, you do that while you have a job, because if you didn’t have your job, if you were not pulling a paycheck and not able to show that income, you wouldn’t be able to qualify for that home equity loan at that point. And that’s kind of why we have the emergency fund. Not in case one thing happens or the other thing happens. But in case we have a year like this, where we just get hit from all sides, with a bunch of situations at the same time, and we can’t bail ourselves out. I mean, quite frankly, you know, with that money in your 401k, with the money in your HSA, you probably could bail yourself out. But then you’re going to pay taxes and you’re going to pay penalties and just reading between the lines at what a great saver you are, I get the sense that that would just kill you. Because I know it would kill me. So, here’s what I am going to suggest. I would open an account in a different bank. When you get your emergency fund up, you said you stare at that cash. I want you to put it someplace where you can’t stare at it. So, what I’ve done, for example, is I have a savings account at a bank where I don’t go and visit that money. I don’t see it when I sign on to the bank to pay my bills. It’s just not there. It’s in a different bank. And in fact, I have the money automatically withdrawn from my brick and mortar savings account and go to that other internet bank. And when I eventually go to check up on the balance, which maybe I do every six months or so, I am eventually surprised. But I don’t really want you to go at all. I don’t want you to sign up for email notifications. Try a backwards playbook. I mean, we tell people, email notifications so that you don’t forget to pay your bills. We tell people, visit your balances so that you’ll feel good about the fact that that money is adding up. I don’t want you to do any of that. Because I think that that is going to tempt you to use the money to pay down your debts. So, set a target. You know what a fully-funded emergency cushion needs to be based on your own living expenses. Set that money as a target, and then just have it withdrawn automatically. Have it go someplace across the country where you are not likely to see it or touch it or use it. And if that doesn’t work, and I was thinking about this because I knew that this question was coming up, I wonder if putting the money into three months CDs would be helpful for you. We don’t typically use CDs for emergency funds because, if you need to get at the cash, you have to break, quote unquote, the CD, to get your money out. And then you suffer a penalty in the form of a bit of that interest. I am thinking that maybe that penalty would be enough of a deterrent to keep you away from that money if you find that the tricks and the tactics that I’ve already laid out, don’t work. But just take it one step at a time. Set up that far away account. Make the contributions automatically. Get off the email notifications. Don’t visit it and see if that does the trick. And you let us know. Okay? Cause I am very, very interested to see if this actually works. If it doesn’t, I’m going to Dan Ariely for some other behavioral finance magic that we can figure out will work for you.
Kathryn Tuggle: (32:52)
I love this feedback, Jean. I also love the term, visit your money.
Jean Chatzky: (32:55)
I visit my money.
Kathryn Tuggle: (32:57)
Jean Chatzky: (32:57)
No, I visit my money. Cause, you know, we don’t get a ton of satisfaction from saving, right? We have to make ourselves feel good about the fact that we’re doing it kind of artificially. Because it’s just sitting there. It’s just money in the bank, right? It’s not a new lipstick. It’s not a new sweater. It’s not a new piece of art on the walls of your house that you can walk by and admire every time you come home. It’s cash in the bank. So, you have to actively do something to make yourself feel good about that. And the last conversation that I had with Dan Ariely, which is a really interesting one, he actually said, automation is great. Automating your deposits into your savings account every time you get paid, that’s a really good start. But if you truly want to give yourself even more fortitude to save, you should both make the automatic transfer, and physically, actively save something additional. So, do it yourself. Move another $25, another $50. Because the act of making that transfer is a strengthening mechanism.
Kathryn Tuggle: (34:13)
Love that. Thank you, Jean.
Jean Chatzky: (34:14)
Kathryn Tuggle: (34:15)
Our next note comes to us from Lisa in Littleton, Colorado. She writes, I’m 55 and no longer have a passion for my legal career. I’d like to retire and give myself the space to consider what’s next for me. Ponder my second act before I make my next move. However, I have a lot of guilt about removing my income from the retirement savings path my husband and I have been on, and losing that annual income for our family. My husband makes significantly more than me, but I do earn an impactful amount for our financial resources. It’s time for me to do something else, but I’m afraid to make the leap. Do you have any words of wisdom or encouragement for me? Thank you so much.
Jean Chatzky: (34:52)
Hey Lisa. I do have some thoughts about this. And first of all, let me just say, I get where you’re coming from. I hear this an awful lot from people, especially people, I’m 56, I just turned 56, and I hear it a lot from people right around our age. And I agree. I think that figuring out what your next act is going to be is really important. But I think you’ve got to do two things. The first is get really, really honest with the numbers. So, this involves a conversation with your husband, but maybe also with a financial advisor, where you lay out what it really financially for you to take a step back. How long you could afford to be out of the workforce. What would happen if you went back into the workforce at a significantly lower level of pay? I mean, I want you to do some scenario running. I want you to look at some what ifs and think about what that means to you. And it may turn out, because your husband is the primary wage earner, it may turn out not to be as significant as you think. But it sounds to me, and maybe I’m just reading between the lines here in a way that you didn’t mean. It sounds like you’ve been having a lot of this conversation with yourself, thus the guilt and maybe not as much of it with your husband. And I don’t think that’s fair. I think you really need to be having it together because you’re in retirement together. You’re in this life together and he deserves a say in what happens as you go forward. But my guess is, he may also be able to alleviate some of this guilt. He may be able to express to you that, in his mind, you don’t have anything to feel guilty about. So, that’s step number one. Step number two is to think about what you can do to explore what that second act might be while you’re still employed during COVID. I don’t think this is a time where we quit a job. I don’t think this is a time where we shake up our financial lives if we don’t have to. Because depending on the trajectory of the pandemic, I think there’s still a lot of uncertainty about what life looks like coming out the other side. Yes, I know that the stock market has held up really well. And for those of us who are fortunate enough to have incomes and have jobs that we’ve been able to continue working at, we haven’t experienced the sort of impact that those in the restaurant business and the travel industry and other industries have experienced. But, putting yourself in a position of uncertainty at a time when life overall is uncertain, seems to me to perhaps be one step too far. And so, although I would like to encourage you to explore, I’d like to encourage you to explore at night and on the weekends until we’re just on a little more stable ground. And that sort of exploration can and should take you in a lot of different directions. Thinking about what you might want to do. Thinking about how you can take these skills that you’ve learned through the years and transfer them to other areas where you might want to work. So, slowly, surely, one step at a time, start with the numbers, start with some communication, and start with an exploration plan while still keeping your feet in the workforce. That’s the way that I would approach this. And I hope that that answer doesn’t disappoint you.
Kathryn Tuggle: (38:57)
I love that advice. I also think that this is a great time for self-reflection without having to actually make those drastic life changes. You can still do all the thinking and the pondering and the plotting out without actually making the leap.
Jean Chatzky: (39:12)
Absolutely. That’s a really, really good point.
Kathryn Tuggle: (39:15)
Our last note comes to us from Molly. She writes, hi Jean. Thank you so much for all that you do. I’m a somewhat recent listener to your podcast and an avid viewer of your newsletter and website. I’ve learned so much from you over the past year or so and I look forward to being a dedicated follower for years to come. My mom is 61 years old and recently divorced from her husband of 26 years. The divorce came as a shock to her. So, on top of dealing with the emotional stress of the divorce, she’s also faced with some extreme financial pressures. She and my father did not do a great job of saving over the years and she currently only has about $10,000 in her 401k. She’s nearly clear of all her debt and lives below or within her means, but I’m very concerned about her funds for retirement. She does have a large inheritance of about $150,000 coming to her from her father who recently passed. She will also receive about $75,000 to $100,000 from the sale of their family home. My question for you is, how should she be maxing out her accounts in preparation for retirement? Let’s say if she were to retire in 10 years. Where’s the best place for her to put those sums in order to make as much money possible. And what moves should she make to better set her up for the future? I truly appreciate any and all advice you can give. Thank you again for all your knowledge.
Jean Chatzky: (40:28)
Thank you for the question. I’m really sorry about the divorce. Divorce just stinks. But it really stinks when you are not expecting it. So, I hope that your mom is holding up okay. And she’s really lucky to have you there to help her with the finances, ask questions like this. It is absolutely no fun to go through this on your own. I would look to do a couple of things here. In terms of these large sums, I think the question is trying to get as much as possible into a place where it can grow both at the right rate, but also tax-deferred, and having some sort of a strategy where perhaps she can really put as much as possible into her 401k, grab all the matching dollars that are possible from her job. Even if that means living on some of the money from this inheritance in order to make the math on that work. She may want a sit down with a financial advisor in order to make that happen. I wonder if the administrator of her 401k plan has somebody that she could call in order to get the sort of advice that she might want about this. That may be a good way to just sort of strategize and do it. But what I’m envisioning is yes, she wants to invest as much of this money from the inheritance and the sale of the house while continuing to live leanly as possible. But she also wants to maximize her 401k contributions and make sure that she gets as much from social security as possible. That’s going to depend, not just on her social security credits, but on the age of her husband and when he is planning to take social security. Because they were married for more than 10 years, she is eligible, even though they’re divorced, to essentially piggyback on his social security. And so, you’re going to want to get a consultation there as well, perhaps from a financial advisor. But it’s also possible to get one from a place like social security solutions.com, which, for a small fee, will run a very detailed social security calculation to help you make sure that you are optimizing your social security. That you’re going to get as much as possible out of the system. It’s great that she is continuing to live below her means. She should keep doing that. She should keep doing that as long as possible. She should stay in the workforce as long as possible and keep putting money into that 401k as long as possible. And as for the money that will remain from the inheritance and from the sale of her house, I think it should be invested to take a moderate risk. Again, the financial advisor can definitely help you with that, but the one mistake she doesn’t want to make is to be too conservative with that money. Retirement is going to last a long time – 20, 30 years – and that means she absolutely needs market risk. And you don’t want to allow her to put it all into a savings account where it continues to lose money after taxes and inflation. So, just to boil it down, a financial advisor, I think a meeting with a financial advisor, perhaps one associated with her 401k. If not, perhaps an advisor who you could book a couple of hours of time with to get some advice on a plan that she could then basically manage herself. Investing the money with a moderate amount of risk while minimizing the fees that generally argues for index funds or exchange traded funds and working as long as absolutely possible. Please let me know if there is more detail that you want to send me or additional advice that your mom needs. And my heart is with both of you for an easier couple of months and years going forward.
Kathryn Tuggle: (45:08)
Absolutely. And your mom is very lucky to have you.
Jean Chatzky: (45:10)
No question. No question. I think, we heard it from Kathy Murphy today. Daughters, you know, they get the job done.
Kathryn Tuggle: (45:18)
I was going to say that. Amazing. Thank you so much, Jean, for your great feedback.
Jean Chatzky: (45:25)
Thanks Kathryn. And in today’s Thrive, with the shift to remote work, pandemic-related work from home expenses are on the rise. So, maybe you’ve been thinking. You’d like to ask your boss to be reimbursed. Before COVID, just 17% of employees worked remotely. Now 83% of us are applying our trades from the kitchen table, the couch, the basement – wherever we can find space, silence, and appropriate zoom backgrounds. But that home office set up, it doesn’t come cheap. There is internet connectivity, equipment, whatever else is required to perform our job duties. So, whose responsibility is it to pick up the tab for these work-from-home expenses? Legally, each state has employment laws that pertain to expense reimbursements. And there are federal regulations that fall under the Fair Labor Standards Act. In March, companies that didn’t have teleworking policies in place before the pandemic, were forced to figure out what operational expenses they would cover. All of this to say, that exactly what may be covered will vary widely from company to company. But no one should be leaving money on the table. It may feel awkward to ask your employer to pay for data coverage on your cell phone or an ergonomic mouse pad, but it can be financially worthwhile, especially since we don’t know how long these work from home orders will be in place. Remember, it’s not your job to subsidize your company to keep doing your job. Take advantage of the benefits. 75% of employees submitted work from home expenses during the pandemic, according to a study from Appsen. If you’re unsure what might be covered, ask. And don’t be shy about asking what you need. Your company may not realize that you rely on a certain piece of office equipment or software or hardware to do your job. If you’re spending your own money on supplies, talk to human resources or your supervisor about being able to submit expense report for those must have items.
Jean Chatzky: (47:32)
I want to thank all of you so much for joining me today on HerMoney. Thanks to Kathy Murphy for a great conversation about what it really looks like to leave the workforce, and how we can all weigh those tough decisions. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review. We love hearing what you think. We also want to thank our sponsor, Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through Megaphone. Thank you so much for joining us today and we’ll talk soon.