Nearly 4 in 10 women are considering either scaling back their work hours or leaving the workforce due to increased caregiving responsibilities during the Covid-19 pandemic, according to data from a recent survey of 1,902 adults conducted by Fidelity, 951 of whom were women.
Of those women, 42% said they are considering stepping back from the workforce due to homeschooling needs.
At the same time, more women are engaged with their finances than they were before the pandemic, Fidelity finds. Fidelity saw a 41% increase in women who sought out Fidelity's services on their own (not through their employers) compared to the previous year.
When women take time off from working, they're not just losing their take-home pay. They also stop contributing to employer-sponsored 401(k) plans and lose any employer match, which could potentially put them behind on saving for retirement.
Fidelity calculated how much women's retirement savings would be impacted by taking just one year off from work. The calculations assume you were saving 9% of your salary per year and earning a 3% employer match.
Here's what taking a year off would mean for your retirement savings at three different income levels:
- If your salary is $50,000 a year and you decide to take one year off, your retirement savings would be reduced by $106,469.
- If your salary is $75,000 a year and you decide to take one year off, your retirement savings would be reduced by $159,702.
- If your salary is $100,000 a year and you decide to take one year off, your retirement savings would be reduced by $212,936.
If you have a choice in whether or not to take time off of work, it can be worth considering how it would impact your finances long-term. It's important to understand what you are walking away from when you leave the workforce, says Lorna Kapusta, head of women and customer engagement at Fidelity Investments.
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Another factor to consider is career growth. If you choose to go back to work after taking a break, it can be difficult to find employment at the same level and the same compensation, Kapusta says.
Of course, for many women it's not a choice. The Covid-19 pandemic has disproportionately affected women and forced many families to make tough decisions.
Saving for retirement
About 70% of women told Fidelity that they are stressed about their long-term savings and investments.
For those who are still able to work, experts say it's important to start saving for retirement as early as possible.
If your company offers a 401(k) plan and an employer match, you should consider enrolling. It's an easy way to get started saving. To have enough money in retirement, Fidelity recommends saving 15% of your salary over the course of your career.
If that number seems too high or out of reach, you can start with smaller increments, even 1% or 2% of your salary, and increase your contribution bit by bit. That being said, if your employer offers a match, you should try to contribute enough to qualify for that match, which is essentially free money.
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