When it’s time to start a family, many parents-to-be are so focused on decorating the nursery and choosing the right car seat that they can overlook the life-altering impact a baby can have on their financial life. And we’re not just talking the exorbitant cost of diapers—we’re talking nearly 4 million dollars in “potential income.”
These startling figures come from an interactive calculator from the Center for American Progress that helps you see the impact of a career break based on your own situation. Suppose you’re a 28-year-old woman making $50,000 annually who has a five-year lapse. First, of course, you’ll lose $250,000 in wages, but that’s just the beginning. In addition, you’ll lose an estimated $252,383 in wage growth and $219,671 in retirement assets and benefits, bringing you to a loss of $722,054. However, that figure hides an even more frightening loss in projected “potential income,” which comes from the fact that you’ll probably take a pay cut when you do return to the workforce, more than 7 percent, according to a survey from Payscale.
Of course, there are considerations other than financial ones to consider when determining if you should take a career break…and it’s a personal choice that each family must make individually. But, here are some questions to ask yourself before making a decision.
1. Can you afford it?
This seems basic, but it’s important since it can be tough to transition from two incomes to one. It’s best to take a trial run while you and your partner are both still working to see if you can and will forgo the extras that a second income provides. And of course during your experiment, you can bank that money to build up an emergency fund or bolster your retirement.
2. Do you have access to adequate childcare?
This is often the top reason that a woman will decide to take a career break—either they can’t find adequate care, or they can’t afford it, given the bite that childcare takes out of a budget. Obviously, it feels unpleasant to think that the majority of your take-home pay is going directly to childcare, but that’s exactly when you need to analyze the “lifetime costs” of that five-year break, as illustrated above, to see how the actual cost of daycare might be a drop in the bucket over the long haul.
3. Can you and your family still retain benefits?
Many families have a working spouse with coverage, but it can be an incredibly expensive proposition if you are going to have to obtain your own benefits on the open market. While the Affordable Care Act website can help you locate coverage, remember that these premiums are for healthcare coverage only, and don’t include supplemental benefits that a company often provides, such as long-term disability insurance and retirement savings.
4. Do you have skills that will remain marketable?
Some industries, such as tech, change at an accelerating speed, meaning which your skills could be obsolete quickly if you take a break. And other positions, such as those in sales, might be easy to slip back into from a functional standpoint, but you may lose the contacts you need to make your job successful. Whatever your situation, you should put together a plan for how you can keep your skills sharp through online learning or other educational opportunities, as well as how you will maintain your network, so that it hasn’t atrophied if and when you decide to return to the workforce.
5. Will you feel fulfilled without your job?
Of course, society says that being a parent is the most important job—and it truly is. However, many women find that staying home with a child isn’t all they expected, and they can become lonely. If you do decide to take a break, make sure that you have created a support system of other at-home parents to allow you to have a social life, along with the support of a partner who recognizes that taking care of a child is a job in itself.
Raising a child is about a lot more than dollars and cents, but if you are considering taking a career break, it’s important to go into it armed with the necessary information to make a decision that’s right for your family.