The events of the past year have turned the lives of countless American workers upside-down.
One of the biggest economic impacts of the COVID-19 pandemic has been on women who have left the workforce in large numbers to care for school-aged children or elderly parents. According to the Bureau of Labor Statistics, there were nearly 2.2 million fewer women in the workforce in October 2020 than there had been in February.1
Many others are also considering such a transition. A recent report by McKinsey & Company and LeanIn.Org showed that one in four women is thinking of taking time out from her career or leaving the workforce altogether because of the pandemic.2 If you or your spouse is considering such a move, even if just temporarily, there are some important factors to think about.
“The very first piece of advice is just to pause,” says Karlee Schultz, a senior vice president and managing director for U.S. Bank Private Wealth Management. “Think about it carefully. Educate yourself on the factors and impacts. Really assess what your options and resources are so that you can make a better decision that's going to work for you, your family and your financial picture.”
Of course, this is a complex decision, and each family has their own needs to consider, from medical issues to financial needs. However, let’s look at two considerations that apply to everyone. The first is employment: What impact will this decision have on your or your spouse’s current and future career options? The second is financial: How will you make up for lost income, potential employment benefits (healthcare or insurance) or the missed opportunity for retirement savings? It’s important to weigh the pros and cons and loop in loved ones or a financial professional.
Consider future employability
Consider the effects that you or your spouse leaving the workforce will have on the future prospect of returning to work. “Most employers actually hire back people who were laid off or terminated, before they hire the people who deliberately chose to step away from the workplace3,” Schultz says.
As a result, there may be a strong case for keeping a job but making adjustments. Discuss your options with your employer. “Can you take a different job? Can you have more flexibility? Can you take a part-time job or reduce your hours? There are many resources that employers have that people don't even know about or take the time to research,” she adds.
Make a careful assessment of your available options. If you or your spouse choose to leave, what is the plan for returning to work and when? Remember that Social Security draws on your highest 35 years of income, so taking a few years out may affect the amount you eventually receive.
And if you or your spouse takes this path, Schultz says it’s important to stay engaged in your industry or network to make your transition back smoother. “Stay informed in the industries that you are interested in, then stay connected to people and meet with them regularly to keep abreast of what's going on,” she adds. “You've got to remain relevant, and you've certainly got to stay educated. That will help you return to the workplace, when and if the time is right for you.”
“My biggest recommendation is to breathe. Recognize you're not alone. There are resources. Take very deliberate and intentional steps to get your house in order.”
Assess your financial options
It’s critically important to make an honest assessment of your family’s finances. Have a look at your monthly expenditures. What’s essential and what can be cut? Cancel nonessentials, from dining out to streaming services, if needed. Come up with a budget and be disciplined about it. Think of what costs you could reduce, stretch or avoid in the event you or a spouse steps away from their career.
Without a job, you could be giving up benefits for yourself and your loved ones, and healthcare can be a large expense. Look into the financial support options that are available within your community. In recent months, for example, banks and other organizations have been offering opportunities to pause temporarily or restructure debt, but there are also nonprofits like the United Way that offer financial and community resources to help.
“There are also many community programs that you will want to educate yourself on,” Schultz says, “whether that be childcare, adult care or finding funding mechanisms to help you with prescriptions or housing needs.”
Wherever you are in your financial journey, Schultz recommends talking to a financial professional. “There are lots of things that people can do to boost their financial picture,” she says, “but everybody is unique.” You may have a 401(k) plan that you can borrow against, but only do this as a last resort. Instead, she suggests managing a disciplined budget, moving assets around or even selling personal goods.
Whatever you decide to do, Schultz has some simple advice: Take the time to make an educated and informed decision. “My biggest recommendation is to breathe,” she adds. “Recognize you're not alone. There are resources. Take very deliberate and intentional steps to get your house in order before you make the decision.”
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