There was a pivotal moment in my life when I had to decide between staying home to be with my baby and returning to the office to keep my career on track. I recognize not every woman gets to make such a choice or has comfortable options. Over the last two years, work-for-pay moms have faced a similar type of decision under the extreme strain of the pandemic. Among mothers living with school-age children, about 10 million were working for pay in January of 2021—the U.S. Census Bureau reports this was a drop of 1.4 million from the year prior.¹

Pausing paid work for full-time motherhood tends to create a V-shaped income pattern. Some women return to the workforce months later—others take years. Starting and stopping employment often results in a fragmented collection of minimally funded employer retirement plans. The V-pattern also exacerbates the pay gap and other gender inequality issues in the workplace. Though we have made progress in reducing the pay gap, a woman still only gets paid $0.82 for every dollar a man gets paid, with even more disparity for women of color, according to the Department of Labor.² But we have essentially stepped back in time due to the pandemic’s devastating impact on women’s participation in the labor force. As of last month, the percentage of women actively working for pay has decreased to 55.8%, the same rate as 1987!

No wonder women’s retirement savings trail those of men. A recent survey by Bank of America found women enter retirement with $70,000 less than men—and 20% of women have nothing saved at all.³So where do we go from here?

Prioritize your savings

We will not be compensated for being martyrs, and no one else will save for our retirement. (And we all know by now that Social Security just won’t cut it). As much as we want to send our kids to college on a mommy free-ride scholarship, do not sacrifice your retirement savings to pay for that private liberal arts college degree! When you are 85 you won’t be able to take out a loan to pay for your living expenses, but a 20-year-old has the time to afford a student loan. I realize, not everyone has the ability to fund retirement fully and continually. When advising parents, I identify ways to save and help them find the right balance between planning for retirement and college expenses.

529 plans are a fantastic way to start saving for college—the funds grow tax-free, and the gains are not taxable if used for qualifying educational expenses. When my son was born, and our close relatives asked what to buy, instead of pointing them to a baby gift registry, I suggested they contribute to the 529 fund I had established for him. Okay, I’ll admit, the cute onesies and the tiny little shoes will garner many more “ooohs” and “aaaahs” at a baby shower than the $20 checks. And the checks probably won’t add up to all that much, but even a modest sum can really help jump-start a fund. Now, when my son receives cash at holidays and birthdays, I try to put the equivalent into his college fund. An 18-year runway gives compounding interest ample time to do its magic.

Pay attention to taxes

We can’t change the tax code, but we can take advantage of opportunities to leverage tax savings and strategies when our income shifts. Contributing to a Roth IRA versus a Traditional IRA is a classic example. When your income is at a lower tax level—often during the bottom of that V-shaped pattern—a deductible contribution to a Traditional IRA may not be advantageous. Assets in a Roth IRA grow tax-free, and there is no tax due when withdrawn at retirement. There are even exemptions that allow for earlier withdrawals free of penalties.

A Health Savings Account (HSA) is another a tax-free vehicle you can use to grow savings. If you are enrolled in a high-deductible healthcare plan, you can contribute annually to an HSA, which creates a cushion to cover medical expenses. However, if you are able to avoid drawing down on the funds, the contributions can continue to grow tax-free. Most HSA accounts allow you to invest your contributions in marketable securities that have a greater chance of compounding and growing over time. The HSA account, with its tax-deductible contribution, can serve in long-term planning as a quasi-retirement fund.

Eliminate the guilt

As schools and childcare facilities return to normal, some of us can more easily return to paid work. During this transition, the language we use with our kids is important. I am not referring to the swear jar, I am talking about how we talk about what we do. When my young son looks at me and asks, “Why can’t you stay with me?” it can be a struggle to not feel the pangs of guilt. Instead of apologizing, I try to express gratitude. I steer the conversation toward how I get to go to a job and use my skills, education, and energy to provide for my family. It’s both a right and a privilege, and I take satisfaction in receiving financial compensation for working hard. I also try to align my language with the attitude I want my son to have about his school. I frame those conversations around how he gets to go to school. I emphasis the chance to attend a school that fosters creativity and a child’s desire to learn is a good reason to wake up early in the morning. How lucky are we? How unequivocally fortunate are we to be able to have these opportunities.

If you want to return to paid work soon—whether motivated by passion for what you do or a desire to attain financial independence—do it! And if you decide to stay home longer, discuss the tips above when meeting with your advisor about contributing to your long-term financial plan.

Cultivate support

Perhaps you’ve had, or are, an invaluable female mentor. I’ve seen firsthand how women supporting each other with shared experiences and expertise enable us to flourish. In my role as a wealth advisor, I find it especially gratifying to help female investors maximize their hard-earned savings. Again, I am aware of my fortunate circumstances. I get to participate in a corporate culture that values female leadership, educate my colleagues on women-specific issues, and help launch initiatives such as InvestHERs, a comprehensive program designed to serve the financial planning needs of women investors and to support women entering the financial services industry.

At the individual level, customizing a financial plan is always important—and it’s particularly crucial for women affected by the V-shaped income pattern. A trusted advisor can help you pull all those scattered or neglected employer retirement savings accounts together with a plan, support you in making strategic decisions through life’s milestones, guide you in providing for your child or children’s future, and help you secure your own long-term financial future. So often taking care of ourselves is where we need the most help! You could call reaching out to your Mercer Advisors advisor part of your “economic self-care routine.”