For women in their 30s and 40s, having a career and a family is a big part of their life. Motherhood looks a lot different now, as women have more choices at every step. Having a career, delaying motherhood, and putting a career on hold to be a primary caregiver to kids (or others) are just some of the options. As well, creating a family with fertility treatments, surrogacy or adoption now allow many more women to experience the joy of being a mom. But the additional choices have added even more complexity. We’ve identified two situations many women will face throughout their life and financial journey. These pivot points require planning well in advance to provide the most flexibility.
Planning for Career Flexibility
The bottom line? Manage cash flow and invest early.
Women’s careers often are not linear. The biggest reason for a break in a career is to take care of young children or be a caregiver to a parent. That could mean reducing work, taking on roles that allow more flexibility (but often lead to less income), or stopping work entirely for some time. Dealing with this means learning to manage cash flow.
Women who have spent a few years out of the workforce often do not return to the same role. Even if they don’t take a break many women realize that their skills are better suited to a position that allows them to feel more fulfilled. As you gain more financial security, getting satisfaction from your job becomes more important. This can mean additional education investments if you are a career-changer. If you are more of an entrepreneurial personality, you’ll need start-up capital for your business.
How can you plan for something you don’t know about yet? That’s the value of saving and investing. Prioritizing retirement savings is your starting point. Removing the financial insecurity of the last few decades of your life means you can take more risks now. As your income increases, the amount you put away should also increase until you max out your contributions.
If you are over the income level for a Roth account, the tax-deferred advantages of saving in a traditional retirement account allow you to boost savings and save on taxes.
Outside of retirement savings, prioritizing saving in a taxable investment account can help you create flexibility. The money can have goals tied to it – for example, you want to quit your job and start your own business in five years. The goal’s timeline will dictate the investment strategy you use for the money.
Preparing for Children
The bottom line? It costs money to have kids, but we can plan for it.
No question about it, kids are expensive. Deciding to raise a child is one of life’s biggest adventures, an adventure you will want to prepare for financially. Sometimes big expenses kick in before the tiny human even arrives!
- If you consider delaying motherhood, be aware of your options. You’ll need to identify a doctor that specializes in preserving fertility. The process can be expensive, it may not be covered by insurance, it’s involved, and there is a relatively short period in a woman’s life to freeze eggs optimally. There’s also an ongoing annual cost, and you’ll have additional costs if you use your eggs and undergo treatment to get pregnant. Prioritizing saving for the expense will help reduce the stress.
- Adoption is a beautiful way to create a family, and while the costs are high, there are also tax benefits. Per the IRS, these include a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion from income for employer-provided adoption assistance. The credit is nonrefundable, which means it’s limited to your tax liability for the year. However, any credit more than your tax liability may be carried forward for up to five years.
Once you have kids, you want to start saving for their education early. Setting up a 529 plan as soon as possible and funding it regularly will give you the most flexibility in paying for college. There can also be some tax benefits, depending on where you live.
Live the Life You Want
To the women of this generation: The career and family things are not new. We just want it to be less stressful and more fun and ultimately lead you to living the life you want! Create flexibility and financial independence by saving early and planning for expenses before they happen. This will help you achieve your goals and keep you on track.
The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
This content not reviewed by FINRA