Are You Thinking of Switching from a Full-Time Job to Full-Time Parent?

Dear Carrie,

Unlike so many other women, I was fortunate to hang onto my job during the pandemic.  However, after a year-plus of caring for my two kids, helping them with schoolwork, keeping the house running, PLUS holding down a full-time job, I’m exhausted and considering giving up my job. My husband makes a good income, but we will definitely have to get by with less. How can I decide, and if I go ahead with this plan, how can we best prepare?

—A Reader

Dear Reader,

First, let me say that you're not alone in feeling the brutal impact of the last year. According to the McKinsey Women in the Workplace 2020 report, the pandemic only intensified the multitude of challenges that working women have always faced. More women than men were furloughed or laid off, and many mothers—like yourself—were crushed by the challenges of keeping up both at home and at work, and now feel the need to take a break.

Therefore, my first impulse is to say you need to do whatever is necessary to take care of yourself—not only for your own well-being, but also for the well-being of your family. That said, leaving a job can have far-reaching consequences on many levels—financial, emotional, and professional. There's a lot to think about.

Of course, every family’s situation will be different. While I'm happy to help you put things in perspective, as with any big change, it's important for you to sit down as a couple to talk it through. Let's start with the financial portion.

First, be realistic about the short term

Short-term, it's kind of a balancing act. On the minus side, leaving your job means you have less money coming in. On the plus side, it can also mean you'll have less money going out. For instance, you may be able to subtract costs like commuting, work clothes, dry cleaning, housekeeping, and lunches out from your budget. You may not have had these costs last year, but they may come back with a 'return to normal.'

Then there's childcare, which is probably the biggest work-related expense for most parents, as I'm sure you're well aware. Childcare costs vary by region, but just as an example, according to the Economic Policy Institute (EPI), in 2020, a parent in Mississippi paid an average of $5,436 a year for infant childcare. In Massachusetts it went up to $20,913 per year, and in Washington, DC, $24,243. And that's only for one child! No longer paying childcare for two kids could mean significant savings.

New child and dependent care tax credits under the American Rescue Plan Act may also help reduce your outflows. However, a stay at home parent doesn't qualify for the dependent care credit. 

Will the savings make up for the loss? That's what you really need to decide as you reprioritize and refine your budget to balance income and expenses. And beyond everyday budgeting, you also want to look carefully at employee benefits you may be losing. For example, make sure you'll still have adequate health insurance for you and your family, as well as enough life insurance.

Don't ignore the long-term impact

The long-term implications can be even more important, especially when it comes to career development and growth in earnings. If you leave your job, but decide to return to it in several years, will you also sacrifice your chances for advancement or face a lower salary because of your time away?

You may understandably feel that you need time at home for now and be happy to put your career on the back burner, but kids grow up fast. I know! Whether you eventually return to your current profession or try something new, chances are you'll find your way back to the workforce as the kids get older. How will you keep your job skills up-to-date? At the very least, stay in touch with your colleagues and keep up on new developments in your field.

Also think about the potential long-term hit to your retirement savings. If you were contributing to a 401(k), how will you make up for this shortfall in savings? You could open a Spousal IRA. Currently, in 2021, a non-working spouse can contribute up to $6,000 ($7,000 age 50 and over) annually to an IRA as long as the working spouse has enough earned income to cover all retirement contributions, but that may not be enough for a secure retirement.

Then there's saving for your kids' education. That can be hard enough on two salaries, let alone one. Could you direct some of your childcare savings to a 529 account? 

I'm not saying that deciding to leave the workforce is a mistake, because the circumstances are different for every family. I just think it's important to realize that the financial impact goes beyond choosing not to take a vacation or buy a new car in the next few years. It can have a significant effect on your future financial security.

Be equally aware of the emotional side

Finances aside, how your everyday life will change is equally important. Since you’ve been working you might have gotten used to being independent, having your own money and professional identity. Looking to the future, will you feel too dependent when you no longer have your own salary?

Money is a known cause of problems for many couples, so make sure you discuss this openly before you make the change. For instance, will you budget a certain amount each month for your personal expenses? What is a fair way to divide up your discretionary income so neither of you becomes resentful of the other? Don't just assume everything will work out. The shift can be jarring, and it often takes time to adjust to new roles and responsibilities. Come to some agreements before your leave your job.

Remember, it can work both ways

Given the ravages of last year, your dilemma is completely understandable. It’s not an easy decision, and there is no one-size-fits-all answer. Only you can balance the financial loss with the personal gain.

One other thought: if you do decide to make this change, realize that what you work out today for yourself could just as likely apply to your spouse down the road. And I think that's great. As long as you're supportive of each other—and realistic about the personal as well as the financial implications—you and your family may all benefit from this new arrangement.

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.