Run the Numbers: Consider the Long-Term Cost of Leaving
When I left the paid workforce, I never took into consideration what the real cost of leaving would mean for my personal bottom line. Frankly, even if I had considered it, it would have been hard to truly calculate. Not anymore.
Michael Madowitz, an economist for the think tank Center for American Progress, and his wife were trying to determine the financial implications of a career pause. He was astounded to discover there were no systems to conduct this analysis, so he created a net price calculator that includes the cost of lost wages, lost wage growth, and lost retirement and benefits when one leaves the workforce to care for children.263
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The result: The average American woman taking a five-year break from her career starting at age twenty-six will lose out on $467,000. The average American man of the same age will lose $596,000. He loses more because he earns more and his lifetime earning potential is higher, which explains why so many couples decide it makes more sense for the woman to pause her career.
I plugged in my data. I was making just over $100,000 when I left my job in advertising at the age of thirty-five. If I had stayed out five years, I would have lost $590,000 in actual income and $1,600,000 in potential income (!). That’s a lot of money that I and my family could have used.
Of course, as Sachi DeCou noted when I posted the net price calculator of a pause on my LinkedIn page, “The decision to stay home and take care of children isn’t purely a financial one,” but not understanding the financial implications of your choices is, well, not very smart. I should know; I didn’t understand them
Don’t make my mistake. Check out the net price calculator at http://interactives.americanprogress.org/childcarecosts/ and decide if the income loss from pausing for parenthood is a trade-off you are willing to make.