An empty nest may lead some stay-at-home parents to look forward to their spouse's retirement and the opportunity to spend more time together. However, experts say there can be significant financial benefits to heading back into the workforce after children have graduated from high school and left the house.
Lane Mullinax, a certified financial planner with NPV Advisory Services in the Atlanta area, says money shouldn't be the only consideration when making the decision to go back to work. "Some of that non-quantifiable stuff is important," he says, referencing concerns such as personal happiness and satisfaction.
However, for those who think they might enjoy diving back into the workforce after an empty nest, the financial rewards can be great.
More money for savings and retirement. The most obvious financial benefit of returning to work is having additional money to set aside for retirement or personal savings. "The first step is to make sure we have that six months [emergency fund]," says Chad Caros, a certified financial planner with The Caros Group in Buffalo, New York. Once short-term savings are fully funded, a second working spouse can add more money to retirement funds.
Lacey Manning, owner of LTG Financial in Ocala, Florida, says working can come with a number of financial benefits beyond a paycheck. A new job may offer insurance benefits, paid time off and other perks that can help a family's bottom life. "When your nest becomes empty, are you going to downsize?" Manning asks. Having a second income can be helpful when it comes time to apply for a mortgage or finance another large purchase.
Big boost to Social Security benefits. An even bigger incentive for stay-at-home parents to return to the workforce is to ensure eligibility for Medicare and Social Security. Both programs require workers to have 40 credits -- or roughly 10 years -- of qualified employment to get benefits. Even if a stay-at-home parent had 10 years in the workforce earlier, additional time on the job can help boost Social Security benefits.
"It's a fairly convoluted formula," Mullinax says of the manner in which Social Security benefits are calculated. However, at its core, the formula takes a person's 35 highest-paying years and averages those amounts to determine retirement benefits. "For the person who doesn't have 35 years, you're replacing [years of zero salary]," Mullinax says. The increase in Social Security benefits makes it helpful to go back to work, even if it's only part time.
Crunch the numbers first. Returning to the workforce can often improve a family's financial situation, but it's not a given. If a stay-at-home parent needs significant training to return to a previous profession, that cost could offset any increase in income. Plus, in the event someone already has a 35-year work history, additional time in the workforce might not increase Social Security benefits in a meaningful way.
Mullinax recommends people meet with a fee-only financial planner to help them crunch the numbers and decide whether it makes sense to go back to work. "Lots of folks are willing to sit down with you for one session or two or three sessions to do a full-blown plan," he says. The National Association of Personal Financial Advisors maintains a searchable database of planners nationwide.
Making it work for your family. If the numbers add up and you want to pursue a new career, don't assume you need to return to a former profession. You also don't need a traditional, full-time job. "I seem to see a lot of adults re-entering the workforce in network marketing and doing really well," Caros says.
Other options may include self-employment, working within the gig economy at companies such as Uber or taking a part-time position. Even minimum wage jobs can be beneficial for former stay-at-home parents who are trying to erase some zeros from their Social Security benefit calculation.
Remember that a new job will likely be a radical departure from a life spent at home with the kids. "It's a huge transition," Manning says. "Prepare yourself for it." For those who do make the leap, the outcome may be more than an extra paycheck today. It could have financial benefits in retirement that last for years or even decades.
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