Retirement restart: How women can begin again after the “she-cession”

The pandemic has been referred to as a “she-cession,” pointing to the fact that the economic fallout from COVID-19 has caused huge job losses for women.

According to a July White House press release, “Despite the progress our nation has made over the last four months, there remain two million fewer women in the workforce than there were before the pandemic struck – taking a toll on our economy and on millions of families across the country.” The release also mentions that the job losses have been disproportionally hard on women of color and that “women who leave the labor force early to care for elderly parents lose $330,000 in lifetime wages.”

Women were forced out of the workforce for many reasons and as a result may have had to dip into their retirement savings. It’s understandable that they may be feeling anxiety or stress surrounding this decision and may need a boost to begin again. In fact, says Anne Gray, Managing Director of Retirement Products and Solutions, “45% of working women in a recent Cerulli survey selected ‘not having enough money saved for retirement’ as a top source of stress. This is compared to 39% of men surveyed.” According to Gray, “After being away from the workforce for the past year, this is a great time to review all of your retirement accounts you may have from previous employers. You may want to consider consolidating your old retirement accounts to make it easier to evaluate your current retirement savings situation.”

Below, we’ve outlined three scenarios to meet women where they are and provide ideas for renewing their savings plan.

Scenario #1: Back at work

Congratulations! You’ve found a new job after a period of unemployment. Some steps you’ll want to take are to review your new employer’s 401(k) and consider contributing at least enough to receive your employer’s match. 50 years old and up? Consider contributing catch-up contributions. And if it’s available, review Roth vs. Traditional, and educate yourself on the benefits of each.

“If your employer offers a Traditional 401(k) (pre-tax contributions) and a Roth 401(k) (after-tax contributions), choose which works best for you and consult your financial or tax advisor with questions. The type of 401(k) you choose may impact your withdrawal strategy when you retire,” says Gray.

According to recent Cerulli research, only 22% of women surveyed “conduct research on investments and make [their] own decisions.” Women more often than men do not feel qualified to make their investment decisions. “It’s not enough to just invest; review your investment options, the associated fees, and ask questions if you have them to make real decisions,” says Gray.

Scenario #2: Trying to find a job

We get it: job searching can be stressful. But with a plan in place, you can start your exploration with confidence.

“You may want to take a step back and evaluate what you really want to do,” says Gray. “Did you enjoy your last job, or would you rather reinvent yourself and try something brand new? Perhaps you picked up a hobby you enjoy during this past year. Could you make your hobby into a small business to start a stream of income? You could then contribute a portion of your income to your IRA.”

Keep in mind that you can make IRA contributions up to the annual maximum either at once in a lump sum or pursue systematic investing, which would be contributing and investing smaller amounts on a recurring basis. Systematic investing may be attractive if you are looking to smooth risk in volatile markets.

When it comes to searching for a job, there’s also the old-fashioned word of mouth. Reaching out to old friends and mentors can be a great way to get advice on the skills that the people who know you best believe you have.

Idea #3: Not returning to work

Even with the vaccine, there are large numbers of people not ready to leave work-from-home life for the office. Or, the loved ones you are caring for, whether they be children or parents, still need you. This doesn’t close the door to your career forever, unless you decide to retire. (And even then, there are still loads of ways to earn money and remain active!) It could be time to reinvent yourself, or even get a part-time job doing something you enjoy.

However, let’s still talk IRA. “You can still save for retirement, even if you’ve chosen to not return to the workforce full-time,” says Gray. “To make your own contributions to an IRA, you will need an income source. Depending on your situation, you may be able to get a part-time job and use your income to make contributions to your IRA.” Another option is your spouse. According to Gray, “If you have a spouse who has an income, they may be able to make contributions to your IRA. Consult your financial or tax advisor to evaluate which options may be best for you.”

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