How the Hidden Penalty of Motherhood Affects Women's
What is the motherhood penalty and how does it impact women?
Being a mother can be extremely rewarding in many ways, but it can have unintended consequences for moms who want to pursue a career while also raising a family. The so-called motherhood penalty can affect women as they attempt to make a steady climb up the career ladder. That can impact their ability to build wealth and create a secure financial future over the long term.
The motherhood penalty may not be fair, but it's a reality that many women find themselves facing. Understanding how this penalty is imposed on mothers—and how it affects their career outlook—is essential for women as they shape their financial plans.
What the Motherhood Penalty Looks Like
In general, the motherhood penalty assumes that mothers aren't able to maintain the same professional footing with women who don't have children, or with their male colleagues. This can play out in the workplace in a number of ways but perhaps the biggest sting associated with the motherhood penalty is how it affects women's earning potential.
According to a report from , a national think tank organization, the typical mother sees her earning power drop by 4 percent for each child she has. Interestingly, the opposite is true for men. Upon becoming a father, men see their income . That inverse relationship suggests that employers may still largely view men and women in traditional rules, with women as caregivers and men as breadwinners.
Alternately, the drop in earnings experienced by mothers may be a result of them taking time away from work to raise their children or downshifting into a part-time or lower-paying role to be more available to their family. Women spend a combined total of 33 hours per week on childcare and housework, compared to just 16 hours combined for men, according to .
Aside from lower earnings, the motherhood penalty can manifest itself in other ways. The found that 39 percent of women believed that their gender would make it harder to get a raise or promotion, or generally get ahead at work. Thirty-seven percent of women believed that they'd missed out on a chance to or be promoted in the past because of their gender.
It can become even more difficult for a women to advance in their careers when they're also a mother. Employers may be biased against mothers if they're concerned about their ability to meet the demands of their professional role and the result is that they plateau professionally.
The motherhood penalty also applies to women who are re-entering the workforce after taking a hiatus to care for children. A study published in the found that are half as likely to land a job interview as mothers who had been laid off from their previous job.
How Women Can Counter the Effects of the Motherhood Penalty
The motherhood penalty can't be eliminated overnight and for women, the best defense is a good offense. The cornerstone of that approach is to have a solid plan in place for securing your financial health. The centerpiece of that plan should be your retirement outlook.
Earning less means you may have less income available to save for your later years. In that scenario, it's important for women to take full advantage of opportunities to grow their savings. That includes saving enough in their employer's 401(k) or a similar tax-advantaged plan to qualify for the full matching contribution. Adjusting your contributions by 1 percent annually is another helpful way to step up your savings rate gradually, so that it rises in tandem with your income.
A Health Savings Account is another avenue for saving in a tax-advantaged way if your employer offers a high deductible health plan as part of your benefits package. These accounts offer a triple tax benefit: tax-deductible contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses.
What you may not know is that after age 65, you can withdraw HSA funds for any reason, without a penalty. You will, however, have to pay regular income tax on the withdrawal. In a pinch, an HSA could be used as a retirement savings supplement, which is a plus for mothers who may not have fully met their retirement goal.
For married mothers who are stepping away from work temporarily, a spousal IRA may be another way to save. With a spousal IRA, your spouse can make an IRA contribution on your behalf, even if you don't have income of your own. The contribution limits are the same as traditional and Roth IRAs; $5,500 for 2018, plus an additional catch-up contribution if you're 50 or older.
Use Career Breaks Wisely
If you spend time out of the workforce to raise children, getting back into the job market may be more difficult after an extended break. For that reason, it's important to make the most of the time you're at home.
Consider expanding your skill set during this time and stay abreast of the latest trends in your industry. Update your resume while addressing any gaps in your knowledge base. Remember to stay in touch with members of your , while also forging new professional connections. Most importantly, get crystal clear about your vision for going back to work. Setting your expectations for what you want to achieve professionally and as a mother can help you maintain balance between the workplace and home.