In 2006, I left corporate America behind. I wanted more control over my time and pace. I wanted the freedom to pursue projects that were interesting to me. I wanted to be more present for my family. I figured, if I could pay the bills and live this lifestyle, I might truly be the one woman who has it all.
When I left, I ignored an uncomfortable fact. In leaving, I lost about $1.3 million dollars…in future retirement funds.
I wasn’t unique in making that choice, though. Persistent societal norms mean women still don’t make career decisions with future wealth in mind (indeed, Pew reports about half of Americans think working part-time is the ideal role for women with young children). Family pressures mean we often leave secure roles, and, though we’re grateful for the flexibility, we’re giving up a lot in the exchange. In my case, the future worth of a 100 percent employer 401(k) match at the salary I’d be at now.
At least it was my choice, and one that I was privileged to have. Even women who like their savings plans are pushed out for a variety of reasons. (Call it the #MeToo penalty.) When, as an editorial assistant, my friend Lizzie politely asked her handsy boss to stop touching her, she calculates she fell about $300,000 behind. It was harder to transition when she left on those terms. “I was more pissed about losing the TimeWarner 2:3 match than I was about what had happened,” she says.
Women are pushed out for more than complaining about harassment. They are pushed out because they have parental responsibilities; because they get pregnant; because they are “difficult”; because they are the first hired and the last hired. Inflexible work schedules make it impossible to perform family caretaking; sexism guarantees a lack of autonomy. What this adds up to? They leave. Journalist Katherine Goldstein, who lost her job the day her son turned six months old, says “our society is so poorly set up to support working families that it’s very often women who are the ones who take a step back in their careers.”
Ilana Bryant left a chief strategy officer in advertising to start her own consultancy. Between a long commute, longer hours (her first week back from maternity was an 80 hour week), and the high cost of childcare, it seemed to make sense, and her freelance income covered childcare. Of the choice, she says, “I think women are very much about makingthe nowwork. 401(k) saving almost seems selfish—taking money the family needs now for yourself in the future.”
And women are often stuck between two bad choices. We are65percent of family caregivers, and are muchmore likelythan men to reduce work hours to care for a family member.43percent of highly qualified women will leave full-time employment for a period of time. Thismeanswe have fewer total, uninterrupted years in the workforce, the model upon which 401(k) contributions are based. Of course, we earn less than men. But women will live5percent longer, and we are saving half of what men save.
53percent of freelancers are women, and the gender wage gap for women freelancers is smaller than that in corporate roles. Becoming your own boss would seem to be a solution in a country that lauds small business owners, but, for women, those ventures rarely match a previous professional salary—and they certainly don’t fund a 401(k).
Add in losing subsidized health insurance, taking off years for children and family, and the expenses of overhead, and there may be little left over for a SEP IRA (simplified employee pension), which has no free matching component, anyway. According toAARP, those who have access to an employer-sponsored retirement plan are 15 times more likely to save for retirement. 2017 was the first year since 2006 that I fully funded my retirement.
This would be less of a problem in a country that didn’t depend largely on the market’s 401(k) to fund people’s retirements. It’s an inherently unfair system because like so many others, it favors white men. Thanks to an extended bull market, workers who have saved in their company’s 401(k) for 10 years had a record high average account balance of $290,100, compared with $250,500 a year ago, reports theWashington Post.The market only rewards slow and steady pre-tax funding, which isn’t possible for people growing businesses, or freelancing.
Small business owners have no market that advantages their earning patterns, and women certainly don’t get an investment bump for taking care of the kids. Yes, freelancing can pay really well,up to 17percent more than a full-time salaried worker would in the same role, and it certainly gives you more time. But it’s not tax-free and the sporadic nature of payment can make it difficult to save.
When I read that Fidelity investments, which manages hundreds of thousands of retirement accounts,reportedthere are more 401(k) millionaires than ever, I was filled with ambivalence about the choice I made to leave. Will I be 87 years old and dependent on the kindness of strangers?
What’s most frustrating is that once women start investing, we actually outperform men, according toEllevest founderSallie Krawcheck. So how can women save enough for retirement when we opt out, or are pushed out of, the primary way people save for retirement?
First, public policy might catch up to us. As the gig economy gains a stronger hold on the US workforce, policymakers are beginning to consider options. The just-launchedOregon Savesprogram offers anyone with a Federal EIN number the choice to save through a Roth IRA retirement plan, so both small business owners, their staff, and freelancers can save (no match, though). Portable benefits plans like Oregon Saves areincreasinglypopular with Americans.
A recent Senate hearing highlighted “Multiple Employer” plans, in which a single 401(k) plan is sponsored by multiple employers, so a freelancer could take small pieces of a 401(k) match from various clients. Solopreneur havenEtsycalled on the Federal Government to create rules that create a central benefits system, like Medicare for benefits. With 40 percent of the US workforce on contingency, change (hopefully for the better) is inevitable.
Women who own small businesses also need to get more comfortable talking about retirement planning, and share the wisdom with people we mentor. In twelve years on my own, only two (smart) women have ever mentioned it to me, and I’ve had hundreds of mentoring conversations as I’ve grown my business. I’m guilty, too: I get numerous queries each week from miserable corporate employees asking me how I’ve done it. I haven’t told them the million-dollar downside.
Along those lines, we need to factor retirement into the decisions we make before we leave an organizational role, no matter how strong the factors pushing us to leave. Can you fund a SEP IRA, or another vehicle for the self-employed? If you miss out on that corporate match, can you still make headway? And if the math for your freelancing or small business just can’t jibe with funding your future, consider holding on to the corporate gig a little longer. Perhaps your employer will consider a more flexible schedule.
When women leave corporate roles, much is lost. I wish we lived in a country with a stronger social safety net; I wish companies and organizations offered more options for flexible work. But until then, I wish for more years of being able to fund my retirement.
The Vault at the Girlboss Rally is where women talk openly about money. On Saturday, June 29, we’re hosting IRL workshops to help you understand and manage your personal finances. Then, on Sunday, June 30, we’re hosting one-on-one and group Money Therapy sessions to get your most pressing money questions answered. In order to reserve your spot, register now at.