Closing the Retirement Gap for Women: Planning Around Career Breaks

Many women take time off from work to care for children, aging parents, or for personal health reasons. These career pauses, while necessary and noble, can cause significant gaps in retirement planning. Less time in the workforce usually means fewer savings, missed employer contributions, and lower Social Security benefits. But there are smart and achievable ways women can plan around these challenges to have a secure and comfortable retirement.

The Financial Impact of a Career Pause

Taking a break from work doesn’t just mean fewer paychecks in the short term. It also means missed opportunities for long-term savings growth. This is known as the “compounding gap.”

What Is the Compounding Gap?

The compounding gap refers to the missed growth of retirement savings due to fewer years of investing. For example, a five-year career break during a woman’s 30s could mean losing hundreds of thousands of dollars by age 65—not just because of missed contributions, but because those contributions don’t have time to grow. Starting retirement investments early and contributing regularly boosts the power of compound interest significantly.

Making Up Lost Ground: Smart Savings Strategies

Fortunately, there are planning tools and techniques that can help women close the retirement gap even after a career pause. It involves catching up on savings, utilizing spousal benefits, and thoughtfully managing taxes.

Catch-Up Contributions

After age 50, individuals are allowed to make higher-than-normal contributions to retirement accounts like 401(k)s and IRAs. These catch-up contributions allow women to accelerate their savings during their later career years. Even outside the catch-up window, increasing contributions once reentering the workforce can help balance earlier slow periods.

Spousal IRAs During Career Breaks

If a woman is married and not earning income, she can still contribute to an IRA through a spousal IRA. This allows a working spouse to contribute on her behalf up to the IRA limit, helping to maintain her retirement savings momentum during non-working years.

Maximizing Social Security for Caregivers

Social Security benefits are based on your 35 highest-earning years. A break in your career could bring down that average. However, there are ways to reduce the impact of this.

Understanding Credits and Eligibility

It takes only 10 years (or 40 quarters) of work to qualify for Social Security retirement benefits. Even with a few years out of the labor force, most women still qualify. But fewer working years may lead to smaller monthly payments at retirement.

Spousal and Survivor Benefits

If your own Social Security record is low due to caregiving, you may qualify for spousal benefits. These can provide up to 50% of your spouse’s benefit. If you are widowed, survivor benefits might provide a higher monthly amount. These rules can be complex, so it’s good to consult Social Security or a financial advisor when planning which benefit to take.

Working Part-Time with Retirement in Mind

Some women work part-time during caregiving years. This can still help earn Social Security credits and, in some cases, qualify for employer retirement plans or health insurance benefits.

Structuring Part-Time Work Wisely

Not all jobs offer benefits to part-time employees. But if you can find ones that do—especially those offering retirement plans—you can continue to build retirement savings and maintain work benefits. Even small income streams contribute to long-term financial security and can reduce the gap caused by a full career pause.

Investing for a Non-Linear Career Path

Women with interrupted careers often have fluctuations in their income, which changes how they should approach investing. Anyone facing an unpredictable income stream should adapt their investment strategy to remain on track for retirement.

Flexible Investment Strategies

Traditional investment advice often assumes a steady income. For women with on-and-off work history, a more personalized glide path is helpful. This might involve being slightly more growth-oriented earlier on, followed by more conservative investing as retirement nears. Using target-date funds or speaking with a financial advisor who understands career breaks can help fine-tune your plan.

Taxes After Returning to Work

Coming back to work after a few years away can come with surprising tax consequences. Rejoining full-time work may place a woman in a higher tax bracket, especially if her income surges. This can impact take-home pay and retirement savings opportunity.

Strategic Tax Planning

One way to help manage this is by timing income or spreading it across years when possible. Also, maxing out tax-deferred retirement accounts like 401(k)s or Health Savings Accounts (HSAs) can lower taxable income. For some, Roth IRA contributions during lower-income years can take advantage of a lower tax rate, offering tax-free income later in retirement.

Final Thoughts

Retirement planning for women, especially those who take career breaks, requires thoughtful strategy—but it is absolutely achievable. With planning and smart use of available tools like spousal IRAs, catch-up contributions, part-time work, and Social Security savvy, women can build strong financial futures. Understanding the unique impact of caregiving on retirement and making proactive moves can greatly improve long-term outcomes. Your financial journey may not be linear, but with each step, you’re coming closer to a secure retirement.