Returning to the workforce

Click here for the downloadable version. (PDF)

Each year thousands of American women return to work after spending time caring for their children. Whether your kids are getting older, your partner lost his or her job or you’re looking to get back to a career you loved, your return to work can be exciting, but also overwhelming. Getting things in your personal life in order before you head back to work, especially your finances, will help ease your transition. Here are some steps you can take:

1. Get organized.

With a new job, your time will be at a premium, and it’ll pay to be organized. Create a personal financial center at home to keep your family’s financial records at your fingertips. If possible, you may want to set this up in your home office, or near your family computer for easy, online bill paying (if you pay your bills electronically).

Make sure that original documents, such as a will or mortgage, are kept in a safe deposit box outside of your home as well as in a secure safe at your house (if you are sure family and friends may not know about your safe deposit box) , with a copy in your financial center. Always keep your financial center in a secure place.

2. Rework your budget.

You may be earning an income, but you will also be taking on new expenses, such as child care, commuting costs, dry cleaning and perhaps even new clothes. Calculate how much these additional expenses will cost each month. Then make any adjustments to your budget based on what you expect to earn and spend in the future.

3. Take advantage of your benefits.

Healthcare. Medical expenses have skyrocketed, so health insurance is a must. If you and your spouse are both offered health insurance through your employers, weigh your options. Figure out which option is best and decide whose plan you should use for your family. Also, be careful not to use two primary policies, which can lead to confusion (at best) when you file a claim.

Retirement plans. If you haven’t already started saving for retirement, now’s the time to do it. One great way to do so is through your employer’s 401(k) or 403(b). Your contributions will be taken out before taxes (in most cases), which lowers your taxable income and enables you to pay less in taxes.

Or, if your retirement plan is still with your most recent employer (and that’s who you are returning to work for), consider increasing the amount of your salary you put toward retirement each year. If you can, contribute the maximum amount to your employer’s retirement plan. At the very least, be sure you meet the company’s matching amount (if it’s offered).

Flexible spending accounts. Inquire about the availability of flexible spending accounts or health savings accounts. They can allow you to set aside up to $5,000 in pretax income to pay for qualified child care or healthcare expenses. This also allows you to lower your taxable income, so you’ll pay less in taxes. However, make sure that you spend all of the money in the account within the year, or you will lose it.

4. Provide a safety net.

Your family depends on your and your spouse’s ability to meet financial commitments. If something were to happen to either of you, life insurance can prevent financial distress for your family. Since you are now earning a salary, you should obtain a life insurance plan that reflects your lost income.

Life insurance provides a tax-free lump sum to your survivors in the event of your death. While your employer may offer a specific rate for life insurance, it is also recommended that both you and your spouse or partner each own at least 10 times your annual salaries in protection (in addition to whatever amount your employer may be offering). However, the appropriate amount of insurance for you depends on your needs and personal circumstances.

5. Don’t forget tax breaks.

Claiming dependents. You can receive a child tax credit by claiming your child as a dependent. But keep in mind a dependent may only be claimed on one person’s tax form, so you and your husband or partner will need to decide who will claim your child.

Childcare credit. For every dollar that you spend on childcare (up to $3,000 for a single child or up to $6,000 for two or more children), you can receive a tax credit. The amount of the credit varies from 20% to 35% of what you pay for childcare, depending on your gross income (your income before taxes and withholdings). A word of caution: The IRS doesn’t allow you to file for a childcare credit and use a flexible spending account at the same time. Crunch the numbers and decide which method is best for you.

Move forward.
Returning to the workforce after spending years away doesn’t have to be a stressful experience. Careful tracking of your finances can enable you to concentrate on what many women strive to do: Achieve a healthy balance between work and family.

Need more information?
Visit for broader Financial Education, including a variety of resources to help you improve your financial well-being.

The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.

The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.

TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., distribute securities products.

© 2014 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017