If you’re thinking about returning to work, you’re not alone. Thousands of American women return to work each year for a multitude of reasons including, kids getting older, a partner who lost a job or they’re simply looking to get back to a career they loved. Your return to work can be exciting, but getting your finances in order before you head back can help the transition be less overwhelming. Here are some tips to help you make the adjustment:
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).
It may be a good idea to keep original documents and copies of important documents, such as a will or mortgage, 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.
You may be earning money, but you’ll 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.
Healthcare. Medical expenses have skyrocketed, so health insurance is a must. If you and your spouse are both offered health insurance through your employers, figure out which option is best and decide whose plan you should use for your family. Be careful not to use two primary policies, which can lead to confusion 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 now and enables you to pay less in taxes.
Or, if you’re returning to work for your most recent employer, consider increasing the amount of your salary you put toward your retirement plan each year. If you can, contribute the maximum amount— and make sure you meet the company’s matching amount (if it’s offered).
Flexible spending accounts. Ask about the availability of flexible spending accounts or health savings accounts. The 2015 limits are $2,550 per person, per employee. A married couple each with one employer is allowed up to $5,100. If a person qualifies under two or more different employer's plan, they would be allowed $2,550 per employer.
Life insurance provides a generally income tax-free lump sum to your survivors in the event of your death.1 Since you are now earning a salary, you should consider getting a life insurance plan that reflects the income that would be lost if you were no longer here.
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 an additional policy that offers at least 10 times your annual salaries in protection. However, the appropriate amount of insurance for you depends on your needs and personal circumstances.
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 if you are not filing a joint return.
Childcare credit. For every dollar that you spend on childcare in 2015 (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 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 option is best for you.
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.
1 See IRC Section 101(a)
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. TIAA-CREF and its affiliates do not provide tax or legal advice. Individuals should seek advice based on their own particular circumstances from an independent tax or legal advisor.
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