Can You Afford to Enter (or Reenter) the Work Force?

The Pros and Cons

by  Phil Dyer, CFP, MOAA

One of the toughest decisions many families face after children come along is whether or not the stay-at-home parent  should enter or reenter the workforce. This is a particularly difficult decision for military families, given their transient way of life, two to four years at a duty station before having to pick up and move halfway across the country (or halfway around the world).

Conventional wisdom holds that both parents must work to make ends meet, but entering the workforce often carries significant hidden costs that should be taken into consideration before taking the leap. To determine which choice is right for your family, it is important to evaluate both the pros and cons of the stay-at-home spouse taking a job.

 Pros

• More income—The single biggest reason that is cited for both spouses working is to increase the household income to cover rising housing prices, upgrade the family’s lifestyle or pay for private-school tuition. 
• Retirement savings—Although a nonworking spouse is eligible for a spousal IRA tax deduction of up to $4,000 annually ($5,000 for those over age 50), company-based retirement plans, such as 401(k) plans, allow you to save much more ($15,000 annually in 2006 plus an additional $5,000 for those over age 50).
• Qualifying for Social Security benefits—You must have 40 quarters (10 years) of qualifying work history to be eligible for Social Security benefits under your own name. 
• Acquiring and improving job skills—While education is important for gaining marketable skills, “real-world” experience is crucial to staying current in today’s fast-paced work environment. Many who leave the workforce for even a few years find that their job skills are pretty rusty when they jump back into working.

Cons

• Childcare costs—The cost of quality childcare is rising rapidly. If you have small children and cannot rely on a relative or friend for childcare support, full-time childcare can be enormously expensive.  According to the National Association of Child Care Resource and Referral Agencies, average childcare costs for an infant range from $3,800 to a whopping $13,500 per year, depending on where you live. Although costs decline as a child ages, having more than one child in care at once can make it cost prohibitive for a stay-at-home parent to return to work. 
• Commuting costs—Unless you plan to work from home or live within walking distance of work, commuting costs can be expensive. According to the American Automobile Association (AAA), the average cost to operate an automobile is 52 cents per mile.  That cost per mile includes the price of gas, maintenance, financing, insurance and other expenses.  That means commuting 10,000 miles per year—relatively low mileage for a full-time job—would cost $5,200 plus per year. 
• “Working” costs—Most jobs have some “hidden” costs, such as the cost of a work wardrobe, dry cleaning, restaurant or cafeteria meals (unless you pack your lunch each day) and even gifts for coworkers, that are usually far more substantial than most people realize.