Parents who opt to take a sabbatical from their jobs and stay at home will face many hidden opportunity costs such as lost wage growth and retirement savings.
A research report conducted by the Center for American Progress, a non-profit organization based in Washington, D.C., delves into other financial ramifications of leaving the workforce in addition to a loss of income. Many parents focus on the rising costs of childcare and neglect to probe into the total cost of leaving their jobs or careers, said Katie Hamm, senior director of early childhood policy and a co-author of the study.
For every year that parents elect to take one year off, they "stand to lose three to four times of their annual salary," in their lifetime income, she said.
The average age for a woman to have her first child is 26 years old, and the median salary of women ages 21 to 31 years old is $30,253, according Hamm, Michael Madowitz and Alex Rowell who co-authored the report. By choosing to stay at home for only five years, a woman will lose $467,000 during her career and reduce her lifetime earnings by 19%.
"You see the impact compound over your career," she said.
In the same scenario, a 26-year-old man generates a median income of $33,278 annually and, by choosing to stay at home, reduces his lifetime earnings by 22% or $596,000 because of the gender wage gap.
An interactive tool developed by the Center for American Progress can help parents calculate their losses based on gender, age, salary and the amount of time they plan to stay out of the workforce.