Half of U.S. Adults Have Taken Career Breaks — Is Your Retirement Plan Ready?

Planned or unexpected career breaks have become increasingly common. A recent TIAA Institute report found that about half of U.S. adults ages 22 to 75 have spent more than a year out of the labor force. While that can create an immediate income gap, it may also affect long-term financial security.

With layoffs, caregiving duties and burnout more widespread, it makes sense to think ahead about time away from work before it happens.

Extended Time Away From Work Is More Common

Many Americans are now stepping away from their jobs for a year or longer for a range of reasons. The most common include:

• Caring for children (17%)

• Changing careers (16%)

• Burnout (16%)

• Layoffs (16%)

• Moving (16%)

“The modern workforce is simply more fluid and more fragile than it once was,” said Surya Kolluri, head of the TIAA Institute. “Layoffs, health challenges, caregiving responsibilities, economic volatility and career changes have become more prevalent — nearly 8 in 10 have changed employers at least once.”

For retirement savers, the main concern is not just time away from a paycheck, but the years of contributions and compound growth that may be hard to replace.

Caregiving Breaks Can Raise Retirement Risks

While 51% of U.S. adults overall have taken a year or more off work, the share is even higher among parents (56%) and caregivers who are currently caring for a child with special needs or for an adult friend or relative (65%).

Those caregiving gaps can create long-lasting problems for retirement savings.

“A caregiving gap means lost contributions, lost employer matches and lost compounding growth, all during years that may be prime earning years, particularly for many millennials who frequently find themselves in this situation,” Kolluri said.

In addition to the direct financial hit, caregivers may return to the workforce in lower-paying roles or with fewer hours, making it harder to rebuild savings.

“The 49% of retirees who regret underestimating life event impacts suggest this is a widespread and underappreciated risk,” Kolluri said.

Job Changes Can Interrupt Retirement Progress

The era of spending 30 or 40 years with one employer is largely gone, and many workers now move from job to job. Although changing jobs can lead to higher pay, it can also weaken retirement preparedness.

“On the risk side, workers who cash out 401(k) balances during transitions rather than rolling them over permanently sacrifice both those funds and their compounding potential,” Kolluri said. “Vesting schedules may also mean leaving employer contributions on the table. Frequent changes can disrupt contribution consistency.”

How to Shield Retirement Savings During a Career Break

The encouraging news is that a career break does not have to wreck retirement plans. Planning ahead can help protect both near-term finances and long-term goals.

Because time out of the workforce is so common, it is wise to build a separate “career interruption fund” alongside an emergency fund.

“This fund can cover living expenses during a gap without forcing withdrawals from retirement accounts,” Kolluri said.

He also suggested thinking about ways to keep retirement contributions going during a break, even if only at a reduced level.

“Americans should familiarize themselves with options for keeping retirement accounts intact during transitions,” Kolluri said. “Working with a financial advisor to stress-test a retirement plan against potential career interruptions can also reveal vulnerabilities before they become crises.”

Career breaks are now a normal part of working life, and planning for one should be normal too. A few steps taken in advance can turn a future gap from a setback into a manageable detour.