Caregiving is an essential piece of modern American life. It’s estimated that 53 million adults provide unpaid care to a family member. A portion of that number is adults caring for children (5.7%), but most are providing care for other adults. Of those, the overwhelming majority care for a relative (89%), typically a parent or parent-in-law (50%), spouse or partner (12%), grandparent or grandparent-in-law (8%), or adult child (6%).

Despite the large number of adults taking care of their relatives, the cost of caregiving can add a large, unexpected burden to family caregivers—particularly for women caregivers.

Women Bear the Brunt of the Caregiving Financial Burden

The costs associated with taking time off work (or leaving the workforce altogether) to care for a loved one in your home can add up quickly. One study estimates that the aggregate of lost wages, pension benefits and Social Security benefits from caregiving is $3 trillion. Now, figure into the calculation the fact that two-thirds of U.S. caregivers are women, and that the average woman’s loss from caregiving is $324,044 compared to the average man’s loss of $283,716. You can see that women are carrying a considerably larger portion of that caregiving financial burden.

The number is large, but it doesn’t begin to tell the story of the long-term financial consequences for women:

  • Largely because of caregiving, women enter and leave the workforce more often than men, which can lead to lower wages, lost income, lost promotion opportunities, and lost retirement savings.
  • Without a consistent workplace presence, women lose the opportunity for compounded returns in their 401(k) plans and matching contributions.
  • Women tend to supplement the living expenses of the person they care for, thereby further reducing money available to set aside for their own retirement.
  • Since your lifetime wages dictate your eventual Social Security payout, you could also miss out on tens of thousands of dollars’ worth of Social Security benefits down the road.

The challenge could potentially become greater over the coming decades as baby boomers continue to age and their female children feel compelled to care for the parents they love.

8 Ways Caregivers Can Protect Their Savings

Given the overwhelming financial burden that family caregivers may experience, it’s important to be proactive in your financial planning to prepare for the costs associated with caregiving. Luckily, there are some steps that you can take to protect yourself and your retirement if you’re a caregiver, regardless of your gender.

  1. While you are working, participate fully in your employer’s 401(k) plan, including taking advantage of any matching contributions.
  2. Consider buying long-term care insurance if you’re 50 or older so you’ll have the choice of a wide range of supportive services and living arrangements once you’re retired. Keep in mind that the younger you are when you purchase long-term care insurance, the more affordable the annual premiums will likely be.
  3. Check with your company’s human resources manager to see if the company offers services to employees who are also caregivers.
  4. Exhaust all your options before leaving your job or cutting back your hours. Consult Eldercare Locator, sponsored by the U.S. Administration on Aging, to find local services that might eliminate the need for you to quit your job.
  5. Remember that leaving a job not only means losing your paycheck, but also your benefits and contacts. Try to work until you’re vested in your company’s pension or profit-sharing plan. If you’re scaling back your hours, try to continue working enough to continue to get benefits like health insurance.
  6. Make sure you don’t get to retirement age with fewer than 10 years of work. You could lose your Social Security benefits.
  7. If you decide you must stop working or reduce your hours, create a budget and make plans for how you’ll deal with less pay and fewer benefits. Reduce your expenses, eliminate debt, and make a budget for the person you’re caring for to help you avoid paying their expenses out of your pocket.
  8. Don’t spend your 401(k). The loss of the compounding interest could be a disaster for your future retirement income. Do the opposite by budgeting for a regular contribution to an IRA.

Like most issues that arise in financial planning, caregiving turns out best when there’s careful planning and the advice of skilled professionals. Although it’s impossible to know the future, it’s always a good idea to proactively plan with your advisor now, before there’s an urgent need for you to put your future at risk in order to care for the people you love.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Edwina Allee

Edwina Allee

Senior Vice President, Financial Advisor

Series 7 & 63 Securities Registrations,1 Insurance License Edwina has more than 27 years of experience in the financial services industry. She has a strong background in retirement and values-based financial planning. She has a passion for helping people understand what they truly value in their lives and how their values are intimately connected to their goals. She enjoys helping people understand how they are positioned financially with respect to important life goals,...Read More