Balancing Caregiving Without Losing Financial Ground

Women account for nearly 60% of Americans providing unpaid eldercare, stepping in to care for aging parents, spouses, or family members in need.¹ It’s a responsibility that often arises unexpectedly. While caregiving can be a deeply meaningful experience, it also comes with significant financial trade-offs. 

Taking time off from work or reducing your hours to care for a loved one often leads to lost income, reduced contributions to retirement accounts, and lower Social Security benefits. On top of that, the direct costs of caregiving—medical expenses, home healthcare, and other related costs—can add up quickly. These financial impacts accumulate over time, and while they may not be fully felt until retirement, they can have a lasting effect on your financial future.  

It’s easy to focus on the immediate demands of caregiving, but it’s just as crucial to plan for both the short-term financial costs and the long-term effects on your financial picture. With thoughtful preparation, you can navigate the challenges of caregiving while still working toward your financial goals. 

The Financial Toll of Caregiving 

While caregiving is often seen as an emotional or personal responsibility, its financial consequences are very real. Women who step away from their careers to provide care, or reduce their work hours to manage caregiving alongside other responsibilities, may face lasting impacts: 

• Missed income and career growth: Time away from the workforce often means lost salary increases, missed promotions, and fewer opportunities for career advancement. 

• Reduced retirement contributions: If you're not working full-time, you may miss out on employer-sponsored retirement plans or find it difficult to contribute to your own savings. 

• Lower Social Security benefits: Social Security is based on your lifetime earnings. Reducing work hours or taking time off can result in lower benefits when it’s time to retire. 

Even a short gap in employment has the potential to result in tens of thousands of dollars in lost income and retirement savings over the years. While the immediate demands of caregiving may be unavoidable, it's important to balance your financial future with your caregiving responsibilities. 

How to Plan Ahead for Potential Caregiving Roles 

If caregiving is something you anticipate in the future, there are steps you can take now to prepare. 

• Build a financial cushion: Start saving early for the unexpected costs associated with caregiving. This can help cover any gaps in income and provide peace of mind during difficult times. 

• Explore flexible work options: If you're likely to take time off or reduce your work hours, consider talking to your employer about flexible work arrangements or part-time opportunities that can help you balance caregiving and career. 

• Get a clear picture of your loved one’s finances early: Have early conversations about their expenses, income, insurance, and health care plans. A clear picture can help you identify gaps and plan ahead for caregiving needs. 

• Understand your rights and resources: Familiarize yourself with state and federal programs that may be available to support your caregiving efforts, such as paid family leave or caregiving stipends, nonprofit resources, and local support services. 

Prioritize Contributing to Retirement Accounts 

Even if you reduce your working hours or step out of the workforce, it's important to keep contributing to your retirement savings if possible. Here are some strategies to consider: 

• Spousal IRAs: If you’re married and your income is reduced or paused, you may be eligible to contribute to a spousal IRA, which can keep your retirement savings on track even during caregiving gaps. 

• Catch-up contributions: Once you return to work full-time, you may be able to make catch-up contributions to your retirement accounts to help make up for lost time and savings. 

Keeping your retirement savings growing, even with a small contribution, can allow the power of compounding to work in your favor. 

Consider Your Own Long-Term Care Plan 

As you care for others, it’s also important not to overlook your own future care needs. Many caregivers focus entirely on the needs of others while neglecting their own long-term care planning. Ensuring that you are prepared for your own future care will not only benefit you, but whomever you may turn to down the road for assistance.  

• Long-term care insurance: This type of coverage can help protect your savings from the high costs of care if you require assistance in the future. 

• Designate savings for future care: If you’re not able to invest in long-term care insurance, setting aside a portion of your retirement savings can also provide a buffer for potential future care costs. 

Seek Professional Guidance During Transitions 

The decisions you face when balancing caregiving and retirement planning can be complex. A financial advisor who understands the unique challenges of caregiving can help you navigate these important decisions and craft a strategy tailored to your situation. They can provide valuable guidance on how to adjust your savings strategy, when to consider tapping into your savings, and how to stay on track with your long-term financial goals.