Caregiving's Financial Toll Is Often Hidden
A growing number of people have become unpaid caregivers for loved ones, and a new report says many are overlooking the financial consequences of their selflessness.
One in five adults now provide uncompensated care to family and loved ones with health problems, according to the report from the TIAA Institute and the University of Pennsylvania School of Nursing.
On average, these caregivers are shelling out more than $7,000 a year, on average, in expenses out of their own pockets on things like housing, health care and transportation.
Nearly half of caregivers say they've suffered financially as a result, forcing them to take steps that eat into their own finances. Many feel they have no choice but to withdraw money from savings, take on debt, pay bills late or cut back retirement contributions.
Overall, caregivers have lower levels of financial assets and carry more debt than those who aren't caring for loved ones, the report found.
For example, one in four caregivers has less than $1,000 in savings and investments, compared to one in seven for those who aren't caregivers.
“Although the emotional and physical toll on family caregivers is well recognized, the financial impact of these roles has received less attention,” said Surya Kolluri, head of the TIAA Institute.
“The impact on lifetime earnings, savings, Social Security benefits and retirement readiness can be severe," she said in a news release from the University of Pennsylvania School of Nursing. "Especially today, as people are living longer, caregivers should plan for these costs at various life stages.”
The fiscal impact also extends into the workplace. About three in five caregivers have jobs outside the home, but caregiving typically requires 24 hours a week.
As a result, about 61% of working caregivers said the care they provide has impacted them on the job -- causing them to arrive late, leave early, take time off or retire earlier than planned.
The need for caregivers is also likely to skyrocket, meaning that more Americans will face these financial pressures, the report noted.
Every day, about 10,000 Baby Boomers turn 65, and they're living longer than ever. Life expectancy has gone up by 17 years since Social Security began in 1935.
Women and millennials particularly feel the financial pinch of caregiving, the report says.
Women already have 30% less income than men during retirement, and about three in five caregivers are women. In addition, about 25% of caregivers are in their 20s and 30s.
Becoming a caregiver at a young age is especially difficult, because that's when people often have smaller salaries, should be taking the biggest strides in their careers and are also raising children.
“As younger generations increasingly take on caregiving roles, they face different financial pressures and trade-offs,” Mary Naylor, director of Penn Nursing's New Courtland Center for Transitions and Health, said in the news release. “The financial choices made at younger ages have ripples for years to come, as families weigh the relative importance of present spending, saving for large expenses and saving for retirement.”
The report recommends that caregivers meet with a financial advisor, to craft a realistic plan based on a solid understanding of life expectancy.
It also outlined ways that financial advisors could help support caregivers, by taking a holistic view of client support that extends beyond simply building a nest egg for retirement.
For example, financial advisors could form relationships with social workers, human resource managers and other professionals, to make connections when they might be helpful to a caregiving client.
“Health and wealth are increasingly two sides of the same coin,” Kolluri said. “The traditional role of a financial advisor needs to shift from retirement planning to a more holistic model that includes considerations such as longevity, health, family, finances, caregiving and, indeed, financial caregiving.”
Employers also can help caregivers by providing benefits like flex time, paid family leave, geriatric care management services, emergency backup care and financial planning services.
The Family Caregiver Alliance has more about being a caregiver.
SOURCE: University of Pennsylvania, news release, Nov. 1, 2023
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