How does caring for a 70-, 80-, or 90-something parent affect the retirement plans of a 40-, 50-, or 60-something woman? Are there financial strategies, savings vehicles, or any other tips women can use to mitigate the financial planning impacts of part-time and full-time caregiving on their own retirement nest eggs?
It’s not a new problem. A 2002 study published in the Journal of Family Issues indicated that men are less prone to retire as a result of caregiving responsibilities for an older parent, a spouse, or another relative, while women in those same circumstances were more likely to retire. Clearly, caregiving can often lead to work disruptions at the very least, and often an early, forced retirement for women in the latter stages of their careers. Because Social Security does not give credit for work absences due to caregiving, and because most private pensions plans likewise do not credit years spent in caregiving toward vesting requirements, women who leave jobs or take retirement in order to make time for caregiving are giving up significant financial resources that they would have otherwise been able to use to fund retirement. According to the Urban Institute, as recently as 2023, the average female caregiver gives up nearly $300,000 in wages, pension payouts, and Social Security benefits over her lifetime.
The better news is that there are answers available to independent women who face the need of caring for aging parents, even as they plan for their own retirements. But the needs are not only financial: the emotional cost of providing care must also be taken into account, and caregiving support should be integrated as a meaningful part of multigenerational planning.
It All Starts with Communication
Independent women who anticipate the need to become care providers for aging parents or other relatives need to begin forming an elder care strategy as early as possible. And the first step in this, as with almost anything really important, is clear, detailed communication with those receiving the care. Conversations should proceed from the premise (too often assumed but left unsaid) that the aging persons are loved, valued, and respected; their wishes and best interests should be thoroughly stated and understood. Important questions should include, but not be limited to:
- Do you want to stay in your own home, or do you plan to move to a retirement center?
- Whom do you most trust to provide or oversee your care?
- Are there things you still want to do or places you especially want to go?
- What are your greatest concerns, and how can I/we help address them?
These conversations should also include some crucial legal and financial information:
- Whether there is a will or a trust, and if so, where the documents are kept;
- Whether there are any advance health directives in place, and if so, where the documents are kept;
- Who the aging relatives’ principal legal, financial, health, and other advisors are, along with their contact information;
- Whether a long-term care insurance (LTCI) policy is in place;
- The location of any safe deposit boxes, as well as the keys to the boxes;
- Amount and beneficiaries of all life insurance policies and annuities, as well as the names of the issuing companies and the locations of the policy documents.
Knowing the answers to these and other questions will likely prove essential for caregivers. Also, if the caregiver is not the healthcare proxy or the holder of the financial power of attorney, they should probably explore getting the documents changed to allow them to fill these roles. At the very least, they should be in close and compatible contact with the persons or entities performing these duties.
Taking an Inventory
Caregivers also need a thorough understanding of not only their aging relatives’ legal and financial arrangements, as mentioned above, but also of their own resources. After all, this is essentially a dual-track process: any planning for the care of aging parents must also consider the needs of the caregiver. Especially for women, who often face the prospect of diminished income and retirement benefits, it’s vital to remember that endangering their own retirements does not serve the interests of those for whom they are providing care.
A professional, fiduciary financial planner can be a valuable ally here. By assisting women caregivers to project and model various costs associated with caring for aging persons, they can help caregivers be more prepared and make better use of the resources available: both their own and those of their aging parents. They can also help the caregivers look for other sources of funding that may include long-term care insurance (for either the aging parent or, more likely, the caregiver), availability of employer-sponsored resources like flexible spending accounts, federal help such as various tax credits and medical expense deductions, and others. For those who are still employed either full- or part-time, the planner may also be able to help the caregiver design or refine a budget that can allow for greater contributions to retirement accounts, both employer-sponsored (401(k)s or 403(b)s) or individual retirement accounts (IRAs). This could also include catch-up contributions for those age 50 or older.
The Emotional Implications
We should never forget that caregivers need care, too. The problem is, the very people we depend on most to take care of others often don’t do enough to take care of themselves.
Especially if you or someone you love is providing care for older family members, there are
some important principles that can help you remember to give yourself the care you need in order to continue to be able to care for the others who are so important to you.
First, don’t skimp on yourself. According to the Family Caregiver Alliance, many caregivers are prone to
- not getting enough sleep;
- not eating healthy;
- skipping exercise;
- “powering through” instead of resting when they’re ill;
- postponing or ignoring medical appointments.
The fact is that taking too much on yourself for too long a period will often lead to poor emotional and physical health, rendering you unfit to care for anybody. So, what can you do to give yourself the care you need? The Mayo Clinic recommends several behaviors that can help caregivers take better care of themselves:
- accept help (and ask for it when needed);
- stay connected with friends and family;
- set meaningful personal goals;
- see your physician regularly.
Equila Financial, a fiduciary financial and wealth advisor, works with clients to develop individualized financial plans that can guide them to their most important financial goals. If you or someone you love is facing the responsibilities of caring for an older relative or other family member, let us help you find the solutions you need.
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