Caregivers suffer financially when it’s time to retire, new study says

When she was 29 years old, Jacquelyn Revere received a phone call in May 2016 from a family friend while riding the New York City subway to see a comedy show.
Revere needed to fly home to Los Angeles right away. Something was wrong with her mom.
Mom had a straight shot to and from work – one road, no turns, 15 minutes. Somehow, mom got lost for two hours before finally finding her way home. Revere immediately took a 21-day leave from her job and flew to California.
When Revere arrived, she found her grandmother, who lived with her mom and was diagnosed with dementia in 2014, also hadn’t been cared for. “It was apparent she hadn’t bathed in months,” she said.
Revere’s 21-day work leave quickly turned permanent. She spent the next six years caring for her mother and grandmother – two dementia patients – at home, first without any pay and then for minimum wage for a certain number of hours per month through a California state home care program. Revere’s grandmother died on Nov. 6, 2017, and Revere continued to care for her mom until she died in March 2022.
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Revere still lives in that home where she took care of her grandmother and mother, but now, at 37 years old, she has almost no retirement savings. She earns money renting rooms to a revolving door of interns who work at a nearby engineering firm and from paid social media posts where she brings light to “invisible” caregivers. She pays for health insurance she gets through the state.
Revere’s situation isn’t unusual. The cost of caregiving isn’t just ravaging the finances of older Americans but also those of younger generations who provide the care, according to a study by the Columbia University Mailman School of Public Health sponsored by pharmaceutical company Otsuka.
Due to reallocating funds to caregiving expenses and foregoing essential retirement contributions, caregivers who begin their duties at a younger age risk an average 40% to 90% deficit in retirement savings, depending on salary, by age 65 compared to non-caregivers, the study said. That’s equivalent to another seven to 21 years of work to recover the savings loss.
Most Americans already have difficulty saving for retirement but when people become caregivers, they’re set further back financially, hurting their ability to accrue and grow generational wealth and manage debt, the study showed.
“Caregivers spend about $7,200 a year,” said John McHugh, the study’s lead researcher. “Some of that comes from what they could have saved for retirement or to get their company’s 401(k) match. Some of it is debt like credit cards or personal debt. Compound that over time, and caregivers are accumulating debt versus a non-caregiver who’s accumulating savings.”
The deficit is the largest among lower-income caregivers. For example, if caregiving begins at age 35, someone earning $50,000 annually will see a 107.8% retirement savings deficit at 65 years old, compared to a 60.4% gap for those earning $75,000 a year and a 46.9% deficit for those making $100,000 annually.
McHugh’s study only accounts for missed contributions and their growth from diverting funds. If other factors like having to leave the workforce, give up promotions, or taking a leave of absence and being unable to return to the same job were included, losses would be even deeper, he said.
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When Revere arrived in California. she had to deal with more than her family’s health challenges.
“We had letters threatening foreclosure because the mortgage hadn’t been paid for two months,” Revere said. “My mother wasn’t able to hold full conversations, not grasping what was going on. There were a few people surrounding the family trying to take financial advantage, so I wasn’t told sooner.” Their life insurance policies also lapsed due to nonpayment.
Since her mom was in a joint bank account with her grandmother, Revere was able to get her mom to give her power of attorney to tap that money for the late mortgage payments. She later used her grandmother’s $5,000 monthly pension payment and Social Security checks to continue paying bills and daily expenses.
But she says the years spent caring for her loved ones with little to no pay have taken a personal financial toll.
If elected president, Vice President Kamala Harris said she plans to expand Medicare benefits to cover home care for seniors and disabled Americans while former President Donald Trump says he would push for a tax credit for family members who care for a parent or loved one. Both plans would require Congressional approval.
“I love that caregiving’s being talked about at the national level,” said Liz O’Donnell, who founded Working Daughter, a resource for women caregivers. O’Donnell discovered both of her parents had terminal illnesses on the same day and for years, juggled caring for them and her own family while also working.
She was lucky she worked out a flexible work plan with her employer, she said. But not everyone’s that fortunate, and “we need the private sector to be involved,” she said. “They can be a greater lever for change and sometimes get things done faster.”
As employers make their employee benefits more flexible, McHugh suggested caregiving could become another benefit option. “Some may not need child care leave but need caregiving leave instead,” he said.
Waiting for government and companies to implement solutions can take a long time, and with more than 10,000 Baby Boomers turning 65 years old each day, there’s not a lot of time to wait, experts said.
“They need to take a bigger responsibility for their own long-term care,” said Patrick Simasko, elder law attorney and financial adviser at Simasko Law in Mount Clemens, Michigan. “People are living longer, and Social Security’s not cutting it. Living longer doesn’t mean living healthier, so they need to plan for that.”
People should consider:
Long-term care insurance: It helps pay for routine services like assistance with bathing, dressing, or getting in and out of bed in a variety of places such as your home, a nursing home, an assisted living facility, or adult day care. These aren’t typically covered by health insurance, but many older adults may need this help.
Those insurance policies aren’t cheap, and people usually must begin paying for them when they’re feeling healthy and invincible, Simasko said. In reality, “a third of us will be in the nursing home for 32 months, on average.”
Life insurance policy with a long-term care rider: This allows people to tap into their death benefit while still alive to pay for long-term care. The amount used for care is subtracted from the death benefit, which means less money for heirs.
Prioritizing your long-term care: “Young married couples think about their 401(k) and get all kinds of advice to save for orthodontia and college tuition,” O’Donnell said. “Why wasn’t it drilled into my head to save for my own longevity?”
It’s OK for parents to let kids figure out how to pay for their college or wedding so they can cover their own long-term care, experts said. That can end up being the best gift parents can give to their children, they said. “It’s incumbent on us to plan so our kids are not so squeezed,” O’Donnell said.
Trusted contacts and power of attorneys: They can ensure someone doesn’t steal money that should go toward long-term care, Simasko said. Scammers often target elderly people, and adding a “trusted contact” to accounts allows financial institutions to alert them to potential fraud. A power of attorney meanwhile ensures that if a loved one suddenly falls ill and isn’t capable of making decisions, someone can access important information and make decisions, he said.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] andsubscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.