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How Caregiving Impacts Your Health and Retirement Savings

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Caregiving can make you tired, stressed and poor for retirement.

In May 2016, at the age of 29, Jacquelyn Revere was on a subway in New York City en route to a comedy show when she received a distressing call from a family friend.

The message was urgent: she needed to return to Los Angeles immediately due to a concerning situation with her mother.

Her mother, who normally had a simple 15-minute, straight-route commute to work, had become disoriented and was lost for two hours before managing to find her way back home. Revere swiftly arranged a 21-day leave from work and flew to California.

Upon her arrival, Revere discovered that not only her mother was in distress, but her grandmother, who had been diagnosed with dementia in 2014 and lived with them, was also neglected. Revere recounted, “It was clear she hadn’t bathed in months.”

What was intended to be a short leave turned into a permanent caregiving role. Revere devoted the next six years to caring for both her mother and grandmother, who were struggling with dementia, at their home. Initially without compensation, she later received a minimum wage for a set number of hours each month through a California state home care program. Her grandmother passed away on November 6, 2017, and she continued to care for her mother until her death in March 2022.

Now 37, Revere still lives in the home where she cared for her family. However, she faces financial strains with almost no retirement savings. She earns some income by renting out rooms to interns from a nearby engineering firm and through social media posts, where she highlights the often overlooked work of caregivers. She also purchases health insurance through a state program.

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Revere’s financial challenges as a caregiver are not unique. According to a study by the Columbia University Mailman School of Public Health, funded by Otsuka Pharmaceutical, the financial burden of caregiving is depleting the savings of not only older Americans but also younger caregivers.

The study indicates that younger caregivers face a risk of a 40% to 90% shortfall in retirement savings by the age of 65, depending on their income, due to caregiving expenses and missed opportunities to contribute to retirement plans. This could equate to an additional seven to 21 years of work needed to recover the lost savings.

Impact of Caregiving on Future Financial Stability

While many Americans already struggle with retirement savings, becoming a caregiver can exacerbate financial setbacks, limiting their ability to build wealth and manage debt, the study highlighted.

John McHugh, the lead researcher of the study, noted, “Caregivers spend an average of $7,200 annually, often diverting funds that could have been saved or used to obtain employer-matched retirement contributions. This can lead to significant debt accumulation over time, in contrast to non-caregivers who might be growing their savings.”

Lower-income caregivers are particularly hard hit. For instance, a caregiver starting at age 35 with an annual income of $50,000 could face a 107.8% deficit in retirement savings by age 65, a significantly steeper shortfall compared to those with higher incomes.

McHugh emphasized that the study only accounts for lost savings from diverted funds. If one considers additional factors like leaving the workforce or missing out on job promotions, the financial impact is even more profound.

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Challenges Beyond Health Care

Revere’s challenges extended beyond caregiving. Upon her arrival in California, she was greeted with overdue mortgage notices and discovered her mother was unable to manage her financial affairs. People around her mother attempted to exploit the situation, delaying Revere’s awareness of the financial distress.

With her mother having joint bank accounts with her grandmother, Revere secured power of attorney which allowed her to manage the overdue mortgage payments. She also used her grandmother’s pension and Social Security benefits to cover ongoing expenses.

Revere admits that the financial and personal toll of caregiving has been substantial.

Potential Solutions and Support

Vice President Kamala Harris has proposed expanding Medicare to cover home care for seniors and disabled individuals if elected president, while former President Donald Trump has advocated for a tax credit for family caregivers. However, both plans would need Congressional approval.

Liz O’Donnell, founder of Working Daughter, a resource for female caregivers, appreciates the national conversation about caregiving. O’Donnell, who has balanced caregiving for her terminally ill parents with her career and personal life, stresses the need for private sector involvement to effect change swiftly.

John McHugh suggests that employers could make caregiving support part of their employee benefits, adapting to the varying needs of their workforce.

Self-Advocacy in Planning for the Future

With the aging Baby Boomer population, experts urge individuals to take proactive steps in planning for long-term care. Patrick Simasko, an elder law attorney and financial adviser, highlights the importance of preparing for the realities of aging and potential health care needs.

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Options include:

Long-term care insurance, which can help cover costs of daily assistance not covered by regular health insurance, in various care settings.

Life insurance with a long-term care rider, allowing access to death benefits for care expenses, reducing the amount available to heirs.

Prioritizing long-term care planning, often overlooked in favor of other financial goals like saving for children’s education or weddings. Focusing on personal long-term care can ultimately be more beneficial for both individuals and their families.

Establishing trusted contacts and power of attorney can protect against financial exploitation and ensure proper management of funds for care needs, according to Simasko.

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