Key steps Congress can take to help caregivers’ finances 

People know about the emotional and physical toll on family caregivers, but they often overlook the financial impact.  

One in five adults now provide uncompensated care to loved ones with health problems, pushing almost half of them to say they’ve suffered financially. Things like housing, health care and transportation add up to an average of more than $7,000 a year. Many people think they have no choice but to withdraw money from savings accounts or retirement nest eggs, take on debt, pay bills late or scale back on their retirement contributions. 

The burden of caregiving also extends into the workplace. Caregiving typically requires 24 hours a week, and about 60 percent of caregivers have jobs outside the home. Many report at least one work-related consequence, such as taking time off, leaving their jobs or retiring sooner than planned. 

That’s why we applaud a new, bipartisan bill called the Expanding Access to Retirement Savings for Family Caregivers Act, which was introduced earlier this month by Reps. Claudia Tenney (R-N.Y.) and Chris Pappas (D-N.H.). It would apply to caregivers who leave the workforce for at least a year, sacrificing income to help loved ones, and it would help them recoup their retirement savings.  

Right now, people must wait until they’re 50 to make catch-up contributions to their 401(k)s, IRAs and other retirement accounts. That could be an extra $7,500 in your 401(k), for example. The bill would allow caregivers to make those contributions earlier — at age 50, minus the years they were out of the workforce. This can have a substantial impact over time.  

Besides the bill in the House, the Senate is also considering another new bill, the Lowering Costs for Caregivers Act. This bipartisan measure, which was introduced by Sens. Jacky Rosen (D-Nev.) and Bill Cassidy (R-La.), would allow people to use their tax-free health savings accounts and flexible spending accounts on medical expenses for their parents. Currently, adult children cannot do that unless their aging parents are classified as dependents for tax purposes.  

Unpaid caregivers fill an invaluable role in their families, but doing so often has a detrimental impact on financial health and retirement preparedness. Caregivers need more ways to address savings gaps earlier and increase their likelihood for a secure retirement. 

The proposed legislation comes as the need for caregivers will likely skyrocket. About 10,000 baby boomers turn 65 each day, and they’re living longer than ever. Life expectancy has risen by 17 years since the Social Security program debuted in 1935.  

We issued a report last month, highlighting research that shows how a growing number of people are increasingly neglecting the short- and long-term costs of caregiving. The report revealed that caregivers have lower levels of financial assets and higher levels of debt compared to those who don’t care for loved ones. One in four caregivers has less than $1,000 in savings and investments, for example. For non-caregivers, the number was closer to one in seven. 

The financial challenges are often steeper for both women and millennials. Women already have 30 percent less income than men during retirement, and a disproportionate number of caregivers (60 percent) are women.  

In addition, about 25 percent of the caregivers are in their 20s or 30s. Becoming a caregiver at a young age is especially difficult, because it’s a time when people often have smaller salaries and should be taking the biggest strides in their careers. Many people that age are also raising children, making them part of the so-called sandwich generation, which creates even more emotional and financial burdens. 

The financial choices made at younger ages have ripples for years to come. It’s difficult for families to weigh the relative importance of present spending and saving for large expenses. In time, it can have a severe effect on lifetime earnings, savings, Social Security benefits and retirement readiness.

So what can be done?  

Policymakers and the private sector must work together, helping caregivers plan, prepare and save for retirement. This comes at a time when 40 percent of all U.S. households — not just caregivers — risk running short of money in retirement.  

More financial advisors should take a holistic view of how they help clients. Health and wealth are increasingly two sides of the same coin. It’s no longer about simply building a nest egg for retirement. It’s about working with families to prepare for the emotional, physical and financial burden of a longer life span, the risks and caregiving issues that could occur at any point and the tradeoffs that come with different decisions. 

Employers can also add benefits such as flextime, paid family leave, geriatric care management services and emergency backup care.   

But besides the steps financial advisors and employers can take, here’s something we can all do: Support the Expanding Access to Retirement Savings for Family Caregivers Act, as well as the Lowering Costs for Caregivers Act.  

Just like our aging loved ones need help, so do their caregivers. 

Mary Naylor is director of the NewCourtland Center at the University of Pennsylvania School of Nursing and Surya Kolluri is head of the TIAA Institute.