Important steps Congress can take to support caregivers financially

People know the emotional and physical strain it takes on family caregivers, but the financial impact is often overlooked.

One in five adults currently provide unpaid care to a loved one with a health problem, and nearly half say they are struggling financially. Housing, medical care, transportation, and other costs add up to an average of more than $7,000 per year. Many people think they have no choice but to withdraw money from their savings account or retirement nest egg, take out debt, delay paying their bills, or reduce their retirement savings.

The burden of caregiving also extends to the workplace. Caregiving typically requires 24 hours a week, and approximately 60% of caregivers have jobs outside the home. Many people report at least one work-related impact, such as taking a vacation, quitting their job, or retiring earlier than planned.

That’s why Rep. Claudia Tenney (N.Y.) and Chris Pappas (D.N.H.) introduced a new bipartisan bill earlier this month called the Expanding Access to Retirement Savings for Family Caregivers Act. praise. The scheme will apply to carers who take time out of work for at least a year, sacrificing their income to help a loved one, and will help them rebuild their retirement savings.

Currently, people must wait until age 50 to make additional contributions to 401(k)s, IRAs, and other retirement accounts. For example, in his 401(k) he could incur an additional $7,500. The bill would allow caregivers to make their contributions earlier, starting at age 50, minus the number of years since they left work. This can have a significant impact over time.

Separate from the House bill, the Senate is also considering another new bill, the Caregiver Cost Reduction Act. This bipartisan bill, introduced by Sen. Jacky Rosen (D-Nev.) and Sen. Bill Cassidy (R-La.), would give people tax-free health savings accounts and flexible spending on their parents’ medical expenses. It allows you to use your account. . Currently, adult children cannot do that unless their elderly parents are classified as dependents for tax purposes.

Unpaid caregivers play a valuable role in families, but doing so often has a negative impact on financial health and retirement preparedness. Caregivers need more ways to address savings gaps early and improve their chances of a secure retirement.

The bill comes as the need for caregivers is likely to increase sharply. Approximately 10,000 baby boomers turn 65 every day and they are living longer than ever before. Since the Social Security program began in 1935, life expectancy has increased by 17 years.

Last month, we published a report highlighting research showing that people are increasingly ignoring the short- and long-term costs of care. The report found that caregivers have lower levels of financial assets and higher levels of debt than those who do not care for their loved one. For example, one in four caregivers has less than $1,000 of her savings or investments. For non-caregivers, the number was closer to 1 in 7.

Economic challenges are often more acute for both women and millennials. Women already earn 30% less than men in retirement, and a disproportionate number of caregivers (60%) are women.

Approximately 25% of nursing care staff are in their 20s and 30s. Becoming a caregiver at a young age is especially difficult. This is because salaries are often lower during this period and it is the time when you should make the biggest leap forward in your career. Since many in this age group are raising children, they become the so-called sandwich generation, which places an even greater mental and financial burden on them.

Financial choices you make at a young age will have an impact for years to come. It can be difficult for families to weigh the importance of saving for large expenses against their current expenses. Over time, it can seriously impact your lifetime income, savings, Social Security benefits, and retirement preparedness.

What can you do with it?

Policy makers and the private sector must work together to help caregivers plan, prepare, and save for retirement. This comes at a time when not only caregivers, but her 40% of all households in the United States are at risk of running out of money in retirement.

More financial advisors need to take a holistic view of how they help their clients. Increasingly, health and wealth are two sides of the same coin. It’s no longer just a matter of building up your retirement savings. It means working with families to prepare for the emotional, physical and financial burdens of living longer, the risks and caregiving issues that can arise at any time, and the trade-offs that come with different decisions.

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

But beyond the steps that financial advisors and employers can take, here’s what we can all do: Supporting the Expanding Access to Retirement Savings for Family Caregivers Act and the Caregiver Cost Reduction Act.

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

Mary Naylor is director of the New Cortland Center and Surya Koluri is director of the TIAA Institute at the University of Pennsylvania School of Nursing.