Understanding the Financial Realities of Caregiving Today

The Costs of Caregiving and Planning for the Future

As life expectancy continues to rise, more Americans are finding themselves in the role of caregiver.  With over 53 million adults providing uncompensated care to family members, it’s essential to understand the financial implications of caregiving. This role often comes with hidden costs, affecting not just personal savings but long-term financial planning as well.


The Financial Burden of Caregiving

Caregiving can be both emotionally and financially taxing. According to the TIAA Institute, caregivers spend an average of $7,200 per year, out-of-pocket, on expenses related to caregiving, including housing modifications, healthcare, and . These significant expenses often lead caregivers to dip into their savings or retirement accounts, take on debt, or reduce their retirement contributions. In addition to the financial strain, the burden of caregiving is further compounded by the are employed outside the home, thus making it difficult to balance their job responsibilities with an average of 24 hours a week of caregiving duties.


The Impact on Retirement Planning

Since the establishment of Social Security in 1935, the average life expectancy in the United States has increased by 17 years. This increased longevity requires a reevaluation of retirement planning strategies. Longer life spans mean a longer period in retirement, which requires more resources. Moreover, the increased likelihood of needing care, either for oneself or for a family member, should be a critical component of retirement planning.


The Challenges Faced by Caregivers

Caregivers, especially those who are part of the “sandwich generation,” face unique challenges. These individuals, many of whom are in their 20s and , care for both their children and their aging parents. Women, who comprise 60% of caregivers, are particularly affected. Many report significant financial sacrifices, with some spending up to 47% of their income on caregiving, especially in black and Hispanic/Latino communities.


Securing Your Financial Future While Caregiving

Caregivers must prioritize their own financial well-being to ensure they have the resources necessary to care for others. Here are some strategies to secure your own financial future while managing caregiving responsibilities:

  • Build an Accessible Savings Cushion: Ensure you have an easily accessible savings cushion for unexpected expenses, generally enough to cover 3-6 months of living costs.
  • Contribute to Retirement Accounts: Contribute to a tax-advantaged retirement account like a 401(k). Contribute enough to get the maximum that your employer offers, and if you’re over 50, take advantage of catch-up contributions.
  • Utilize Legislative Support: Congress has introduced the Expanding Access to Retirement Savings for Family Caregivers Act. This bill, if enacted, would allow caregivers who have left the workforce for at least a year to care for their loved ones to make catch-up contributions to their retirement accounts earlier than the standard age of 50.
  • Separate Caregiving Expenses: Small expenses can quickly add up. Consider having the care recipient’s income, such as Social Security benefits or retirement income, in a separate account to make tracking and budgeting for these expenses easier.
  • Solicit Family Support: Be specific about the kind of support you need. Try to split financial responsibilities and caregiving tasks among siblings and other family members. Ensure all financial agreements are put into writing.
  • Tap into Workplace Benefits: Ask your employer about arrangements such as flexible schedules and paid leave so you can remain employed and maintain your benefits while meeting your caregiving duties.
  • Engage with Financial Experts: Work with an expert at RMC Group who can help you fortify your financial future. RMC Group can assist you in understanding the SECURE 2.0 distribution exceptions, evaluating your life insurance coverage, and more.


The Role of Financial Planning

Despite the financial challenges of caregiving, many caregivers do not seek advice from financial advisors. This lack of professional guidance can lead to poorly managed finances and increased stress.. Proactive financial planning, with a focus on longevity and caregiving, can significantly improve retirement readiness and quality of life.


Strategies for Effective Financial Planning

  • Early Engagement with Financial Experts: Engaging with financial and legal advisors, as well as benefits representatives like RMC Group, is essential. This early engagement helps build a robust understanding of the financial landscape, enabling caregivers to make informed decisions about short-term and long-term trade-offs at each life stage. It ensures that their own retirement and potential future care needs are adequately planned for.
  • Incorporating Caregiving Costs in Financial Plans: Having firsthand experience with caregiving responsibilities, it’s crucial to integrate potential caregiving costs into personal retirement plans. This includes understanding the financial implications of possibly needing to retire early due to caregiving duties and exploring alternatives to maintain workforce participation and financial stability.
  • Preparing for Crisis Situations: Often, caregiving responsibilities arise unexpectedly, making it vital to have legal and financial safeguards in place. Caregivers can use their experiences to better prepare for crises, ensuring that they have the necessary plans to avoid stress and financial strain in the future. This preparation includes having the right insurance coverage, emergency funds, and legal directives.



The “longevity bonus” we experience today is more than just an extension of life; it also impacts our health and wealth. Financial planning must encompass longevity planning, taking into consideration the costs and responsibilities of caregiving at different life stages. By addressing these challenges early on, individuals can better prepare for a secure and fulfilling retirement.


Contact RMC

For personalized assistance with your long-term financial planning and retirement needs, contact RMC Group at (239) 298-8210 or email us at [email protected]. Our experts are here to help you navigate the complexities of financial caregiving and ensure your financial future is secure.