New research examines the role caregiving can have on an individual’s financial wellness and retirement.
The latest issue brief from the Employee Benefit Research Institute (EBRI) Retirement Confidence Survey (RCS) finds caregivers are more likely to have lower levels of financial assets and problems with debt. The findings, which surveyed 2,537 Americans who have provided unpaid care within the last 12 months, reported that a quarter of caregivers have less than $1,000 in savings and investments compared to 15% of non-caregivers. They’re also likelier to say that debt is a problem (64%), compared to 52% of their non-caregiving counterparts.
The limitation on financial assets and greater debt likely stem from overwhelming costs associated with taking care of a family member or friend, including healthcare and added day-to-day expenses. Over one-third of caregiving workers (35%) and caregiving retirees (37%) have provided anywhere in between of $5,000 to $14,999 in financial support to their caregiving recipient in the past 12 months.
The additional financial strain could have damaging effects for retirement and long-term financial planning, reports EBRI. In fact, caregiving retirees were more likely than non-caregivers to believe their overall lifestyle in retirement is worse than initially expected.
“Not surprisingly, given their reported debt issues, caregivers are more likely than non-caregivers to agree that debt is negatively impacting their ability to save for retirement/live comfortably in retirement,” the research noted in its report. “Caregivers are also more likely to say their non-mortgage debt is having an impact on their ability to participate in or contribute to an employer’s retirement plan.”
This is particularly true for middle-income caregivers, who were likelier to place low priority on retirement savings due to current family needs. Middle-class caregivers were also more likely to not know a good financial or retirement plan advisor to seek advice from.
When asked which approach they were likelier to take between managing their savings or investments on their own or purchasing a product that gives them guaranteed income for life, only high-income caregivers were likely to purchase a product with lifetime income.
Caregivers in this class, which included an income of $75,000 or more, were also less likely to be confident in their retirement prospects than non-caregivers. Specifically, 26% of caregivers with incomes of $75,000 or more are not confident that they will have enough money throughout their retirement, compared with 17% of non-caregivers with these incomes.
There was no difference in confidence levels among those in the two lower-income groups (at less than $35,000 and between $35,000 and $74,999).
Caregivers understand their retirement needs
Among caregivers and non-caregivers, there was no significant difference between both strongly and somewhat agreeing on their knowledge of managing day-to-day finances. Additionally, there was no significant difference in how both groups felt about managing savings and investments for the future, EBRI reported.
When it came to retirement preparation, despite the stress of juggling caregiving responsibilities, work, and finances, caregivers were just as likely non-caregivers to have done various retirement preparation tasks, including understanding their retirement income in later years, knowing the amount of money needed to withdraw from retirement savings, understanding retirement investments, and knowing how to plan an emergency or big expense in retirement.
There was also no difference in how both groups understood certain investments available in workplace retirement plans, added EBRI.
SEE ALSO:
- Women Are Stressed in Balancing Caregiving and Work
- Americans Compromise Retirement Savings for College Education
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
