Young adults facing financial ruin as they care for aging loved ones

PHILADELPHIA — Caregivers offering assistance to loved ones as they live longer are facing financial burdens they might not be able to recover from. A recent report by a team from the TIAA Institute and the University of Pennsylvania School of Nursing (Penn Nursing) is highlighting this often-overlooked issue, urging financial advisers and employers to provide assistance. The report reveals that one in five adults now provides uncompensated care to their loved ones with health issues, and these caregivers encounter a range of financial and professional challenges because of it.

On average, caregivers spend more than $7,000 annually on uncompensated expenses, including housing, health care, and transportation. This financial strain forces nearly half of them to experience financial difficulties, resorting to actions like withdrawing money from savings accounts, taking on debt, delaying bill payments, or reducing retirement contributions.

Caregiving, which typically demands around 24 hours a week, affects approximately 60 percent of individuals who also have jobs outside the home. Consequently, 61 percent of these caregivers report experiencing work-related consequences, such as arriving late, leaving early, taking time off, or retiring earlier than planned.

“Although the emotional and physical toll on family caregivers is well recognized, the financial impact of these roles has received less attention,” says Surya Kolluri, head of the TIAA Institute, in a media release. “The impact on lifetime earnings, savings, Social Security benefits and retirement readiness can be severe. Especially today, as people are living longer, caregivers should plan for these costs at various life stages.”

The report also warns that the demand for caregivers is expected to rise, particularly with the aging Baby Boomer population. As people live longer, caregivers face lower levels of financial assets and higher levels of debt compared to non-caregivers. For instance, one in four caregivers has less than $1,000 in savings and investments, while the proportion among non-caregivers is closer to one in seven.

Man stressed over bills, money — Man stressed about money (© fizkes – stock.adobe.com)

The financial challenges of caregiving are even more pronounced for women and millennials. Women, who already have 30 percent less income than men during retirement, represent 60 percent of caregivers. Additionally, around 25 percent of caregivers are in their 20s or 30s, a stage when individuals typically have lower salaries and are striving to advance their careers.

“As younger generations increasingly take on caregiving roles, they face different financial pressures and trade-offs,” explains Dr. Mary Naylor, director of Penn Nursing’s NewCourtland Center for Transitions and Health. “The financial choices made at younger ages have ripples for years to come, as families weigh the relative importance of present spending, saving for large expenses and saving for retirement.”

The report outlines ways in which financial advisers and employers can provide support to caregivers in managing their emotions, finances, and careers. Financial advisers are encouraged to adopt a holistic approach that addresses the emotional, physical, and financial aspects of caregiving and longevity planning.

Employers can contribute by offering benefits like flextime, paid family leave, geriatric care management services, and emergency backup care. They can also create employee networks or caregiver resource groups to facilitate knowledge sharing on achieving a better work-life balance.

The report concludes by recommending that employees seek guidance from financial advisors to better understand life expectancy and plan accordingly, emphasizing the evolving role of financial advisors to include considerations like health, family, caregiving, and financial caregiving in addition to traditional retirement planning.