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Raiding Your Retirement to Pay for Caregiving

Nearly 1 in 5 caregivers take this step, study says

High Cost of Caregiving

Dan Brownsword/Getty Images

Transamerica reports that 18 percent of family caregivers have taken a withdrawal from a retirement account due to caregiving.

En español | In a stark illustration of the financial sacrifices that older Americans make when caring for a loved one, nearly 1 in 5 caregivers say they’ve had to raid their retirement savings as a result of taking on this responsibility, according to a recent study.

But while the direct and indirect costs of caring for a relative or close friend can be great, families often overlook resources that can lighten their financial burden, says a financial planner who works with clients on eldercare issues.


The study, released in September by the nonprofit Transamerica Institute, documents multiple economic hits taken by people who, out of love and family ties, step up to care for someone close to them, usually a relative.

Based on surveys conducted earlier this year with more than 3,000 Americans who identified themselves as caregivers, Transamerica reports that 18 percent of nonprofessional family caregivers have taken a loan, hardship withdrawal or early withdrawal from a retirement account as a result of becoming a caregiver.

Most caregivers, whether a primary caregiver or not, spend their own money while caregiving, says Transamerica. The median outlay for all caregivers is $150 out of pocket per month for their care recipient’s expenses. People who say they’re a person’s primary caregiver spend a median of $250 a month, and 12 percent of primary caregivers say they spend at least $1,000 a month. Only 25 percent of caregivers say they receive any sort of financial assistance for their caregiving duties.

The financial harm sustained by caregivers touches not only their savings but also their ability to earn a living. Three out of 4 caregivers who are currently employed or have been employed during their time as a caregiver have had to make some sort of adjustment to their employment as a result of caregiving, according to the report. Thirty percent have used vacation or sick days for caregiving, for example, and 26 percent have cut back on hours or responsibilities.

Seventeen percent of boomers who are caregivers say they’ve retired early or quit their job because of their caregiving.

Nearly half of primary caregivers say their role at home has strained their relationship with their employer, and 32 percent of primary caregivers say their employer has taken adverse actions against them, such as giving them less attractive assignments or writing them up.

Sandy Adams, a certified financial planner at the Center for Financial Planning in Southfield, Mich., says caregivers don’t always take advantage of ways to lessen the negative economic impact.

“What a lot of people do is they get in these situations and panic,” says Adams, who has a master’s degree in gerontology. “They start making decisions without thinking about what is a prudent decision.”

One common mistake, she says, is for a caregiver to start spending his or her own money on caregiving when it makes more sense to draw money from other sources.

“A lot of people aren’t aware of the benefits that are available,” she says. For example, lower-income veterans and their survivors may qualify for the Aid and Attendance pension benefit. The caregiving recipient’s money, if available, should also be tapped.

Surprisingly, says Adams, people who have a long-term care insurance policy sometimes wait unnecessarily before claiming benefits. “If you’re going to pay those premiums, start using it as early as you can,” she says.

Consulting with knowledgeable experts such as financial planners, elder-law attorneys and geriatric care managers can also be helpful, she says. They can help in such areas as navigating the health care system or devising a plan to draw upon a recipient’s financial assets in a tax-smart way.

Adams’ advice for workers trying to juggle caregiving with their paid jobs is to be upfront with managers— “going to them and saying, ‘Hey, this is what’s going on with my situation, this is how it might impact my time at work’ ” — and to ask for accommodations such as working flexible hours or telecommuting.

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