At a time when many have dreams of finally taking a long-awaited trip or dominating the pickleball court, a growing number of retirees are instead spending much of their time and money on caring for others—and risking their own financial security.
An estimated 19% of unpaid family caregivers were 65 or older in 2020, up from 13% in 2004, according to reports by the National Alliance for Caregiving and AARP. By 2030, the Census Bureau expects the population of adults over 65 will surpass children, indicating the older share of caregivers will also continue to rise.
Americans of all ages become caretakers, of course, and one in five adults currently provides uncompensated care to a loved one. But for retirees or those near retirement who are relying on a fixed basket of assets to pay for their own living expenses—and less time to make up the money—the financial toll can be especially deleterious, experts say.
Research from AARP finds caregivers spent, conservatively, more than $7,200 a year on average—26% of their income—on costs related to their new roles, and an average of 4.5 years in each adult caregiving role, for a total of over $32,000. That survey was done in 2021; AARP says inflation has exacerbated those costs.
Typical expenses include medication, meals, and travel but can also include a loved one's utilities or housing costs, which may rise further because of home modifications like ramps or handrails. Even for well-off retirees, those expenses can add up—and keep increasing should the person they're caring for receive a severe medical diagnosis like dementia or cancer. Many caregivers often spend down their own assets and end up in debt.
'They're all unexpected costs'
"When you're not prepared to be a caregiver, they’re all unexpected costs," says Rita Choula, senior director of caregiving with the AARP Public Policy Institute. "When you’re retired, you're basically living on a fixed income...If you have not factored in an additional $7,000, $8,000, $9,000 a year for your fixed income, that can have a big impact."
The financial hits of caregiving are potentially larger for those just ahead of retirement, in the 50 to 65 age range, says Julia Cohen Sebastien, cofounder and CEO at caretaking platform Grayce. For many people, that's when kids have left the house and they are able to get serious about saving for their own retirement, taking advantage of catch-up contributions and generally dialing back discretionary spending.
Leaving the workforce early to care for a parent prevents saving additional money in these prime years, and it potentially lessens upcoming Social Security payments—or forces some to take them early at reduced amounts. It could also preclude them from contributing to a health savings account for their own medical costs in retirement, says Sebastien.
"It makes childcare look inexpensive by comparison," Sebastien tells Fortune. "You trade off your time, your livelihood. You’ll be doing something purposeful, and it is fulfilling, but it will cost you."
And then there are the health implications. Those 65 and older are already more likely to be dealing with their own medical issues, and caregivers tend to have worse physical outcomes than non-caregivers, due to the added stress and deprioritizing their own needs, according to research from Courtney Harold Van Houtven, a population health sciences professor at Duke University School of Medicine.
"It's all very intertwined," says Van Houtven. "They have such bad health outcomes because they have such bad financial outcomes. You don't have leisure time, you don't have time to do what you want in your retirement, or you leave [the workforce] early so you're not fully saved for your retirement."
All of that lost income—and physical health—can be impossible to make up once the caregiving period comes to an end, says Van Houtven. For women and minorities, the effects are even more pronounced.
"Part of our research has found that they leave the labor force and they don't reenter," she says. "It’s really hard. They can't find a way back into the workforce even if they think it’s temporary."
Seeking support
Many retirees take on caretaking because their family lacks options—a home health care aide or nursing home room are just too expensive. Families are surprised to discover Medicare doesn't cover many of these expenses. "The default long-term care insurance in the U.S. is kids and family," says Van Houtven.
On an individual level, there isn't much one can do to remedy these costs.
"Once you get older, there are fewer levers you can pull for your finances," says Anqi Chen, senior research economist at the Center for Retirement Research at Boston College. "The work levers kind of disappear. Moving to a lower cost of living area can get more difficult as you get older, especially difficult if you have disabilities. It really limits the number of options you have."
Sebastien says to look for government programs that may be able to help cover the costs, or to local senior centers for help finding programs, while Choula suggests seeking out your community's Area Agency on Aging. AARP is pushing for workplace policies to add flexibility for workers who are also dedicated caregivers.
There is private long-term care insurance, but it's prohibitively expensive for most people, with annual remiums costing thousands of dollars. And that's if you can find an insurer—most have stopped selling stand-alone policies due to the cost. For middle-class families, Van Houtven says it often becomes necessary to spend down assets and then apply to Medicaid to pay for nursing home care, something many people don't want to do.
It's important for caregivers to know where a loved one's financial documents are to understand whether any of those assets can help defray the costs of care, says Sebastien. It's also crucial to form a plan with other family members, ideally while potential care providers are still in good health. For example, one sibling might provide financial support while another takes parents to their doctors' appointments. Sharing responsibilities can reduce stress, both physically and financially.
"Philosophically, you need to know what your loved one wishes for," adds Sebastien, so have a conversation with them too. "It gives you as a caregiver more peace of mind, and that is good for your long-term mental health."
