The Retirement Challenges for Women in Transition

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How does caring for a 70-, 80-, or 90-year old parent affect the retirement plans of a 40-, 50-, or 60-something woman (especially a woman navigating a major transition)? How does it impact her family? Are there financial strategies, savings vehicles or other tips women can use to mitigate the financial effects of part-time and full-time caregiving on their nest eggs?

As a financial advisor for many women in transition, I help clients wrestle with those questions daily. And the dilemma isn’t new: A 2002 study published in the Journal of Family Issues indicated that men are less prone to retire as a result of caregiving responsibilities for an older parent, a spouse, or another relative, than women in those same circumstances.

Clearly, caregiving will often lead to work disruptions at the very least, and often an early, forced retirement for women in the latter stages of their careers. Social Security does not give credit for work absences due to caregiving and, likewise, most private pension plans do not credit years spent in caregiving toward vesting requirements. Therefore, women who leave jobs and take retirement in order to make time for caregiving are giving up significant financial resources that they would have otherwise been able to use to fund retirement. According to the Family Caregiver Alliance, the average female caregiver loses $324,000 in wages, pension payouts, and Social Security benefits over her lifetime.

For the family as a whole, the financial impact of a woman’s early retirement to become a “full-time” caregiver seems obvious from the above data. Because many of these women are in the “sandwich generation,” responsible simultaneously for the care of elderly parents and financial assistance to older adolescent or young adult children, such loss of income has serious implications.

How can caregivers care for themselves?

Perhaps the most important financial strategy that women facing the caregiving decision can utilize is careful planning and analysis of all options.