Caregiver Tip: What You Need to Know About Protecting Your Money and Retirement


It is important for caregivers to keep track of finances and plan ahead for retirement. The Women's Institute for a Secure Retirement (WISER) has created a detailed step-by-step guide specifically for caregivers who want to get their financial affairs in order.


The following is a condensed version of the booklet prepared by the National Resource Center on Women and Retirement Planning. For the full guide, click the link above.


1. Getting Started

First have a conversation with your siblings and other family members about the various costs involved in providing care to a family member, keeping in mind that you may need to hire services for your family member, such as transportation services, home health aides, or visiting nurses. Also consider the possibility that you may need to make some modifications to your home to accommodate your loved one. WISER writes,

Caregivers who live with or live near the family member they care for tend to spend more time caregiving than others. If you are providing most of the care, consider asking your family to pay you as an independent contractor. If you are paid, you can set up a small-employer type pension plan, such as a Simplified Employee Pension (SEP). See page 4 [of the guide] for information about legal agreements for families and caregivers. If you don’t have a workplace retirement plan or a SEP, open an Individual Retirement Account (IRA).

Next, think about who will care for you when you need care later in life. Educate yourself on buying a long-term care insurance policy.


2. Leaving a Job or Working Part-Time

It is important to consider the potential financial and retirement costs of changing your employment. WISER writes,

If you are thinking about leaving your job or reducing your hours to part-time, find out what will happen to your benefits. Decisions you make now can have a tremendous impact on your financial future. Be sure to exhaust your other options before leaving a job or reducing your hours. A good place to start is the Eldercare Locator, sponsored by the U.S. Administration on Aging. This service helps individuals find local caregiving services and resources. (Call 800-677-1116 or go to eldercare.gov). You might find the resources you need to help you stay at your job while providing care. Leaving your job will cost not only your salary, but probably important benefits like retirement contributions and health insurance.

3. Create a Household Budget

Caregivers often pay for the expenses of their loved one. These expenses can add up quickly and could subtract from your retirement savings. A household budget is essential, especially if you are considering decreasing your work hours. WISER writes,

As a caregiver, you may also help manage your care recipient’s budget. Keeping careful track of spending is a way to protect a caregiver from false allegations of financial exploitation. It can also prevent future family conflicts over what was spent and why. The Consumer Financial Protection Bureau has Managing Someone Else’s Money guidebooks that can also help (consumerfinance.gov). The first step is to keep track of your spending. Write down everything you spend money on, from the smallest “odds and ends” to larger purchases. After a few weeks, put your expenses into categories, like food, transportation and clothing. You may be surprised, for example, how much you spend on food when eating out. m Make a list of bills you have to pay on a regular basis like car insurance, rent or mortgage payments, dental checkups, and gifts. Study your credit card statements and bank statements to make sure you have included (accounted for) everything. Next, compare your expenses to your monthly income and establish a monthly budget. Add up your total income—all of the money you receive in salary, other payments and benefits and any earnings on investments each year. Divide your annual income by 12 to calculate your monthly income. Subtract all your regular monthly bills and the other expenses that you found by keeping track of your spending in your notebook. If your income is not covering your expenses, find ways to cut back and reduce your debt. Listing all of your expenses will help you think of ways to economize. If you find yourself picking up expenses for the person you care for, be sure to track these expenses and include them in your monthly budget.

4. Saving for Retirement

One of the most important steps to take in planning for your future is considering how much you need to save for retirement. There are a few steps to accomplish this. WISER writes,

First, you need to know how much you can expect from Social Security and other retirement plans. Estimate what your monthly income in retirement will be: make a list of all sources of retirement income. Include Social Security, private or government pensions, IRA and 401(k) retirement savings. For information about your Social Security benefit, you can get your Social Security statement online at ssa.gov/mystatement. If you participate in a pension plan through your employer, contact the plan administrator to get an estimate of how much your benefit will be. Finally, look at your 401(k)—or similar workplace plans, which might also be called 403(b)—and IRA statements to see how much you have saved. Next, calculate your net worth. Estimate the total value of your assets, including cash, home equity, automobiles, other personal property, the value of insurance policies, and so on. Then, subtract the total of your liabilities, including mortgages, credit card and loan balances, home equity loans and other debts, from your total assets. The result is your net worth. Remember, not all of your assets will be available for retirement income unless you sell them or use your home equity as a source of income. Calculate how much you will need in retirement. Many experts recommend planning for at least 85 percent of pre-tax income in order to maintain your current living standard. WISER recommends 100 percent for women to cover their longer life spans, inflation, and additional health care expenses.

Source: “Financial Steps for Caregivers: What You Need to Know About Protecting Your Money and Retirement.” Wiser Women, www.wiserwomen.org/resources/publications/.