The financial costs of unpaid caregiving
Your employee caregivers are taking a hit to wellness and financial health.
There are an estimated 51 million unpaid caregivers in the United States, and they face an array of challenges that often prove daunting and difficult to overcome. Those challenges can cause a major financial strain in direct and indirect ways, worsening the physical and emotional demands that accompany caregiving.
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Uncompensated care represents a large share of caregiving in the United States, and the share of American adults providing uncompensated care to the elderly or those with serious medical conditions is growing quickly, according to Blue Cross Blue Shield.
The direct impact of caregiving involves the time that is spent caregiving and its influence on work, absences from work, and productivity. That estimated direct economic effect amounts to approximately $44 billion, including costs associated with more than 650,000 lost jobs and almost 800,000 caregivers missing work, according to Blue Cross Blue Shield research.
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In addition, caregiving indirectly can lead to poor health outcomes among caregivers because of the commitment required. The overall economic impact of unpaid caregiving is estimated at $264 billion, the study showed.
In a first-person account, Amy Goyer, AARP’s family and caregiving expert and author of “Juggling Life, Work and Caregiving,” detailed how caregiving for her mother and father led to her personal bankruptcy due to out-of-pocket costs that she had to provide to help support her parents. An AARP study found that family caregivers spend an average of $7,000 of their own money per year on caregiving, though the figure can far exceed that average in cases such as Goyer’s.
Goyer’s mother had had a stroke, and her father developed Alzheimer’s. Both reached a point where they needed 24-hour care. The costs added up. At one point, following the death of Goyer’s mother, medical expenses for her father, who had Alzheimer’s, exceeded $10,000 per month.
“People are living longer but with chronic health issues,” Goyer wrote. “My parents planned for their future but didn’t predict their high long-term care costs.”
Even with paid caregivers taking part of the load, Goyer found herself spending 60-80 hours per week caring for her father. The loss of potential income associated with the time required of caregiving represents a major financial challenge. Goyer, for instance, had to leave her full-time job in Virginia to move to Arizona with her parents and work as an independent consultant, which gave her more flexibility but meant that she had to give up the crucial benefits provided at her job.
According to a 2021 AARP survey, paying a portion or all of a loved one’s housing expenses accounted for more than half of caregivers’ additional costs. Medical expenses averaged more than $1,200 per year, encompassing costs such as health care providers, hospitals, therapists, medical equipment and devices, in-home care and adult day care.
The AARP survey also found that 59% of caregivers work either part-time or full-time, and those who reported acute work strains due to caregiving, such as needing to take time off or adjust their hours, also averaged almost double the amount of out-of-pocket caregiving expenses than those caregivers with fewer work-related issues.
Research from the American Time Use Survey indicated that caregiving was associated with a 40% increase in workplace absences in the months after a caregiving experience started. The COVID-19 pandemic strengthened the strain, as more than 40% of caregivers said they spent more time and money on caregiving because of the pandemic.
The pandemic also created more challenges for parents in their caregiving role for their children, especially as schools and daycares faced interrupted operations. According to Fidelity, parents and others considering short-term or long-term departures from the workforce because of caregiving needs should be aware of the full financial impact of the decision beyond just the salary sacrifice.
For instance, the opportunity costs of stepping away could include lost raises and bonuses and the risk of a reduced salary when you re-enter the workforce. Lost retirement contributions also can add up. According to Fidelity, a 35-year-old woman who makes $100,000, takes a one-year break and returns to work at a slightly lower salary will have lost retirement contributions and earnings at age 67 estimated at $212,936.
Goyer’s advice for caregivers includes enlisting a financial advisor early in the process for help managing the complex issues at hand. She said navigating the expenses involved while searching out potential sources of income – long-term care insurance and Veterans Affairs benefits helped in her parents’ case – can require a great deal of study and time.
“While my situation may be extreme, the unimaginable can happen,” Goyer wrote. “The cost of caregiving can be too much for anyone.”
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