Stopping work to care for elderly parents: The economic cost can be devastating

Millions of women — yes, it's mostly women — end up in midlife weighing a temporary work exit to care for ailing parents. The economic cost can be devastating. The Center for American Progress has an eye-opening calculator, designed to help young families understand the cost of taking time off to raise kids, and it's also useful to estimate the financial loss from taking time off to care for an aging parent(s).

Millions of women — yes, it's mostly women — end up in midlife weighing a temporary work exit to care for ailing parents.

The economic cost can be devastating.

The Center for American Progress has an eye-opening calculator, designed to help young families understand the cost of taking time off to raise kids, and it's also useful to estimate the financial loss from taking time off to care for an aging parent(s).

A 58-year-old woman making $85,000 today who started work at age 25 and has been contributing 10% of salary to her workplace 401(k) with a 3% match would lose nearly $200,000 in foregone wages and lost retirement benefits if she stops work for two years. Read on and you'll see how the cost could easily be far greater.

That presumes she will be able to re-enter the workforce at age 60. Studies based on federal data suggest she will be hard pressed to ever find work at a similar salary: www.rate.com/research/news/work-longer-reality-check.

Let's be honest. After a few years of intense caregiving, returning full force may be asking way too much. Suppose her caregiving takes more than two years, and by the time her parents have died, she's in her mid-60s, justifiably exhausted on many levels. If she chooses not to return to work, she will lose an estimated $765,000 in wages, compared to having kept at it until age 67 (when today's 58-year-olds are eligible for full Social Security benefits.) She will also lose out on an estimated $120,000 in retirement and Social Security benefits. That's an $885,000 hit.

To be clear, those are estimates. The Center for American Progress has to make a bunch of assumptions; it errs on the side of conservative estimates. Also, the calculator isn't set up to tally the all too common double whammy: A woman takes a few years off to care for young children, and later takes a few years off to care for parents or parents-in-law.

An academic study a few years ago reported that among workers at least 58 years old, around 12% were caring for an elderly patient. More than one-third had made the decision to stop working. Research from Merrill Lynch and AgeWave found that 15% of women in their 50s were caring for a parent, compared to 8% of men. In their 60s, 18% of daughters are caregiving compared to 11% of men.

There is no easy answer as to what is best to do given the current environment, where the federal government shows no appetite for building better support systems for caregivers of all ages.

Money is never the only factor when loved ones are the centerpiece of a decision. But running the numbers may help you make the best informed decision, and highlight the fact that you are not just losing out on salary. ( A web search of "Center for American Progress Hidden Cost of Interrupting a Career" will spit out a link to the tool.)

If it is at all possible to continue working a bit longer, even if it means paying for caregiving, the math suggests it is a strategy worth considering.

If taking time off is the right answer and you have siblings, they should pay you for your caregiving, when possible. Sound weird? Seem odd to suggest? Maybe you need to run through the calculations one more time ... with your siblings. At a minimum, they should pay you enough to fully fund an IRA ($7,000 in 2020 for anyone over the age of 50). www.rate.com/research/news/navigate-expense-caregiver.

Ideally, your siblings and your parents would be able to provide you the funds to keep saving for retirement, and cover your rent/mortgage and basic living expenses. The goal is to not raid your retirement savings early.

And while the need and temptation to claim Social Security in your early 60s will be fierce, the reality is that you need to delay as long as possible. The higher guaranteed payout from waiting until your full retirement age (67 for anyone born in 1960 or later) or 70 becomes ever more valuable, given your foregone salary and retirement savings. www.rate.com/research/news/more-retirement-social-security-strategy.

If you're reading this and worrying that something similar might happen soon, perhaps now is the time to think a bit out of the box. Got some space in the backyard, or a garage that is ripe for a transformation? Building an accessory dwelling unit where a parent or parents can live nearby, yet give everyone some space, can make caregiving significantly easier. www.rate.com/research/news/bring-aging-parents-close.

Maybe it's feasible to keep working, at a reduced pace. That's not exactly easy to pull off, as employers often aren't exactly enlightened about the caregiving juggle. But if you are highly valued at work, you're nuts to not at least ask about a revised job (at a lower salary) if you work from home. Even if you need or want to go into work one or two days a week, paying for care for those days is still going to make long-term financial sense.

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