How To Plan For a Secure Retirement as an Unpaid Caregiver

mactrunk / iStock.com

According to the latest stats, more than 65 million American women provide unpaid care in the form of child care, family care and eldercare. And a majority of these women do so while holding full- or part-time jobs, the National Partnership for Women & Families reported. For those who are working part time — or not at all — saving for retirement during this time can be a challenge. In today’s “Financially Savvy Female” column, we’re chatting with Shelly-Ann Eweka, CFP, ChFC, senior director of advice strategy at TIAA, about what options these women have to ensure they don’t fall behind on retirement savings while providing unpaid care.

Keep Up With the Latest: Sign Up for The Financially Savvy Female Newsletter
Stay in the Know: Read More From the Financially Savvy Female

Having a Plan Is Key

Unpaid caregivers need to have a plan in place for how they will fund their retirement — even if saving for it can be a struggle during this time.

“That’s where you start — working with someone or working with a digital [tool] to get a financial plan put together, and that starts with understanding how you’re spending your money,” Eweka said.

Retire Comfortably

Look For Ways To Spend Less and Earn More

Once you have a clear picture of how much you are spending, you can see how much you can put aside each month for retirement. If that amount is nothing or nominal, you may need to make some temporary adjustments to your spending.

“Pay attention to what you are spending and see if there are ways to reduce that,” Eweka said. “With very limited income, because you’re not really getting a full salary, this is the time to really pull back on your expenses as much as possible.”

You should also look for ways to increase your earnings outside of your caregiving commitments, if possible.

“Caregiving is such a huge responsibility, but if you can get part-time employment, or get a few more hours of employment, that will help you have extra cash flow to help you put money aside,” Eweka said.

Important: The Woman’s Guide To Collecting Social Security

Consider Opening a Simplified Employee Pension Plan

If you are self-employed, you can make contributions to a simplified employee pension plan, or SEP IRA.

Retire Comfortably

“It’s really an IRA for business owners,” Eweka said. “You can contribute $61,000 or 25% of your earned income, whichever number is lower.”

This is significantly higher than the annual limits for a traditional or Roth IRA, which is $6,000 or $7,000 if you are 50 or older. If you’re able to save more than a traditional or Roth IRA would allow, a SEP IRA can be an invaluable retirement saving tool for a self-employed unpaid caregiver.

Or, Open a Spousal IRA

If you are married and are not earning income because you are providing full-time care, consider opening a spousal IRA.

According to the IRS, “If you file a joint return, you may be able to contribute to an IRA even if you didn’t have taxable compensation as long as your spouse did. Each spouse can make a contribution up to the current limit; however, the total of your combined contributions can’t be more than the taxable compensation reported on your joint return.”

Make Contributions Automatic

When you’re a full-time employee, it’s easy to keep up with retirement savings, as many companies offer the option to automatically contribute a percentage of your paycheck to an employer-sponsored plan. If you are working part time or not at all, you’ll have to make more of an effort to save for retirement — but you can make it as easy as possible by automating contributions to whichever IRA you choose.

Retire Comfortably

“Try to do some automatic savings, even if it’s a little bit per month,” Eweka said. “When it comes out automatically, it’s the first thing that comes out each month, so that’s one way you can do it.”

Put Any Financial Windfalls Into Retirement Savings

While working as an unpaid caregiver, it’s vital to make sure you’re still contributing as much as possible to retirement savings. Take advantage of any financial windfalls you may receive to stay on track with your retirement goals.

“We’re getting close to tax time, so if you’re getting a refund, use a good portion of that refund to put aside into your account,” Eweka said. “Look for those types of opportunities.”

GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.

More From GOBankingRates

Share this article:

Retire Comfortably

About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert. 
Learn More

Best Bank Accounts for October 2022

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.