Retirement Planning: 6 Ways Women Caregivers Can Protect Themselves Financially

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If unpaid family care in the United States were an industry, it would be worth roughly $600 billion a year and involve about 38 million caregivers providing an average of 18 hours of care a week, according to a study from AARP. That’s not the case, of course, because the “unpaid” part means all of this work is being done free of charge.

Most unpaid caregivers are women, according to research from Edward Jones — and the impact on their lives is dramatic. In fact, a majority of women said becoming a caregiver was a “life-destroying event,” according to Lena Haas, head of wealth management advice and solutions at Edward Jones.

“Women are less prepared to begin with for retirement,” Haas said told CNBC. “They are hit with curveballs more frequently and they’re less equipped to make adjustments.”

Retired women aren’t the only ones affected by unpaid caregiving, either.

“It’s hitting us during working years, too,” Heather Ettinger, chairwoman of Fairport Wealth in Cleveland, Ohio, told CNBC.

One result is that women who are already behind on retirement savings are getting pushed even deeper into a financial hole through unpaid caregiving. Not only do they have to devote time and money to caring for others, in many cases they also either have to leave the workforce or reduce the hours they do work.

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For women who find themselves in this position, it’s important that they take steps to protect themselves financially. Here are six ways they can do that.

Make a Financial Plan

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

“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,” Shelly-Ann Eweka, CFP, senior director of advice strategy at TIAA, told GOBankingRates last year.

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.

“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.

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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.

“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 $6,500 or $7,500 in 2023 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.

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.

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“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.

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