3 Ways to Add Caregiving, Longer Careers to Retirement Plans

As the last group of baby boomers turns 65, seven out of 10 will require long-term care in their lifetime — and their adult children will likely become unpaid family caregivers during their prime earning and childrearing years, according to the Genworth 2020 Cost of Care Survey.

As a result, the National Alliance for Caregiving estimates there are 11 million “Sandwich Caregivers” who are caring for a child and an adult loved one simultaneously.

At the same time, more Americans are working past age 65 because they do not have the resources to retire. These “Career Extenders” now total 20% of Americans over age 65 , or 10.6 million people, representing a 57-year high.

The reality is that traditional financial planning advice — which focuses on the three-legged stool of retirement plan income, Social Security Retirement and personal assets — has not kept up with the changing retirement reality.

Forward-thinking financial professionals are wise to prepare now for a shift away from traditional retirement planning guidance in favor of a more holistic approach that integrates special needs planning into their practices.

Here are three ways advisors can incorporate special needs financial planning and better meet the needs of these two groups.

1. Ask the right questions

Magnifying the challenges for Sandwich Caregivers and Career Extenders is the fact that their unique needs have yet to be fully addressed by the financial services industry, because they often do not disclose their situation. Here are some questions to ask every client and prospect as part of the initial conversation:

• Are you providing, or would you be expected to provide, care for another person in the future?
• What is your vision for retirement; do you plan to work later than your full retirement age?

2. Leverage government benefits

Gain an understanding of the government benefits available to your clients and recommend that they apply for all programs for which they may be eligible.

The special needs financial planning process emphasizes the use of a variety of government benefits — Supplemental Security Income, Social Security Disability Insurance, the Social Security Survivors Benefit, and the Childhood Disability Benefit, for example — in coordination with employee benefits to supplement available assets.

3. Explore a variety of solutions

Learn about specific solutions that can help Sandwich Caregivers and Career Extenders prepare a long-term plan. For instance, employee benefits may offer resources as value-adds that can help support employees in both these groups. Here are a few that may be particularly useful:

• Long-term care insurance: Awareness of the limited long-term care coverage that Medicare provides, as well as what it takes to obtain Medicaid coverage, is fundamental to a long-term financial plan. LTCI may be a solution. Newer more affordable hybrid products combine elements of life insurance or annuities with long-term care insurance to help protect against multiple risks.
• Emergency savings: Focusing on emergency savings helps promote holistic financial wellness and enables individuals to build retirement savings while also being able to absorb short-term financial shocks and disruptions in income.
• Individual Retirement Accounts (IRAs): Caregivers generally need more retirement savings because the additional cost of providing care has limited their ability to save, and they also need to plan for care of a loved one with a disability once they no longer can provide that care — over decades, in some cases.

Career extenders also have streams of income in addition to salary, as they are forced to decumulate their retirement savings, including Required Minimum Distributions from employer-sponsored retirement plans at age 72 and Social Security retirement payments, if they are over 70-years old. IRAs provide a way to invest those income streams and help them continue to grow, while still drawing a salary.

Demographic shifts in the U.S. are upending traditional views of retirement and throwing into question tried-and-true retirement planning guidance. Given their unique challenges, Sandwich Caregivers and Career Extenders require a more holistic planning approach. Financial professionals can play a critical role in developing holistic, individualize solutions that enable every American to both prepare for the needs of family members and retire well.

Jessica Tuman is head of Voya Cares and ESG Practice Centers of Excellence.

(Photo: Shutterstock)