Unpaid Caregiving Can Demolish Retirement Outcomes: EBRI

What You Need to Know

EBRI’s 2023 Retirement Confidence Survey suggests caregivers have lower levels of assets and more problems with debt.
On the positive side, caregivers feel knowledgeable about and remain committed to retirement planning.
The findings raise questions about the potential value of long-term care insurance and other means of mitigating at least the financial aspects of caregiving risk.

Americans with caregiving responsibilities are less likely to have saved for retirement and are more likely to have retired earlier than planned for reasons beyond their control, according to the latest survey data published by the Employee Benefit Research Institute.

Additionally, EBRI’s 2023 Retirement Confidence Survey suggests caregivers have lower levels of assets and more problems with debt — despite having similar levels of knowledge about what it takes to achieve retirement security.

Craig Copeland, director of wealth benefits research at EBRI, says the survey results show caregivers are more likely than non-caregivers to say that their overall lifestyle in retirement is worse than they expected it to be before they retired, underscoring the potential for unexpected caregiving responsibilities to derail even those who otherwise feel well-prepared for life after work.

Caregivers in the survey are defined as those who provided unpaid care for an adult or child within the past 12 months in a non-institutional setting and helped their care recipient with at least one activity of daily living or instrumental activity of daily living.

Simply put, Americans in this situation find themselves exposed to a number of new financial risks that must be addressed by financial planners and their clients — because caregiving is as common as it is disruptive. To this end, the findings raise big questions about the potential value of long-term care insurance and other means of mitigating at least the financial aspects of caregiving risk.

How Caregiving Disrupts Retirement

According to the EBRI data, compared to non-caregivers, caregivers are less likely to say that their health status is excellent or very good, are more likely to be female, are less likely to be white and more likely to be Hispanic.

Caregivers are more likely to have lower levels of financial assets and more likely to have a problem with debt than non-caregivers, EBRI finds. Specifically, one-quarter of caregivers have less than $1,000 in savings and investments compared with 15% of non-caregivers, and at the same time, caregivers are less likely to say that debt is not a problem, at 36%, compared with 48% among non-caregivers.

In addition, more than one-third of worker caregivers (35%) and retiree caregivers (37%) say they provided between $5,000 and $14,999 in financial support to their caregiving recipient in the past 12 months.

Beyond this financial burden, the role and responsibilities of being an unpaid caregiver are more likely to have a negative effect on the caregivers’ mental and physical health. Among working caregivers, 66% say their mental health is negatively affected by the caregiving, EBRI reports, while 57% say their physical health is negatively affected.

The most common financial tasks that are affected among working caregivers are saving for emergencies and working the hours they want or need to work (54%).

Notably, there are no significant differences between caregivers and non-caregivers as to whether they feel knowledgeable about managing their day-to-day finances. There are also no significant differences in the likelihood of caregivers and non-caregivers strongly or somewhat agreeing that they feel knowledgeable about managing savings and investments for the future.

A Commitment to Retirement Prep

EBRI’s survey shows caregivers are more likely to express concern over various scenarios that could affect Americans’ retirement finances or retirement in general than non-caregivers. This includes such scenarios as the U.S. economy going into a recession in the next 12 months, inflation staying high for at least the next 12 months, and salary and any other work compensation not keeping up with inflation.

Other concerns include the increasing cost of living making it harder for caregivers to save as much money as they want, and having to make substantial cuts to their spending because of inflation.

According to EBRI, caregivers in many instances have less overall confidence in their finances than non-caregivers. However, when it comes to preparing for retirement, caregivers are just as likely as non-caregivers to have done various retirement preparation tasks.

This includes such tasks as having tried to figure out how much money they will need to have saved by the time they retire so that they can live comfortably in retirement and having thought about how much money to withdraw from their retirement savings and investments in retirement. Another common step is planning for how they would cover an emergency or big expense in retirement.

EBRI finds the distributions of the ages at which both caregivers and non-caregivers retired are not different. In addition, the likelihoods of retirees having retired earlier, later or when planned are also not different between caregivers and non-caregivers.

Despite this, the top reason caregivers were most likely to have retired earlier than planned was to care for a spouse or another family member, whereas non-caregivers’ top reason is that they could afford to retire earlier than planned.

Ultimately, caregiver retirees are more likely to say that their overall lifestyle in retirement now compared with how they expected it to be before they retired is worse relative to non-caregiver retirees.

Other Key Findings

EBRI’s in-depth report includes a wealth of other statistics that underscore just how disruptive caregiving can be.

The data shows, for example, that 8% of retired caregivers and 27% of working caregivers have had to borrow money from family or friends. Some 13% of retired caregivers and 25% of working caregivers have taken on new or additional debt to support their caregiving.

One in five working caregivers (20%) has reduced the amount they are contributing to a retirement savings plan, while 10% have taken a loan or a hardship withdrawal from a retirement savings plan.