Source:  WiserWoman Newsletter

In over 20 million households across the country, an adult is providing full or part-time care to an older family member or friend. In a million households more, a woman is home caring for children. Women are the primary caregivers in our society. It is important for women to understand that caregiving can have serious financial consequences.


Women often will decide to work part-time, stop working, decline a promotion requiring longer hours or pass up a training opportunity requiring travel. Other subtle consequences include: forfeit pay and benefits; compound returns on 401(k) matching contributions and reduced savings and investments. They may experience an inability to pay for home improvements. One study found that an average caregiver lost $659,130 over a lifetime in reduced salary and benefits.

If you are a family caregiver, take these steps to more secure financial future.

Create a Household Budget
If you are the family caregiver, living within a household budget is a must. A budget will enable you to live in a way that protects you from financial crisis. It will also let you make realistic plans for how you will deal with reduced pay and benefits.

If you are a caregiver, you may find yourself paying expenses without adding it up all or considering the long-term consequences. Small expenses add up quickly and could be preventing you from saving enough for your own retirement.

If there is a shortfall, think of ways to reduce spending. There are ways to get assistance with medical costs, stretch income with an annuity or tap into home equity for additional income.
Plan Carefully Before Leaving a Job or Working Part-Time
It is important to understand and plan for financial and retirement implications. If you are in a crisis situation, think carefully about leaving a job or reducing your hours. Take time to check into what will happen to your benefits as a result.

Leaving your job will mean losing compensation and benefits. It may mean losing skills and contacts. If you are leaving behind a pension plan, you will lose years of service toward vesting or increased benefits that build up while you work. The longer you stay with a job, the more valuable the benefit will be. If you have a defined contribution retirement plan, you must stay a certain number of years to receive the benefits provided by your employer - usually 3 - 6 years.
If at all possible, try to stay at your job until you are vested in the company's pension plan.

If you leave your job, resist the urge to spend your 401(k) money! Now is the time to protect and build your savings, not deplete your accounts. Budget for regular contribution to an individual IRA to make up for lost pension contributions at work.

Prior to leaving a job or reducing your hours, try to pay off all credit card and loan debts. This will put you in a better position to save money after the job change. If you do leave the workforce, try to keep your skills updated and maintain professional contacts. Returning to work will be easier if you do.

Make a Plan to Save Enough for a Secure Retirement and Stick to It
If you are caregiving and working, be sure to participate in any workplace retirement plan. If you think you may leave your job, or reduce your hours in the future, maximize your retirement savings in preparation for this time. Look at purchasing long-term care insurance for yourself.

Take the time to sit down and see where you stand right now on retirement savings. Make a list of all of your sources of retirement income, and estimate of what the monthly benefit will be. Include Social Security, pensions, IRA and 401(k) retirement savings. Review your Social Security benefits and pension plans. Calculate the value of your savings, investments and any property you may own.

Now that you have an estimate of what you have, calculate the amount of income you will need in retirement. Many experts recommend on planning on 80% of your pre-retirement income to maintain your current living standard. Some concerns include the inflation and medical cost factors and recommend 100% of your pre-retirement income.
Finally, calculate the gap between your estimated retirement income and your retirement income goal. The gap is the amount you will need to save between now and your retirement date.
A recent study from Rice University found that women who are caregivers are 2.5 times more likely to live in poverty after retirement than women who are not.
Careful financial planning can set the stage for a secure retirement.