By Jessica Tuman
The impact of the pandemic on parents as they’ve transitioned to full-time care of their school-aged children has been well documented for more than a year.
But one of the fallouts from the pandemic overlooked by many is the crisis it has caused for caregivers who are doing double-duty — caring for young children or adult children with special needs, as well as for aging loved ones.
Over the next decade, as the last group of baby boomers turns 65, seven out of 10 will require long-term care in their lifetimes, and because of the eye-popping cost of care, their adult children who are in their prime earning and childrearing years will likely become their unpaid family caregivers.
As a result, millions of Americans — 11 million or 28% of all caregivers — are “Sandwich Caregivers,” those who provide unpaid care to an adult while also caring for children living in their home.
Even before the pandemic, the cost of providing care to aging Americans was skyrocketing with the price tag of a nursing home averaging $100,000 annually. Hiring in-home skilled nursing care is equally out of reach, costing up to $87.50 per hour, leaving many family members and friends to take over caregiving responsibilities themselves, and by 2030, costs are predicted to more than double.
Since the COVID-19 pandemic, the economic future of caregivers who support family members has been indelibly impacted. The enormous challenges many unpaid caregivers faced pre-pandemic have been exacerbated as they experienced reduced hours, salary cutbacks, furloughs and layoffs.
Caregivers have been particularly hard hit, reporting a higher likelihood of being impacted by job loss or having their hours cut back. One in 5 said they experienced difficulty meeting the financial needs related to providing special care for their family member. As take-home pay decreases, so do contributions to retirement and emergency savings. For those who decide to tap into their Social Security benefits earlier than anticipated, the reduced benefits they receive due to early filing will directly impact their financial future and the vision that they once had for it.
The pandemic has taught us that retirement planning must take into account unforeseen emergencies — a situation that caregivers understand all too well — and the role of a caregiver is one that all of us can, and probably will, play at some point in our lives.
As a result, traditional retirement planning may not be as effective for caregivers; however, the special needs planning process — one that coordinates all available government benefits, employee benefits and personal assets to plan a secure financial future for individuals with disabilities and special needs — can be equally effective in helping to secure a strong financial future for caregivers.
Below are some financial planning solutions to help caregivers prepare for financial hardships.
Investment and retirement income products: The current investment and interest rate environments have changed the way people approach investing.
Americans who are looking for products that better address individual risk tolerance must also take into account life stage, current interest rates, stock market performance and, most importantly, how these factors influence personal financial challenges.
As an example, lifetime annuities with the right investment strategies can help reduce the frequency and magnitude of losses in portfolios should they be negatively — and unexpectedly — impacted.
Long-term care products: Newer, more affordable hybrid products — ones that combine elements of life insurance or annuities with long-term care insurance riders — are another option.
Some of these programs allow caregivers who have these types of policies to receive a portion of the death benefit while still alive to help pay for the cost of long-term care. These hybrid products help provide a way for people to protect against multiple risks.
Debt mitigation: Americans are carrying tens of trillions of dollars in debt that, even in the best of circumstances, can prevent or reduce savings for retirement.
Consumers who currently are managing their existing debt may become overwhelmed when it is combined with the added cost of caring for a family member, and long-lasting financial hardships are likely to result. For example, the potential debt that Sandwich Caregivers may carry could directly affect how they help pay for their children’s post-secondary education.
Employee benefits offerings: Employees’ lack of understanding of and engagement with their benefits is well documented, but employee benefit plans can offer a wealth of resources to help ensure health care costs are predictable and provide life insurance and wellness benefits that may be an otherwise costly purchase in the marketplace. Consulting with your benefits administrator may reveal options such as employer-paid back-up care and Employee Assistance Programs that can free up resources for retirement savings and positively impact quality of life for caregivers, while Employee Resource Groups can provide much-needed emotional and social support.
Employees also may find more generous leave policies and more flexible telecommuting policies, as employers respond to the difficulties posed by the COVID-19 pandemic and work harder to retain their workforce.
Ultimately, staying employed means that caregivers not only have access to ever-richer benefits programs, but also can continue to contribute to their retirement savings.
Letter of Intent (LOI): Although not traditionally thought of as a main-stream financial planning tool, an LOI is both a guidebook-like reference for designated future caregivers and a roadmap of the hopes and dreams for the future. It is widely used in special needs planning to establish a foundation on which to build the long-term financial plan. By preparing an LOI, caregivers document all required care both in the present and anticipated in the future. Understanding the scale of needed care is the first step to putting a realistic plan in place to cover potential costs in the future and protect retirement savings.
Emergency savings solutions: A study from academic researchers found that 66.5% of all bankruptcies were tied to medical issues — either because of high costs for care or time out of work that leads to reduced income. Caregivers may be forced to handle more medical emergencies that cannot always be “absorbed” into expected monthly expenses. Maintaining a focus on emergency savings enables individuals to build retirement savings that will remain untouched, when a crisis — or more than one — strikes.
A few examples of other savings vehicles that can help protect retirement income include:
Health Savings Accounts (HSAs)/Dependent Care Flexible Spending Accounts (FSAs): HSAs can help buffer not only the high price of health care in retirement but also the need for caregivers to pay for services received by the person for whom they are caring — therapies, accessibility devices and modifications. Dependent Care FSAs can help pay for the costs of care for qualifying children under the age of 13, but they also can help with the cost of care for spouses or aging parents who cannot care for themselves and who have lived in the household for more than half the year.
Individual Retirement Accounts (IRAs) and Roth IRAs: Caregivers generally need more retirement savings because the additional costs of providing care may limit their ability to save for their future. IRAs and Roth IRAs may be able to supplement retirement income.
ABLE accounts: These tax-advantaged investment accounts are a way to set aside savings for eligible children and adults with disabilities, lessening the need for withdrawals from accounts earmarked solely for retirement. ABLE accounts help qualified individuals with disabilities and their families save for disability-related expenses. Anyone can contribute to an individual’s ABLE account, but total contributions cannot exceed $15,000 in any given tax year. Importantly, ABLE account funds are not taken into consideration when determining eligibility for means-tested federally-funded benefits such as Supplemental Security Income (SSI) and Medicaid.
Pooled trusts and special needs trusts: Caregivers planning for the future of a family member with a disability need to be careful to maintain eligibility for government benefits, while accumulating assets for their care. Special needs trusts and pooled special needs trusts allow people under age 65 to receive gifts, inheritances, settlements and other assets, while continuing eligibility for government benefits.
Financial planning conventional wisdom advises to start planning for the future early, well before the solutions will be needed. Caregivers, however, may have more difficulty understanding what their future needs will be. Employees who work for organizations that offer robust benefits programs with long-term saving products would be well served to explore how they can help address their current and future needs — those that are anticipated and those that are not. In addition, exploring available government benefits and working with a financial professional who is experienced in special needs planning can help families get on track with planning and saving to help ensure a secure financial future.
About the author: Jessica Tuman
Jessica Tuman is vice president of the Voya Cares® Center of Excellence at Voya Financial. Voya Cares provides training and resources to help its staff and external stakeholders understand, employ and better serve those with special needs and disabilities and their caregivers to achieve the quality of life they seek today and through retirement. Learn more at
. And, check out one of Voya’s recent ad campaigns, titled
, which features a family with special needs in three periods during the course of a lifetime.
Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.
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