Caregivers are unprepared for the reality of retirement

For employee caregivers heading into retirement, leaving the workforce comes with a whole new set of challenges. 

According to the Employee Benefit Research Institute's recent Retirement Confidence Survey, a third of caregivers who are now retired say that their lifestyle in retirement is worse than what they expected, compared with 20% of retirees who do not have caregiving responsibilities. 

During their working years, caregivers are less likely to have saved for retirement, but are forced to retire earlier than expected because of reasons out of their control, the EBRI report found. A separate survey from AARP estimates caregivers spend more than a quarter of their annual income on caregiving costs, money that could have been allocated to their retirement savings. 

"Caregivers may have to reduce work or quit work entirely in order to provide care. If this happens, the caregiver will have less financial resources to support themselves," says Craig Copeland, director of wealth benefits research at EBRI. "If caregivers can't support themselves, they may not be able to provide additional support for those receiving care, and both the caregiver and the recipient will face significant challenges." 

Read more: Don't let caregiving sabotage retirement planning

Currently, 18-22% of the workforce spends at least 20 hours per week on caregiving responsibilities, according to the Rosalynn Carter Institute for Caregivers. The financial and emotional toll this can take on workers means that more than a third will leave the workforce for an extended period of time to focus more fully on their caregiving role.

For many, that's an option that puts them into a deeper financial bind, as caregivers have a higher debt burden and less savings than their peers who do not have caregiving responsibilities. EBRI found that a quarter of caregivers have less than $1,000 in savings and investments, and 64% say debt is a problem for them, compared to 42% of non-caregivers who cite debt as an issue. 

Caregivers often lack confidence in a care plan that meets both their needs and the recipient of their care, says Madhavi Vemireddy, co-CEO of caregiving platform Cleo, which has expanded to cover the full life spectrum of family care needs. The platform will connect users with a guide, who will also facilitate frequent check-ins to track progress and prevent employees from needing to leave the workforce entirely. 

"We do a family health assessment to find out, 'Wow, it looks like your confidence levels are really low, and you're not feeling as connected, and you've got a high caregiving burden score,'" Vemireddy says. "That's when our guides can work with a member and address the confidence and put a plan in place." 

Read more: At every stage of caregiving, employees crave more support from their employer

As a caregiver to her son, Vemireddy recognizes the emotional and financial toll these responsibilities can take at various phases of life. It's critical employers provide a sense of community and support with their benefits, she says. 

"You can't expect to take care of your family if you're not taking care of yourself," Vemireddy says. "It's so hard, but let's just acknowledge the fact that we're going through a tough journey together. Having a community really allows you to step back and do that." 

Beyond a care platform like Cleo, employers should provide flexible work schedules for caregivers, as well as backup care benefits so employees don't have to miss work, Copeland says. Caregivers are trying to stay on the right track for retirement — they just need more support getting there. 

"Caregivers as a group are as knowledgeable about their finances and are as likely to have carried through with many of the retirement preparations tasks as those who are not caregivers," Copeland says. "They're also providing care for someone on an unpaid basis, which has resulted in falling behind. These are the people that should be getting more support since they are supporting others."