Weigh your options

If you work full time and provide support as a caregiver, you might be feeling like you’ve got two jobs — with little time left over for anything else.

You’re not alone. Of the 53 million or so caregivers in this country, 61% also hold down a paying job at some point while taking care of a loved one. In addition to that, 40% live with their care recipient. And caregivers, on average, spend nearly $8,000 of their own money on family members who are ill, aging or living with disabilities.

The day-to-day stress may have you wondering if you should leave your paying job to become a full-time caregiver. But can you afford that?

Caregivers who leave the workforce — even temporarily — don’t just sacrifice a paycheck. They may also miss out on some of their highest earning years, depending on their age and job. So not only could you lose income and benefits in the short term, but you might have less income from Social Security and retirement savings to draw from later in life.

In other words, you should give serious thought to the effect that leaving your job to care for a loved one could have on your finances. Instead, look into hybrid work or full-time telework; being at home can help you balance responsibilities. Or consider asking your employer if you can reduce your hours. Working 30 instead of 40 hours a week can lighten your load quite a bit. Combining personal, sick and vacation days is another way to manage your job time and your caregiving time.

Quitting your full-time job to become a full-time caregiver could have a big economic impact both through lost wages from leaving the work force early and from diminished private pensions and retirement contributions. Studies show that lost wages and pension benefits can range from $303,260 to $659,139 over a caregiver’s retirement years. For example, if you currently contribute to a 401(k) at work, and your employer matches a percentage of your contributions, you’ll miss out on those retirement funds.

The effect on private pension savings is harder to predict. Two-thirds of all workers say they save for their retirement, and 59% expect to get income from their employer’s defined contribution or defined benefit plan. But private savings for workers over 55 can be as little as $10,000 or more than $250,000 — a wide gap. The loss of income from lost pension contributions may add an additional $50,000 burden for caregivers over a “career” of caregiving.

Higher income translates to a bigger Social Security benefit when you retire, so if you quit your full-time job, you should first try to figure out what that will mean to your wallet.

Your Social Security benefit is based on the average amount of money you made each month during your 35 highest-earning years, adjusted for inflation. If you’re one of the 40% of people over 65 who get at least half of their income from Social Security, then a lower benefit means less money later in life.

On average, women who leave the workforce early because of caregiving can lose about $142,693 in wages. Their lost Social Security benefits can be another $131,351. Combining the two means the impact of your caregiving can add up to $274,044. Check the Social Security Administration’s estimate of your retirement to see your benefits.

We get it. You feel like you’re not doing either of your jobs — the full-time paying one or the unpaid caregiving one — as well as you could. But quitting the full-time job temporarily to devote yourself to full-time caregiving comes with risks beyond the loss of pay and benefits.

Specifically, you could risk being hired at a lower salary when you return. Your age, your job market, and your skills all have an impact on your ability to re-enter the workforce. You also need to think about things like transportation costs that you’ll have to pay when you’re working again.

Another thing to keep in mind: If you retire and start getting Social Security benefits before your full retirement age, there’s a limit to how much you can earn if you decide to go back to work. If you earn more than the limit ($21,240 in 2023), you’ll have penalties deducted from your Social Security payments.

About 2 out of 5 caregivers report that their care recipient lives with them, and it can be a rewarding experience. It’s less expensive to care for loved ones at home than it is to pay for assisted living or a nursing home, and it can also lead to more quality family time.

Remember, though, that there can be disadvantages, emotionally and financially. Senior parents may want to make decisions, but that’s not easy to do when they’re dependent on their adult children. Negatives can include a loss of privacy for the caregiver, and living together can make it harder to take a break from caregiving. There can also be financial costs, such as renovations to make the house safe and accessible. It’s important to reach an agreement before move-in about who will pay which expenses.

Having your care recipient live in your house gives you a tax benefit if you meet the necessary IRS requirements. You could also be eligible to have your parents transfer their home to you as a form of payment. But there are strict rules and requirements, including that you need to have lived with your parent(s) for at least two years immediately before they move to a nursing home, and provided a level of care that delayed the parent’s need to relocate. Make sure you understand Medicaid’s Look-Back Rule well in advance, and get advice from a professional Medicaid planner. Find a Medicaid planner here.

Hiring caregivers to help during the day, or overnight if necessary, could lighten your responsibilities so you can also focus on your job. Local in-home care agencies offer a range of services and prices. If your loved one needs full-time supervision, consider hiring a live-in caregiver. AARP’s care cost calculator can help you estimate the cost of in-home care services, adult day care, and residential services in your ZIP code.

Some employers might also provide caregiving benefits, such as counseling, referrals to help with care, and dependent care assistance plans. The assistance plans let an employee set aside tax-free money to cover qualified day care costs for adult dependents.

More states are giving care recipients the ability to direct their own care. You might find yourself “hired” by your loved one … and you also might find that your relationship with your family members changes.

The benefit of getting paid to care for your loved one, aside from the money, is the feeling that you’re valued for the work you’re doing. But family members may have a problem with the idea that you’re somehow profiting from the situation. Communication is crucial here. Let them know exactly how much money you’ll make and that the money will balance out your caregiving costs.

Your loved one might also treat you differently once they’re paying you to care for them. They might feel entitled to bark orders or take their frustrations out on you. It will be important to let your loved one know that you’re there for love, not money, and that you’re not just an employee.