The Financial Strain and Savings Penalties for Caregiving: A Significant and Growing Threat to Retirement Security

By Shailee Sinha, Linnea Saxton, and Angela Antonelli

One in four American adults is a family caregiver. They help elderly parents get dressed, drive a sick family member to chemotherapy, or handle a myriad of other responsibilities for a loved one in need. Most of these caregivers do not call this work — but it is work, and it comes with a heavy financial cost that has largely been ignored. From out-of-pocket spending to lost or reduced wages to interrupted retirement savings, caregiving imposes a largely unacknowledged financial and economic toll on the well-being of millions of Americans.

Who Are Family Caregivers?

According to AARP, there are 63 million known family caregivers who provide ongoing care to people of all ages with a medical condition or disability. Family caregivers look after family members such as parents and spouses, as well as friends and neighbors, most often helping them live independently in their homes and communities, where many want to be. Caregivers help with everything, including medications and medical care, meals, bathing, dressing, finances, grocery shopping, transportation, coordinating and arranging care, advocating on behalf of their loved one, and more. About four in 10 caregivers are men and about six in 10 are women.

Caregivers are often juggling the responsibility of caring for an older loved one with working and raising a family. Seven in 10 working-age (ages 18–64) caregivers are employed while providing care. About 16 million “sandwich generation” caregivers provide care for both an adult with disabilities or complex medical conditions and a child under 18 at home. These caregivers may feel the challenges of caregiving more acutely.

Millions of Caregivers Provide Billions in Labor

Although family caregivers perform essential and often intensive labor, the majority receive no compensation, in addition to experiencing out-of-pocket expenses, impacts on paid employment, and other negative financial effects. The lack of pay, among other financial pressures, is a substantial challenge. Consider a husband who helps his mobility-impaired wife around the house or a daughter who brings meals to her aging parents each week. These family caregivers may not view their tasks as an economically valuable form of labor equivalent to the work of a paid employee — they may see their work as an expression of love or a moral duty, or they may not recognize the sustained demands on their time at all. However, if their families hired an in-home aide or a meal delivery service instead, the labor would come at a high cost, although costs vary.

Family caregivers, therefore, produce enormous — although often hidden — economic value. In 2024, the value of family caregiving totaled $1.01 trillion, more than all Medicaid spending that year. While this figure captures the value of both paid and unpaid family caregivers, very few caregivers receive compensation. A 2025 study by AARP found that of 59 million family caregivers of adults, about 9 million received pay for some of their care hours, while only about 2 million received pay for all hours. For the other almost 48 million caregivers, the immense economic value they produce is not compensated.

A 2024 study evaluated the economic value of such labor and concluded that 44 million unpaid caregivers performed the equivalent of $873.5 billion worth of labor, or 3.2% of the U.S. GDP. If family caregiving were a business, its revenue would exceed that of any company worldwide. These figures reveal a striking contradiction: Although family caregivers create vast economic value, their work remains overlooked and underpaid.

Caregivers’ Expenses and Financial Strain

In addition to dedicating time and labor to their loved ones, caregivers shoulder substantial expenses on their behalf. A 2021 report from AARP found that caregivers’ average out-of-pocket expenses exceed $7,200 annually. More than half of this spending broadly covers housing expenses, while 17% goes to medical expenses like hospital payments, in-home care, and adult day services. On average, a caregiver spends 26% of their income on caregiving expenses, more than double what the average American spends on food.

This spending leaves caregivers unprepared to handle their own expenses. In a Pew survey conducted in 2025, 21% of caregivers of an aging partner or spouse reported that caregiving had a negative impact on their finances. In a 2023 EBRI survey, 64% of caregivers — versus 52% of non-caregivers — reported that debt was a problem for them. These figures underscore the strain caregivers experience on their daily cash flow. While out-of-pocket spending immediately affects caregivers’ expenses, it is not the only financial pressure they face. 

Caregiving Imposes Career and Income Penalties

As of 2025, 70% of working-age caregivers held paid jobs. While most caregivers are employed, they must balance their caregiving responsibilities with their job responsibilities. This can be challenging when the average caregiver provides 27 hours of care per week — the equivalent of a second part-time job.

It is not surprising to find that when caregiving becomes a priority, career growth stalls. In a 2024 survey report of employed caregivers, half reported having to make scheduling changes — such as arriving late, leaving early, or taking time off — because of their care responsibilities. More than a quarter of respondents needed to reduce their hours, 16% had to turn down promotions, and more than 15% had to leave the paid workforce temporarily due to care responsibilities. These results illustrate the barriers America’s caregivers face to upward growth in the workplace.

Women and lower-income caregivers face especially steep career penalties. An estimated 21% of female caregivers and 26% of caregivers with a household income under $100,000 report that caregiving has had a negative effect on their career path. Only 11% of men and 9% of higher-income individuals report similar negative impacts.

When a caregiver’s career stalls, they face income cuts. Nationwide, unpaid family caregiving is estimated to result in an annual opportunity cost of $107 billion, a figure including lost earnings, diminished productivity, and forgone tax revenue. One study estimated that caregiving reduces women’s wages by $0.66 per hour, while another study reported that in the first three years of caregiving, women’s earnings fall by $1,428 annually. Reduced earnings heavily affect long-term financial well-being. 

Caregivers’ Savings Suffer

Caregiving takes a well-documented toll on cash flow, earnings, and career advancement. However, these short-term consequences do not capture the full story of caregivers’ financial well-being. The opportunity cost of caregiving is not only the income they would have earned but also the lost savings that could have been invested and grown over time to build wealth and long-term retirement security.

Survey research shows that caregivers pause saving money or withdraw cash early to make ends meet. According to AARP, 31% of family caregivers had stopped saving due to their care responsibilities. Some 13% of caregivers had dipped into long-term savings, including retirement savings that often come with steep penalties for withdrawals, to cover daily expenses. Every day, millions of caregivers are forced to jeopardize their long-term financial stability to handle short-term care expenses. Furthermore, when a worker leaves their job due to their care responsibilities, they lose access to their employer-sponsored retirement plan, so they can no longer take advantage of any available employer match, compounding the detrimental effects of caregiving on their savings.

Over decades, these cuts to caregivers’ savings balloon into major deficits compared to non-caregivers. Researchers estimate that if someone with a $50,000 salary began caregiving at age 25, they would need to work 21.4 additional years — or until age 86 — to make up for the lost savings they would have accrued by age 65. The 2025 report from AARP finds that nearly one in 10 family caregivers delayed retirement or never retired because of their caregiving role.

Decreased assets and investment growth are only one way caregivers’ retirement security suffers. In the absence of substantial retirement savings, retirees must rely heavily on their Social Security paychecks. Interruptions to earnings, however, can lead to a decrease in the net amount of Social Security benefits. Earning less income or losing a job can have a cumulative, harmful impact on caregivers’ retirement savings and security. All of this is compounded by soaring long-term care costs, delivering a devastating 1-2 punch to financial security in retirement.

How Are Employers and Policymakers Responding to Caregivers’ Needs?

There is some good news. To address caregivers’ retirement preparedness gap, employers and lawmakers are designing and implementing policies that respond to caregivers’ needs with support.

In the workplace, some employers offer supportive benefits to caregiving employees, such as paid family leave and caregiving insurance. A 2026 report found that 29% of surveyed HR leaders offered paid caregiver leave. Some employers subsidize care concierge services, backup caregiving, and guidance counseling offered by companies like Cariloop, Care.com, Homethrive, and Wellthy. These benefits are growing in popularity among employers; approximately the same proportion of employers are actively expanding family care benefits as are maintaining their 2025 benefit levels. Although employers have made some progress, survey data from 2026 indicate that only one in five employees feel “very supported” by their employer when their care responsibilities affect their work.

Federal lawmakers are responding to caregivers’ needs through the Lifespan Respite Care Program of the Administration for Community Living in the U.S. Department of Health and Human Services, which awards grants to state agencies that provide respite care services. In some states, these grants fund vouchers that reimburse families who pay for respite care. Funds also go to training programs to increase the caregiving workforce. This federal program supports caregivers in 39 states and DC. Congress recently reauthorized this program through Fiscal Year 2030 and made family caregivers under age 18 eligible for the program.

Federal lawmakers have proposed additional legislation to support family caregivers as well. Bipartisan members of Congress have sponsored legislation to provide a federal tax credit for eligible working family caregivers to help offset a portion of out-of-pocket caregiving expenses. Another bipartisan proposal would allow a family caregiver with a health savings account, flexible spending account, health reimbursement account, or medical savings account to use the funds in such accounts to pay for qualified medical expenses of a parent or parent-in-law.

State lawmakers are also taking steps to support caregivers, looking both to tax policy and paid leave policies to do so. As of April 2026, 14 states and DC have enacted paid family and medical leave policies. Under these state policies, an estimated 32% of private-sector workers nationwide, or 46.2 million workers in total, can access paid leave. States are also exploring how tax policy can be used to provide financial assistance for family caregivers.

The Cost of Caregiving is a Major Economic and Fiscal Challenge for the Nation

For the one in four American adults who are caregivers, the financial costs of caregiving do not stop at paying out-of-pocket expenses or time off from work. They are stepping back from careers, earning less income, and reducing their savings, while incurring greater costs than non-caregivers. These costs can also jeopardize their own long-term retirement security, with retirement contributions never made and reductions in Social Security benefits. Although employers and policymakers are beginning to pay attention, the need for caregiving services will only increase as our population continues to age rapidly and birth rates drop. Left unaddressed, the worsening strain on America’s workforce and its families will have enormous long-term fiscal and economic consequences for the nation.

2026-06

June 2026

Shailee Sinha and Linnea Saxton are Research Assistants and Angela Antonelli is the Executive Director of the Center for Retirement Initiatives (CRI), Georgetown University.