Estimate Time5 min

The hidden costs of caregiving

Key takeaways

  • Women are more likely to become caregivers, which means they are also more affected by the far-reaching and long-term financial impacts of caregiving.
  • Caregiving has a financial impact far beyond salary including, but not limited to, retirement contributions and lost potential growth, Social Security benefits, health care, and missed raises and bonuses.
  • If you do step out of the workforce, there are ways to keep investing and saving for retirement.

Caring for loved ones is a complicated and demanding situation that impacts our time, money, career, free time, family dynamics, and mental and physical health. And now, more than ever, the responsibility of caregiving is shouldered by women: Approximately 45% of women say they’ve taken on an even larger share of household responsibilities compared to their significant other since the onset of the pandemic (compared to 38% of men).1 Additionally, nearly 4 in 10 working women (39%) have actively considered leaving the workforce or reducing their hours due to increased remote schooling, caregiving responsibilities, and other unpaid labor.1

Making the caregiving decision

When most people look at the financial reality of caregiving, they generally think about how providing it themselves compares to their take-home salary or wages. But that’s just the beginning.

If you are in a 2-person household, be careful not to simply compare these costs to the lower-earner’s salary. Instead, think of the cost of caregiving as a shared household cost. Additionally, remember that these are simply numbers, and do not take into consideration the importance or need to have a career simply for its own sake. “It’s also the power you have over your own life,” says Eve Rodsky, New York Times best-selling author, in Women Talk Money’s Q&A on the cost of caregiving. “If one person is going to have a reduced income for caregiving, it’s really important to sit down with your partner and have a conversation about the longer impact.”

If you are weighing your options, here are some important financial considerations.

How to calculate the full cost of caregiving

Salary and wages There are opportunity costs for your career beyond what your salary is right now. These can include promotions, raises, bonuses, and new jobs. You may also be offered a reduced salary when you do try to go back into the workforce after time away, particularly if you are a parent and even more so if you are a mother.

Retirement and potential growth After salary or wages, factor in your lost retirement contributions, including any employer match. Then add on potential growth over the course of your lifetime. For example, let’s say a 35-year-old woman making $100,000 takes a one-year break, and then goes back to work at a slightly lower salary. Assuming a 4.5% annual growth rate, the lost retirement contributions and earnings at age 67 are estimated to be approximately $212,936.2

Estimated retirement savings at age 67 for a woman considering a career break at age 35, based on salary2

2. This hypothetical example shows estimated ending retirement plan balances for a woman who at age 35 is earning $50,000, $75,000 or $100,000 in salary. The estimates assume a 9% employee contribution rate to a workplace retirement account, with an additional 3% employer match, and a 1.22% annual real salary growth rate. Example assumes an 18% reduction in salary when returning after the one-year career break. Contributions are made at the beginning of every year and a 4.5% real rate of return is applied every year until age 67. The ending values do not reflect taxes, fees, or inflation. If they did, amounts would be lower. Earnings and pre-tax contributions are subject to taxes when withdrawn. Distributions before age 59½ may also be subject to a 10% penalty. Contribution amounts are subject to IRS and Plan limits. Systematic investing does not ensure a profit or guarantee against a loss in a declining market. This example is for illustrative purposes only and does not represent the performance of any security. Consider current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for 4.5% annual rate of return also come with the risk of loss.

Health care If you have your health care through your employer, will you have to pay for that through COBRA, an independent provider, a state marketplace, or switch to a partner’s plan? If you do have to switch, what is the difference in cost? If you have a health plan with a health savings account (HSA), factor in those contributions, including any from your employer, as well as the tax savings and potential growth of the invested portion.

Social Security Next, factor in lost Social Security contributions. Your Social Security benefit is calculated based on your top 35 years of earnings, so if you don’t work for many years, have a lower salary, or you don’t reach the minimum eligibility, you could have a lower check when it comes time to collect in retirement.

Out-of-pocket expenses Finally, remember that there are out-of-pocket expenses for other caregivers even when you’re doing the care yourself—because realistically, you can’t be on call 24/7.

If you do need to take time away

If you or your partner are still working (full or part time), make sure to make the most of employee benefits. Many employers have new and improved caregiving benefits, particularly in light of COVID-19, that are specifically meant to help you deal with family issues and illness without permanently leaving your job. They may offer enhanced childcare reimbursement (such as a flexible spending account), flexible schedules, workshares, and FMLA benefits (the Family and Medical Leave Act). Before you decide to leave your job, talk to your benefits department; it’s in their best interest to help you succeed.

If you leave the workforce, there are steps you can take to keep your retirement savings on track. If you are married and not employed, you can contribute to a spousal IRA. Talk to your partner about how much you as a couple can put into this retirement saving account. If you’re single and working part time or an independent contractor (even for part of the year), you can contribute to an IRA. This way, you aren’t losing out on all of that potential growth over so many years.

No matter what you end up doing, talk to a financial professional to help you understand how to have the best financial future possible. Says Sangeeta Moorjani, an executive in Workplace Investing, “You have to do what you need to do to stay sane, feel good about your career, and care for the people you love. What we do is help you figure out how to make good financial decisions to support that.”

Get organized, hit your goals

Create a flexible plan you can adjust to your life.

More to explore

1. Fidelity Investments Pandemic Impact Study, September 2020. Investing involves risk, including risk of loss. Fidelity Investments, Eve Rodsky and Fair Play are not affiliated. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. The experts are not employed by Fidelity but may receive compensation from Fidelity for their services.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917