TAKING TIME OUT OF THE WORKFORCE TO CARE FOR A FAMILY MEMBER IS THE ULTIMATE ACT OF SELFLESSNESS AND LOVE. IT’S ALSO AN ACT THAT’S BECOMING INCREASINGLY COMMON, AND INCREASINGLY COSTLY. WHETHER YOU’RE TAKING TIME OFF TO CARE FOR CHILDREN OR AN ELDERLY PARENT, THE IMPACT ON YOUR FINANCIAL SECURITY CAN BE SEVERE.
Taking time out of the workforce to care for a family member is the ultimate act of selflessness and love. It’s also an act that’s becoming increasingly common, and increasingly costly. A third of employees say that they have left a job because they couldn’t balance the responsibilities of work and caregiving.1 Whether you’re taking time off to care for children or an elderly parent, the impact on your financial security can be severe. Taking a year out of the workforce can result in a 7% pay penalty.2
The costs go beyond the foregone salary. Time out of the workforce also typically means missed Social Security contributions and retirement savings (including those valuable matching dollars) and losing out on raises that compound over the course of a career.
There are, of course, many non-financial factors that go into the decision to become a family caregiver. If it’s a path you’re considering, here’s how to minimize the impact on your finances:
Talk to your employer before you quit.
While most corporate leave policies still focus on the care of new babies, a growing number of companies are expanding their policies to also provide some paid time off to workers caring for adult family members.3 Consulting firm Deliotte, for example, offers four months of paid leave to workers caring for a family member.4
There may be other benefits as well, that allow you to continue working. Back-up care for the elderly, for example, or access to an eldercare concierge to help you coordinate care are sometimes options. Even companies without formal policies or programs may be willing to create a solution, such as reduced hours or telecommuting arrangements, that allow you to keep your job while fulfilling your caregiving duties.
“Make sure you have an understanding of whether [your employer] offers any leave, and what other benefits you could be entitled to before you decide to leave you job,” says Joy Loverde, author of Who Will Take Care of Me When I’m Old? If it looks like you’ll only be out of the workforce for a short time, you may qualify for the Family and Medical Leave Act, which allows you to take up to 12 weeks off to care for a family member, without losing your health insurance or the guarantee of a job when you return.5 Additionally, five states (CA, RI, NJ, NY and WA) require that companies provide paid family leave.6
Don’t check out of the family finances.
If you’re fortunate enough to have a partner whose income will support you while you’re not collecting a paycheck, you’ll still want to take an active role in helping maintain your family’s financial security. Sit down with your partner to work out a new budget, adjusted for the loss of your income. Look carefully for areas where you can cut back while trying not to abandon your savings contributions. Maintaining an adequate emergency fund becomes even more important when you’re living on just one income. If you’ve got that covered, make sure you’re also continuing to save for retirement. Consider opening a spousal IRA, which allows you to save up $6,000 per year for retirement in addition to contributions your spouse is making.
Look into getting paid.
Caregiving is emotional and physical work, but it’s doesn’t have to be unpaid. If you’re caring for an elderly parent or other family member with healthy assets, you might work out a caregiver contract, in which they pay you--either while you’re providing the care or by leaving you a larger portion of estate—for the time spent caring for them. In some families, one or more siblings pays another sibling for the work they do caring for a parent, or a middle generation pays grandchildren to care for grandparents.
If possible, discuss and work out any such arrangements ahead of time, rather than after an emergency hits when all family members are emotional, says Suzanne Asaff Blankenship, author of How to Take Care of Old People without Losing Your Marbles. Whatever you decide, work with a lawyer to get an agreement in writing that spells out the scope of your responsibilities and payment.
There are other options to receive payment for your work as well. The Department of Veterans Affairs, for example, has some programs to provide payments to eligible caregivers, as do some state and local organizations, although rules and eligibility requirements vary. If the person you’re taking care of has long-term care insurance, their benefits may include payments to family caregivers. Your local Area Agency on Aging (find yours here) can help you figure out which programs you might qualify for.
Stay connected to the work world.
Finally, note that the growing gig economy has created a slew of opportunities to keep large gaps from developing on your resume. “Maybe the 60-hour-a-week job with a commute absolutely won’t work, but there are other options that can still be professional and lucrative and allow you to keep your hand in the working world,” says Kathryn Sollman, author of Ambition Redefined: Why the Corner Office Doesn’t Work for Every Woman & What to Do Instead.
If you can, carve out some dedicated time—around your caregiving schedule—for working in some capacity. Sollman recommends shooting to take on one project every quarter. Even a few small projects will show future employers that your job skills haven’t gone stale. Bonus: In addition to making it easier for you to return to work later, gig work also allows you to bring in some income, even when you’re spending the majority of your day caregiving.
In addition to the work itself, maintain your other connections to work. Check in with colleagues occasionally, either online or in-person. Stay abreast of industry news and keep your LinkedIn profile active and up-to-date with your latest projects.
With Beth Braverman
1. “The Caring Company: How Employers Can Help Employees Manage Their Caregiving Responsibilities – While Reducing Costs and Increasing Productivity,” Harvard Business School, January, 2019.
2. “Here is How Much it Costs to Leave the Workforce.” Payscale.com, September, 2018.
3. “Paid Leave + US Employer Trends Report,” Paid Leave + US, 2019.
4. “Deloitte Announces 16 weeks of Fully Paid Family Leave Time for Caregiving,” September, 2016.
5. Family and Medical Leave Act, U.S. Department of Labor.
6. “State Impose Paid Family Leave as Congress Weighs National Policy,” SHRM, March, 2019.
About the author
Annuities are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and in New York, annuities are issued by Jackson National Life Insurance Company of New York (Home Office: Purchase, New York). Variable products are distributed by Jackson National Life Distributors LLC, member FINRA. May not be available in all states and state variations may apply. These products have limitations and restrictions. Contact the Company for more information.
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Jean Chatzky is not affiliated with Jackson.