Many parents have read the children’s book “Love You Forever” by Robert Munsch and found themselves with tears in their eyes at the end when the son, now a grown man, cares for his mother in the same tender, selfless way that she cared for him when he was a baby. Providing daily care for an aging parent affects every facet of the caregiver’s life.  Caught up in the day to day juggling of multiple households, doctors’ appointments, and declining abilities, caregivers and care recipients could easily forget to consider the impact on the caregiver’s earnings record and future Social Security benefits. This blog cites statistics compiled by The Family Caregiver Alliance and reminds caregivers and care recipients to think about Social Security benefits.

Millions of People Are Helping Family Members with Everyday Activities

  • 7 million informal and family caregivers provide care to someone who is ill, disabled or aged in the U.S.
  • 8 to 7. 2 million people (family, friends and neighbors) provide care to a person (65+) who needs assistance with everyday activities.
  • The average age of a caregiver is 49.2 years.
  • The number of hours dedicated to caregiving increases with the age of the caregiver.
  • Higher-hour caregivers are, on average, 51.8 years of age.
  • Lower-hour caregivers average 48 years of age.
  • Family caregivers spend an average of 24.4 hours per week providing care.
  • Nearly 1 in 4 caregivers spends 41 hours or more per week providing care.
  • 47% of care recipients are 75+ years old.

The Caregiving Role Lasts for Years

  • The average duration of a caregiver’s role is 4 years.
  • Only 30% of caregivers provide care for less than a year.
  • 24% of caregivers provide care for more than 5 years.
  • 15% of caregivers provide care for 10 or more years.
  • Higher-hour caregivers are twice as likely to have been in their caregiving role for 10 years or more.

The Caregiving Role Affects Employment

Caregiving has shown to reduce work productivity by 18.5% and increase the likelihood of leaving the workforce according to Joseph Coughlin, PhD, Massachusetts Institute of Technology AgeLab, Center for Health Research, Healthways, Inc.

The Caregiving Role Can Affect Social Security Benefits

A person’s Social Security benefits at retirement or in the event of a disability depend on lifetime earnings (unless he or she is eligible for a higher benefit as a spouse).  When a caregiver reduces earnings due to a caregiving role for many years, it can actually reduce future Social Security benefits.

Planning for a Typical Caregiving Scenario

For purposes of illustration, I will create a fictional family scenario.

Mary (age 50) lived 10 miles from her mother (Anne) who was 77 years old when her husband (Jacques) died.  She worked as an administrative assistant at a medical clinic.  She took turns with her siblings, staying with her mother for 2 days and nights each week so that her mother would not have to live in an assisted living center.  As a consequence, she reduced her hours at work from 5 days a week to 4 days a week, taking a 20% cut in pay. This arrangement lasted for 7 years.

When Mary’s mother moved to an assisted living center, Mary continued to work 4 days a week instead of 5 because her full time position was no longer available at her employer, and she still spent several hours a week visiting her mother.

When Mary reached early retirement age (62) she visited the Social Security Administration’s website and used the online benefits calculator to see what her monthly benefits would be if she retired and drew benefits on her own earnings record.  She was surprised to find that this estimate was lower than the one she received when the Social Security Administration had mailed a statement to her when she was 50.

Let’s look at how that could have happened and then look at how it could have been avoided.

Reduced Earnings Can Reduce Retirement Benefits

Social Security Retirement Benefits are based on a formula that uses the highest 35 years of earnings indexed to current values in a formula to arrive at the Primary Insurance Amount (PIA).

If we assume that Mary did not enter the work force until age 32 when her youngest child started kindergarten, the 12 years between 50 and 62 will clearly be included in her PIA calculation because at age 62 she has worked less than 35 years: after 18 years of full time work and 12 years of part time work, Mary has 30 years of earnings.

The Impact on Social Security Benefits is Greatest for People Working Close to Minimum Wage

As explained on the Social Security website:

For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2016, or who dies in 2016 before becoming eligible for benefits, his/her PIA will be the sum of:

(a) 90 percent of the first $856 of his/her average indexed monthly earnings, plus

(b) 32 percent of his/her average indexed monthly earnings over $856 and through $5,157, plus

(c) 15 percent of his/her average indexed monthly earnings over $5,157.

Mary’s PIA Will Go Down Dramatically if She Gives Up Her Job

The following examples do not take into account the fact that over a lifetime of work, people generally earn more each year because they pick up new skills and experience.

These examples also do not take into account that earnings after age 60 are not indexed to current values, but are averaged in at face value.

And these examples assume that Mary is not eligible for benefits as a spouse or widow of a higher-wage earner.

Given these assumptions, I have prepared illustrations for a hypothetical worker (Mary) earning $10.00 per hour.

In one scenario, Mary reduces her time at work by one day a week.  In the other scenario, Mary gives up her job completely.

Note the change in Mary’s PIA in the 2nd and 3rd table compared to the 1st table which assumes she did not reduce her earnings.





Talk With Your Estate Planning Attorney

If you are receiving care from a family member, it might be time to talk with your attorney about a fair way to compensate your caregiver.

When caregivers make great sacrifices to provide care to a family member or friend, the true cost of those sacrifices needs to be taken into account when managing the care recipient’s income and assets.

One way to offset the reduction of the reduced earnings and PIA is to have the care recipient pay the caregiver each week to replace the earnings lost at work.  If that approach is chosen, the caregiver must pay self-employment taxes on those earnings to preserve the PIA he or she would have had if there had been no reduction in hours at work.

If not all of the care recipient’s children are making the same sacrifice of time and earning potential to provide care, it is appropriate to adjust the care recipient’s will to leave more assets to the caregiver.

Your estate planning attorney will have other flexible solutions that reflect your unique family.

Love You Forever

Making the adjustment from being the caregiving parent to being the care recipient requires grace and wisdom.  All parents want the best for their children.  Don’t forget to think about Social Security benefits when a family member is reducing work to care for you.

“I’ll love you forever

I’ll like you for always

As long as I’m living

My baby you’ll be.”