Advocating for caregivers to achieve financial success

On behalf of our Policy, Regulatory and Government Relations (PRGR) team and the Grassroots Task Force at Edward Jones, I'm proud to announce that two bipartisan bills we brought forward to help family caregivers better save for retirement were introduced in the House of Representatives and Senate in Washington, D.C. last week.

Senator Suzan Collins (R-ME) and Mark Warner (D-VA) introduced the legislation, including the 'Improving Retirement Security for Family Caregivers Act' and the 'Catching Up Family Caregivers Act,' on the floor of the U.S. Senate on Tuesday. Companion bills were introduced in the U.S. House of Representatives by Congresswomen Maria Elvira Salazar (R-FL-27) and Brittany Pettersen (D-CO-07).

The timing couldn't have been better as the entire PRGR team was together this week in Washington, D.C., onboarding our new Grassroots Task Force chairs. It was a great way for these new volunteer advocates to see the impact they can make.

The state of caregiving

Roughly half of U.S. adults care for a child, parent, or other relative; that’s more than 100 million caregivers. As the country ages and as more individuals provide care to both aging parents and growing children at the same time, this number will only grow.

Caregivers routinely make significant personal and professional sacrifices, including stepping out of the workforce or moving from full-time to part-time work. Because of this, it’s no surprise that caregiving for loved ones can have a significant negative impact on savings and retirement readiness. According to a report from the AARP, the estimated economic value of uncompensated family caregiving was $600 billion in 2021, up from $470 billion in the previous study in 2017.

The system must change for the better or caregivers will face irreversible detrimental impacts on their savings and retirement plans. It is our responsibility as leaders and financial services professionals to support the following legislation that ensures caregiving does not slip through the cracks.

The need for change

While legislation (SECURE 2.0 ) is already in place that seeks to help the situation our country’s caregivers face, it is not sufficient to have a lasting impact or ensure their longevity. This is why our team has so strongly supported additional policy proposals to build on the success of SECURE 2.0 and provide savings opportunities to help the millions of Americans who provide caregiving to family and friends. As I stated above, these proposals include:

1.??? The Improving Retirement Security for Family Caregivers Act, which would allow family caregivers to contribute to a Roth IRA – an individual retirement account where money invested has already been taxed. For tax year 2024, a single person must make under $161,000 a year to contribute to a Roth IRA.

2.??? The Catching Up Family Caregivers Act, which would allow family caregivers an extra year of eligibility for the highest catch up contribution levels for up to five years. Catch up contributions allow individuals over 50 years old to contribute above the $23,000 annual limit to an employer-sponsored retirement plan. Those aged 60-63 are given an even higher contribution rate. These increased limits were created to help individuals “catch up” in saving for retirement if they chose not to contribute at a younger age.???

Harsh realities for the “Sandwich Generation”

The generation of middle-aged adults (usually ages 40 – 59) that are “sandwiched” between caring for both older and younger family members have been fittingly deemed the “Sandwich Generation.” As one generation of young adults is struggling to achieve financial independence and another generation continues to age, the burdens and responsibilities placed on middle-aged Americans are increasing.

Nearly half (47%) of adults in their 40s and 50s have a parent aged 65 or older and are either raising a young child or financially supporting a grown child (age 18 or older). And 15% of middle-aged adults are providing financial support to both an aging parent and a child.

This generation faces a perfect storm of caring for older and younger family, while trying to work and manage their own finances – including saving for their eventual retirement. This balancing act is a tremendous challenge for a full or part-time caregiver.

The adverse effects of caregiving are most acute for women and minorities

According to Edward Jones research , nearly two-thirds of women in the “sandwich generation” (64%) who care for both children and elderly parents or relatives say that their caregiving duties have negatively impacted their ability to save towards their financial goals, and 57% say that they assumed less professional responsibility due to caregiving, which has resulted in less income than they might have earned otherwise.

However, women live an average of six years longer than men, retire earlier and need more money to fund their retirement, thus facing an amplified impact of the caregiver’s turmoil down the line.

There are also racial disparities impacting the experiences of unpaid caregivers. According to a 2020 report , Black caregivers more often provided an excess of 40 hours of care per week as compared to white caregivers (54.3% vs 38.6%). Coupled with the racial earnings gap , which currently shows Black people earn 76 cents for every dollar white people make, this group takes on an increased financial responsibility with caregiving, despite having less income.?

Making a lasting impact

Amendments to these policies are another step in the right direction of helping ensure all Americans have the same opportunities to set themselves up successfully for retirement. I put the onus on Capitol Hill and implore them to support this legislation – it will have real impacts on real families across the country for years to come.