The Case for Supporting Working Parents: A Healthy Workforce Benefits Us All

Many of us are familiar with the delicate dance required when building careers while caring for families. Some of our nation’s most unsung heroes, family caregivers, are honored every November during National Family Caregivers Month.?

Family caregivers are the backbone of our households, communities, and society, yet caregiving usually comes without pay and can take a toll on earnings and retirement savings.?

My colleagues at TIAA Institute have published a report, “The Case for Supporting Working Parents,” that explores how being a caregiver can negatively impact retirement security, especially for women, while also laying out actions that individuals, employers, and policymakers can take to minimize these financial headwinds and create a more successful support system for caregivers.?

I recently spoke to Surya Kolluri, head of the TIAA Institute. Surya oversees the Institute’s research on enhancing lifelong financial security and organizational effectiveness. Surya and his team’s insights are invaluable for our business and clients, and he took the time to answer some questions surrounding “The Case for Supporting Working Parents” and related research:

Thasunda: How do the caregiving responsibilities that fall on women impact their long-term retirement security? What solutions surface from the research that can help reduce these effects??

Surya: Thank you, Thasunda, for the opportunity to have this conversation and for shining a light on the?important topic of caregiving.?

About 60% of caregivers are women and nearly one-fourth are part of a “sandwich generation,” taking care of both parents and children. This time spent caregiving can result in lost wages, diminished or slower career growth, and interrupted retirement savings. In addition, women still only make 83 cents on the dollar compared to men. One of our recommendations is that employees who plan on taking extended leave for childcare consider maxing out their retirement contributions early in their careers. However, we also urge employers and state and federal policymakers to support working parents by expanding access to an array of programs that can reduce the financial burdens on people who temporarily leave the workforce to care for others, which is a critical social need.?

Thasunda: How significant is the financial burden that caregiving responsibilities place on working parents, particularly in terms of lost wages and diminished retirement savings?

Surya: Our research shows that women experience an immediate decrease in earnings at the birth of their first child and don’t return to their previous earnings trajectory for two to three years, or perhaps even longer. In addition to lower wages, time out of the workforce for caregiving can result in a 22% retirement savings gap compared to a peer with no workforce interruptions.?

Time out of the workforce also has implications for Social Security. Benefits are based on a person’s lifetime earnings, meaning that unpaid gaps and reduced income following parental leave can yield lower Social Security benefits decades in the future.?

Thasunda: What can employees themselves do to help minimize the financial burden from meeting caregiving responsibilities?

Surya: Younger employees in particular should remember that plans can change over time. Just because you’re not a caregiver now doesn’t mean you won’t take time out of the workforce to be a caregiver in the future. So, it’s important to max out retirement contributions early in one’s career, to help make up for any future shortfalls.?

Workers of all ages should also widen their scope when considering employment decisions. Immediate salary matters a great deal, but benefits that support caregiving can also have long-lasting positive effects, even if they’re not timely or top of mind for the job hunter. As we’ve seen, about 25% of family caregivers will end up caring for both children and elders, the latter of which incurs an average out-of-pocket expense of $7,200 each year.?

We suggest considering all aspects of the benefit package. Months of full-pay parental leave or the possibility of working from home might have substantial value in the long run.

Thasunda: The report suggests that state legislatures and federal policy officials are making caregiver support a higher priority. Where are we seeing success so far, and what more could be done??

Surya: Thus far, we’ve seen that paid parental leave for all parents encourages a higher level of labor force participation for women, and state-level policies that support, supplement, or enhance pregnancy support and parental leave are gaining ground. Making it easier for caregivers to remain in the workforce has significant long-term benefits. For instance, today, 28% of caregivers stop saving for retirement completely once assuming caregiving responsibilities and 12% dip into their long-term retirement benefits to pay current expenses. Maintaining steady employment can reduce these numbers over time.?

At the federal level, innovative approaches—such as childcare requirements for certain grantees—can help industries compete more effectively for talent. These types of requirements attract workers, making companies more competitive, which is always a win for workers. I think reducing the stark gap in retirement savings should be a priority for future legislation that can ensure individuals won’t have their Social Security benefits reduced due to taking time out of the workforce.

Thasunda: Supporting working caregivers requires a multifaceted approach. What can employers do to help employees feel safe and supported while on parental leave?

Surya: Employers in all industries benefit from hiring and retaining top talent, and offering a supportive environment for caregivers can go a long way toward building a motivated workforce. I would suggest that employers evaluate their current policies and emphasize or grow those benefits that support caregiving employees. Paid parental leave is increasingly a top consideration for workers and the positive effects of paid parental leave for both parents extend beyond finances to strong relationships, mental health benefits, and increased engagement at work. Equally important to employees is the support they receive when returning to work. “Returnships” or “reintegration programs” are becoming more common and can make it easier for people to return to work after taking a career break that lasts longer than the basic parental leave period.?

Caregiving is one of the most important roles we can take on as individuals, but giving care should not be seen as a burden to be completed in a silo. A thriving society requires participation from all sectors. All employees should have access to financial planning services, retirement and health benefits, fair pay, family-friendly policies and support for caregiving. Holistic employer benefits and a working culture that embodies these values can reduce individuals’ stress, support positive mental health, and foster broader financial wellness.??

This material is prepared by and represents the views of the author and does not necessarily represent the views of TIAA, its affiliates, or other TIAA staff. These views are presented for informational purposes only and may change in response to changing economic and market conditions.

TIAA Institute is a division of Teachers Insurance and Annuity Association of America (TIAA), New York, NY ?2024 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, New York, NY.?

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