Retirement Saving Strategies for Family Caregivers

Joshua Iversen

Family caregivers who are helping their elderly parents or other relatives often must curtail their own careers in order to help care for a loved one. 

If you are in this position, it is important to make sure that you are not neglecting planning for your own retirement.

5 Retirement Saving Strategies To Consider

There are several steps you can take to help prepare for your financial future by designing a retirement savings plan while still serving as a caregiver.

These include:


1. Put Money Away in Retirement Accounts

Most people caring for an elderly family member are not officially employed as a caregiver. 

Additionally, the average age of Americans who are family caregivers is 49, well below retirement age. 

Thus, to reach the retirement goal they often will need to set aside as much of their income as possible in retirement savings. The larger the amount of money you need to retire comfortably, the more you will typically need to set aside each year in savings accounts for retirement. 

Basically, the higher your savings rate the better when it comes to improving your chances of reaching your retirement goals. 

People in this category can take advantage of tax-advantaged retirement accounts designed for individuals. If you aren’t covered by an employer-sponsored retirement plan you can always set aside retirement savings in a traditional IRA or a Roth IRA. 

An IRA contribution to a traditional individual retirement account is tax deductible, while eligible withdrawals are taxed. Contributions to Roth IRAs are made on an after-tax basis and not tax deductible, but eligible withdrawals are tax-free. In both cases, any yearly earnings in these accounts are not subject to taxes. 

For self-employed people and those who own or work in a small business, SEP IRA accounts, are designed to enable you to set aside a much larger amount of money based on your gross income than a traditional or Roth IRA, as long as you earn enough income to justify the contribution. 

These plans were designed so that whether you are a business owner or work as an independent contractor, you still have a chance to contribute funds for retirement. Socking away as much as possible in retirement accounts is a good way to boost your retirement income. 

Employer plans such as a 401k plan may feature an employer match, meaning that employee contributions will be matched up to a certain percent of the employee’s compensation. 

Contributing to the plan up to the amount your employer matches can help maximize your retirement savings. 401ks and other employer-sponsored retirement plans can typically be converted into a rollover IRA when an employee separates from service or retires. 

An annuity can also be used for retirement planning, as these insurance products offer a tax-deferred accumulation of earnings on the accounts. They also feature lifetime income annuitization options that can provide retirees with a steady source of income in retirement for as long as they live. 

2. Take Advantage of Tax Breaks for Caregiving

Certain expenses associated with working as a caregiver may be deductible from your income taxes. 

One option for writing off these expenses is the dependent care credit, which can cover up to 35% of your qualifying expenses. 

Depending on your tax rate, the tax benefits of writing off these expenses can be substantial. 

If you aren’t responsible for paying more than 50% of the funds needed to care for your loved one, it may be possible to still write off your expenses using a multiple support declaration.


3. Look into Receiving Compensation as a Family Caregiver

Caregiving can be a very time-consuming role. As a result, it can cut into the time a caregiver has to earn money, some of which they could set aside in retirement savings. 

Thus, it makes sense to seek some amount of funding or other assistance to compensate you for the work you do as a caregiver. In some cases, your elderly loved one may be willing to dedicate funds from their income to compensate you for the caregiving services you provide. 

If you receive income as a caregiver, paying taxes on that income as an independent contractor means that you will be earning Social Security credits for income from that source. This positions you to receive Social Security benefits when you are eligible to do so.   

Even if this is not possible, there are public and private sources of aid for caregivers. 

Listed below are a number of resources that may provide compensation, help reduce costs associated with caregiving, or provide other forms of assistance for caregivers that you may want to look into to see if they apply to your situation. 

In addition to government programs, long-term care insurance can be another option for receiving payment as a family caregiver. 

It typically covers expenses for care that is not covered by health insurance, care needed for seniors who have Alzheimer’s disease, a disability inhibiting their ability to perform daily personal care, or a chronic medical condition. 


4. Cut Costs Where Possible

Every dollar you don’t spend on non-discretionary expenses is a dollar you can set aside for retirement-saving purposes. This can be easier said than done with inflation rising recently, however, it is a worthwhile endeavor if you want to boost your chances of saving enough to retire comfortably. 

There are numerous programs that offer senior benefits that you can look into to see if they can lessen the financial burden of caregiving.


5. Consult with a Retirement Advisor

Whether you decide to hire a financial advisor to manage your retirement savings or simply consult with an advisor when needed, seeking expert advice can be smart when planning for retirement. 

A financial advisor who specializes in retirement planning can help you run the numbers to see how much you should be saving to reach your savings goals for retirement. 

An advisor can also help with regard to making investment decisions as to which securities to place in your portfolio with the goal of optimizing your chances of reaching your investment goals. This typically includes using your preferred investment strategy to help select between investment options from asset categories such as individual stocks, bonds, ETFs, mutual funds, etc. 

Your portfolio allocation is an important element in your investment performance, so expert advice can be helpful if you are not experienced with making these types of decisions. 

If you work with an advisor who is bound by the fiduciary standard, that means they are required to put your best interests first when giving financial advice. This includes both general financial planning suggestions and investment advice related to selecting and managing an investment portfolio. 

Working with a fiduciary advisor may not be important if you have opened a brokerage account to trade stocks yourself. 

However,  if you are having an advisor manage your investment portfolio, the fiduciary standard helps provide you with the peace of mind of knowing they must put your best interests first when making investment decisions on your behalf.   


Whether or not you work with a financial advisor, it’s never too late to start planning for retirement. Even if you are close to retiring, you can still benefit from taking action in accordance with the five steps outlined in this article. 

Once you’ve had a chance to review your retirement preparations and decide what steps to take, The longer the money you save for retirement has to compound, the greater your retirement savings are likely to grow, and the more likely you are to be able to afford to live the lifestyle of your choice in retirement.