Retirement Savings Options for Family Caregivers

Unpaid family caregivers provide an invaluable service to their loved ones, and ensuring they have a secure retirement is essential. For many family caregivers, saving for retirement may seem impossible. This guide explores retirement savings strategies for caregivers, including creative ways to save, types of retirement accounts, and special considerations for caregivers.

5 steps to saving for retirement 

Saving for retirement can be incredibly challenging for unpaid family caregivers who may not have traditional employment benefits. Prioritize your financial needs and financial stability. Thinking about your future when you have caregiving responsibilities might be challenging. By following these steps, you can work towards building a secure financial future for both yourself and your loved ones.

1. Start early: The sooner you start saving for retirement, the longer time your money has to grow. Even if you can only afford to save a small amount each month, it can add up over time.
2. Create a budget: To save for retirement, you need to know how much money you have coming in and going out each month. Creating a budget can help you identify areas where you can cut back on expenses and save more money for retirement.
3. Determine your retirement goals: How much money will you need in retirement to cover your expenses? Will you have other sources of income, such as Social Security or a pension? Knowing your retirement goals can help determine how much you need to save each month.
4. Choose the right retirement account: There are several retirement savings options available, such as an Individual Retirement Account (IRA), a 401(k), or a 403(b). Each has different tax benefits and contribution limits, so choosing the one that's best for your needs is essential.
5. Automate your savings: Setting up automatic contributions to your retirement account can help ensure you consistently save for retirement. You can set up automatic contributions through your employer or bank, so the money is automatically deducted from your paycheck or checking account monthly.

Types of retirement accounts for family caregivers

There are several types of retirement accounts available, including:

1. Individual Retirement Account (IRA): An IRA is a tax-advantaged savings account to save for retirement. There are two types of IRAs: traditional and Roth. Contributions to a traditional IRA are tax-deductible, and earnings grow tax-free until withdrawal. Although contributions to a Roth IRA are made using post-tax dollars, any earnings on those contributions are tax-free. Withdrawals from a Roth IRA in retirement are tax-free.
2. 401(k): A 401(k) is a retirement plan sponsored by an employer, which enables employees to set aside a fraction of their income before taxes into a retirement account. Employers may also offer a matching contribution of up to a certain percentage of the employee's salary. Contributions and earnings grow tax-free until withdrawal. Many 401(k) plans also have "Roth" options that allow for post-tax contributions.
3. 403(b): A 403(b) is a retirement plan for employees of public schools, specific tax-exempt organizations, and certain ministries. It's similar to a 401(k) but has different rules and restrictions.
4. Simplified Employee Pension (SEP) IRA: A SEP IRA is a retirement plan that caters to self-employed individuals and small business owners, offering tax-deductible contributions and easy setup and administration.
5. Simple IRA: A Simple IRA is another retirement plan for small businesses with under 100 employees. Employees can make tax-deferred contributions, and employers must make either a matching or a non-elective contribution.
6. Defined Benefit Plan: A defined benefit plan is a conventional pension plan that assures employees a predetermined retirement benefit. It is calculated using a formula that factors in their salary history and years of service.
7. Profit-Sharing Plan: A profit-sharing plan is a retirement plan that allows employers to make contributions to employees' retirement accounts based on company profits.

It's important to note that each type of retirement account has its own rules, contribution limits, and tax implications. It's recommended to consult a financial advisor to determine which retirement account is best suited for your individual needs and goals.

Special retirement considerations for caregivers

Balancing caregiving responsibilities with retirement savings goals can be a challenge. Seeking professional financial advice, saving wisely, and creating better saving habits can help caregivers reach their retirement goals.

The Saver's Tax Credit

The Saver's Tax Credit provides tax savings for those who need it most.

Income limits for 2024 (taxes filed in 2025) are:

• Single filers: $38,250
• Head of household: $57,375
• Married filing jointly: $76,500

The credit rate is also tiered, with 50%, 20%, or 10% of the contribution being credited depending on income level.

Retirement Catch-Up plans

The IRS allows catch-up contributions for individuals over the age of 50. Caregivers who have fallen behind on their retirement savings can use these catch-up contributions to help compensate for lost time.

Find ways to make extra money for retirement savings

As a caregiver, finding ways to make extra money for retirement savings can be challenging, but it's important to take steps to ensure a secure financial future. Here are some suggestions:

1. Find part-time or flexible work: Look for part-time or flexible work opportunities that fit your schedule as a caregiver. You can find work-from-home opportunities or flexible part-time jobs that allow you to work on your own terms.
2. Start a side business: Consider starting a side business you can run from home or on your own schedule. It can be as simple as selling items on eBay or Etsy or offering services like pet-sitting or house-sitting.
3. Take on freelance work: If you have a skill or talent, you can offer your services on a freelance basis. Freelancing can include writing, graphic design, web development, or any other specialized skill set.
4. Rent out a spare room or backyard: If you have extra space, consider renting it out short-term through services like Airbnb. You can also rent your backyard for dogs to play through a service like Sniffspot. 
5. Sell unused items: Look around your home and identify things you no longer use or need. You can sell these items through online marketplaces like eBay, Craigslist, or Facebook Marketplace to make extra money.
6. Consider a reverse mortgage: If you own your home, a reverse mortgage may be an option to access the equity in your home and receive regular payments to supplement your retirement income. However, this should be approached cautiously and after consulting with a financial advisor. A reverse mortgage can have long-term consequences for your estate and inheritance.

These are just a few suggestions when looking for ways to make extra money for retirement savings. Even small contributions can add up over time and help secure your retirement. It's essential to evaluate your situation and consult a financial advisor to determine the best course of action for your needs and goals.

A note from Givers

Retirement savings is essential for caregivers. Creating a realistic budget, maximizing resources, and exploring retirement account options are crucial. Work with a financial advisor to determine which retirement plan will help you work toward your retirement savings plan.