How Caregiving Is Affecting Retirement Planning, Career Advancement

Adults who are raising children while caring for their aging parents are part of what’s known as the ‘Sandwich Generation.’ Rising consumer prices combined with a competitive housing market are making it difficult for many families to get by.

Adding the financial burden of caring for aging parents into an already tight budget can significantly derail working parents, and studies show that the emotional toll may affect women more than men.

Related: Dave Ramsey explains how to thrive with a fulfilling retirement

We spoke with Vanessa Okwuraiwe, Principal at Edward Jones, to unpack findings from their recent study, “Caregiving Responsibilities Leave Half of American Women Lacking Confidence in their Ability to Save for the Future.”

The data highlights that many women have to step back in their careers to care for a relative, which can impede the ability to save, make strategic investment decisions, and plan for retirement. While there isn’t an easy fix, the burden may ease over time as access to resources increases with the number of women in the Financial Services industry.

Women are more likely to suffer career setbacks and lower retirement savings when caring for family members

Men are also affected by caregiving for aging family members, but women often feel the emotional toll.

A surprising finding from the study highlights a disparity in financial planning: women are responsible for 85% of household spending decisions. They are considered the CFOs of their families, yet only 42% have sole responsibility for investment decisions.

Okwuraiwe noted that confidence and lack of resources are the likely cause.

“Insights from the report and research tell us that only about 50% of women feel confident in their financial futures,” she explained. “If only 50% of women feel financially confident in their futures, then, of course, there will be a correlation where just over 40% of women have sole responsibility for their investment decisions.”

More on personal finance:

• How your mortgage is key to early retirement
• Social Security benefits report confirms major changes are coming
• The average American faces one major 401(k) retirement dilemma

“Women often take care of the budgeting, but the more complex decisions are left to their male counterparts. We still have an opportunity within financial services to have more women who are financial advisors," Okwuraiwe said. "The more women we see in this profession will increase the number of women who feel confident about their financial futures and can take more responsibility in investment decision-making.”

Edward Jones partners with Everfi to increase access to financial education resources, hoping to reach one million people by 2025. Increasing access to educational resources is another way women can take a more provocative role in their financial plans.

“As we continue to invest in financial education, women will be the beneficiaries,” she continued. “We're going to see women feel confident enough to take on more financial planning and investing responsibility.”

64% of women in the sandwich generation have said that caregiving has negatively impacted their ability to save for financial goals, and more than half (57%) of women have needed to step back from work responsibilities in order to care for a relative. This hindrance to career progression and loss of potential earned income can add up significantly over time, putting women caregivers at higher risk of becoming financially insecure.

“Women are more likely to step away from their careers to care for family members, whether children or elderly relatives,” Okwuraiwe said. “When they step away from their careers, they're likely to earn less, and a cycle begins: If they’re earning less, then they're not going to save as much in their 401(k)s, and they're not going to invest much.”

Shutterstock

Ways to ease the burden of caregiving

Okwuraiwe notes that there is not an overnight solution to helping caretakers in the sandwich generation, but including access to financial resources and having financial advisors who understand the unique challenges women face today is a good starting point.

“We're finding that there's always an implication when you step away from your career, even though women might be earning more than they were in the past,” she said. “There's a way to shift what's already happening by providing the advice.”

Advisors who work with women to help them balance their competing financial, professional, and personal obligations will be key to enacting change.

Related: The average American faces one major 401(k) retirement dilemma

“Women want a financial advisor who understands them and can ask the right questions to know what matters most,” she added. “That's a call out to our industry to ensure we're doing what we can to provide women with the resources they need to make the necessary changes in building a successful financial plan for their future. When we have more confidence built into this generation of women, that will positively impact families and society for generations to come.”

“Once financial advisors can provide women with this more holistic understanding of their opportunities, where you're talking about not just their finances, but health, purpose, and family comprehensively, then you're able to help you help women get better outcomes.”

Okwuraiwe also believes the federal government should take action to provide a better financial safety net, especially as workers approach retirement or need to take time off from work.

“Public policy initiatives must be developed to mitigate the negative consequences of taking a step back from your career for our caregivers,” she said. “When it comes to saving for your retirement or investing in your financial future, I think there's more we can do to ensure that society and government can better support more families.

Related: Veteran fund manager sees world of pain coming for stocks