The Pension Costs of Caregiving

Background and Purpose:  Many research studies have documented the balancing of work and family life among adults who have caregiving responsibilities.  This balance is more tenuous when the care recipient has significant disabilities or special needs.  While many parents reduce work hours while their children are young, the workforce ties of those whose children have disabilities resulting in functional limitations into adulthood remain weak for a longer period of time.  Workers whose older relatives require help as they age may experience similar changes in work hours as caregiving needs increase.  For both groups of caregivers there may be negative impacts on income saved for retirement. 

This paper examines the pension costs of caregiving, specifically whether women who are or have been caregivers are more or less likely to hold a pension in their own name, whether there is a significant difference in the value of private pension holdings, given age, and whether these differences persist when joint pension values are compared among women who are married and are, or are not, caregivers. 

Methods:  Data for women aged 50-64 are drawn from the 2008 Survey of Income and Program Participation (SIPP, n=7,529).  Several caregiving questions are asked, for those providing care for a minor child, elder, and/or non-elderly person with a disability.  Pensions can be defined benefit or defined contribution with only private pension holdings examined.  Data are analyzed using Heckman selection models.

Results:  Among women who have at least 6 continuous months of paid work as an adult, 35.8% hold a private pension, with an average value of $39,455.  Average value of household level private pension savings for those who are married is $110,960.  Those caring for elderly or non-elderly, disabled relatives are less than half as likely to have pension savings (16.6% & 17.3% respectively) as those caring for children (37.1%).  In addition, pension savings for those caring for non-elderly, disabled relatives are significantly lower than average at each age group and controlling for socio-demographic characteristics:  -$13,409 for those 50-54, -$11,688 for those 55-59, and -$5,706 for those 60-64.  Among this oldest group, pension savings are also significantly lower if caring for an elderly relative (-$8,803).  Household pension savings for those who are married are significantly lower only for those caring for elders (-$33,195).

Conclusions and Implications:  Although private pension savings are lower for women who are caregivers for non-elderly, disabled relatives, these deficits are made up by private pensions savings held by their husbands.  For those women who are not married, caregiving is associated with significantly lower household pension savings.  Caregiving could be rewarded through the Social Security system, as it is in several European countries, reducing the relatively high risk of poverty among retired, nonmarried women.