5 ways unpaid caregivers can avoid a decades-long financial setback
Listen and subscribe to Decoding Retirement on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
America is facing a growing caregiving crisis. With healthcare worker shortages and rising dementia cases, more families are being forced to fill the gaps, often at enormous emotional and financial cost.
As a result, younger Americans who step away from work to care for aging parents risk derailing their own retirement. Research led by John McHugh, an associate professor at Virginia Commonwealth University, shows that even short caregiving breaks can leave workers 40% to 90% short of the savings they’ll need by age 65, forcing many to work seven to 21 years longer to catch up.
McHugh, the lead researcher of The State of Family Caregiving, said the setbacks come from more than just lost wages. Caregivers lose employer retirement matches, miss out on compounding and career advancement, and, in some cases, take on debt — a combination that can turn a temporary pause into a decades-long financial hit.
“If you leave the workforce, you’re foregoing any sort of 401(k) match,” McHugh said in a recent episode of Decoding Retirement. “And so if you’re a young worker who’s then foregoing that match and your own contribution and perhaps taking on some debt to care for a loved one, the cycle just perpetuates.”
McHugh also noted that unpaid family caregivers are propping up a healthcare system that can no longer meet demand — and they are paying a steep financial price for doing so.
His study estimated that unpaid caregivers now provide the equivalent of $873.6 billion in annual labor, acting as substitutes for nurse aides, transportation providers, and even case managers. The average caregiver delivers $19,594 worth of labor each year, and in some states, that figure exceeds $27,000.
So, how might someone avoid ending up with a decades-long financial setback? McHugh outlined five ways unpaid caregivers can prepare to support a loved one.
Susan Bushby, right, a patient at Ammonoosuc Community Health Services, and her son, Steven, sit in their home, Tuesday, Oct. 21, 2025, in Lisbon, N.H. (AP Photo/Robert F. Bukaty) ·ASSOCIATED PRESS
McHugh recommended budgeting for caregiving the same way you budget for retirement or emergencies. Even small contributions can build a cushion that helps protect future savings should caregiving responsibilities arise.
“As you think about retirement savings and you think about budgeting into the future, you may include caregiving as one of the line items that could potentially come up,” he said.
This type of account can be a family fund or an individual one. The important thing is to start planning early to maximize your savings, McHugh said.
“If you never have to use it, then you’ve saved some additional money,” McHugh said. “That’s also a good thing.”
McHugh recommended having conversations about care preferences before a crisis hits. Doing so helps families understand their future needs, costs, and expectations and prevents last-minute decisions that lead to financial strain.
He suggested talking openly about whether a loved one wants to age in place, move to assisted living, or consider a nursing home.
The care recipient’s diagnosis also shapes the discussion. “Some of that is contingent on … whether or not they are diagnosed with dementia, which can then become a 24/7 caregiving experience and is very, very intense,” McHugh said.
The supply, quality, and affordability of care can vary dramatically by state, McHugh said. Understanding your region’s caregiving support and workforce can help determine whether aging in place is realistic or whether a move may be beneficial.
According to McHugh’s research, nearly half of US states are on the brink of a caregiving emergency.
US states ranked by the urgency of local caregiving needs. (Credit: Columbia University Mailman School of Public Health)
He noted that states ranked as “critical” or “well-supported” differ for many reasons, including housing affordability, the supply and quality of home health aides, as well as the overall strength of long-term care supports and services.
McHugh encouraged people to think ahead. “Consider what the supply looks like as you age,” he said. “Is this a place where you can age gracefully, or is it a place where you are going to face significant hurdles if you have some sort of crisis?”
He added that state conditions evolve over time.
“State to state, policies change, quality of healthcare changes,” McHugh said. “You may be in a critical state now, but there may be some policy changes or supply changes that affect the long-term situation.”
Ask your HR department about flexible leave, caregiver support benefits, or expanded sick time that can be used for caregiving, McHugh said.
He added that employers are increasingly open to these discussions, and some workplaces are already offering more flexibility.
“Perhaps sick time could include taking some time off for a caregiver,” he offered as one solution. Ultimately, support must come from multiple levels, he said.
“There’s the federal level, there’s the state level, and there’s the employer level,” he added. “All three … really have to work together to be supporting caregivers.”
McHugh said senior centers, regional agencies on aging, and national organizations all offer programs, guidance, and respite support.
“Alzheimer’s Association has produced a lot of great reports,” McHugh said, also naming the National Alliance for Caregiving and the Caregiver Action Network as “great resources for individuals to tap into.”
Understanding what exists close to home is also essential. Senior centers and area agencies on aging can be especially valuable, offering local dementia programs and caregiver training, McHugh said. And communities often offer informal resources as well, such as support groups and church groups.
The bottom line, according to McHugh, is that caregivers should not try to shoulder everything alone.
“This can be a very isolating experience,” he said. “It doesn’t have to be … [to make sure] you’re not only taking care of your loved one but taking care of yourself too.”
Got questions about retirement? Email Robert Powell at yfpodcast@yahooinc.com, and we’ll do our best to answer it in a future episode of Decoding Retirement.
Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.
