As the impact of unpaid family caregiving takes a toll on the ability to save for retirement, newly introduced legislation seeks to alleviate some of that stress.
Reps. Claudia Tenney (R-NY) and Chris Pappas (D-NH) on Dec. 13 introduced the Expanding Access to Retirement Savings for Caregivers Act (H.R. 6772) to allow individuals who took at least one year out of the workforce—for the purpose of caring for a family member—without receiving earned income to make catch-up contributions in years prior to age 50 to their 401(k) plans, IRAs and other eligible retirement accounts.
Rep. Debbie Lesko (R-AZ) was also an original cosponsor of the legislation.
“Our bipartisan bill would allow caregivers to put their families first without having to miss out on valuable retirement contributions,” Rep. Tenney stated. “This would help us move away from a system that disadvantages caregivers and instead offer additional tools for them to contribute to their retirement savings.”
“Individuals who leave the workforce to provide care for a loved one should not be penalized on their retirement and forced to do more with less later in life,” added Rep. Pappas. “This bipartisan legislation will allow caregivers to make catch-up payments to their 401(k)s, IRAs, and other accounts so they don’t lose out on valuable retirement savings as a result of the time they took to help a family member in need.”
Background
Under current law, employees aged 50 and older are eligible to make catch-up contributions to their 401(k) plans, IRAs and other eligible retirement accounts.
Although using catch-up contributions can be an important mechanism for many Americans to expand their retirement savings, it may still not be enough for individuals who take time out of the workforce to care for family members, Rep. Pappas contends. These individuals, he notes, often miss opportunities to save for their retirement for multiple years, and this disparity predominantly impacts women, since women are more likely to take more time to act as family caregivers full-time.
In fact, findings from the 33rd annual Retirement Confidence Survey (RCS) conducted jointly by EBRI and Greenwald Research show that, while unpaid caregivers serve a vital function in taking care of a family member, it can take a toll on retirement preparedness, as they are more likely to have lower levels of assets and more likely to have problems with debt than non-caregivers. Caregivers are also more likely to be of Hispanic descent compared with non-caregivers.
According to the research, a quarter of caregivers have less than $1,000 in savings and investments compared with 15% of non-caregivers. What’s more, 55% of caregiving workers and 37% of caregiving retirees report that they provide financial support to their caregiving recipient.
With these tolls on caregivers, they are also less likely to have saved for retirement and are more likely to have retired earlier than planned for reasons out of their control, which can reduce the lifestyle of caregivers in retirement, the study notes.
The Expanding Access to Retirement Savings for Family Caregivers Act seeks to provide some modest relief to this element of the retirement system. More specifically, the bill would amend current law to allow individuals who took at least one year out of the workforce and received no earned income primarily for the purposes of caring for a family member to make catch-up contributions in years prior to age 50. These former caregivers would be eligible to begin making catch-up contributions at age 50, minus the eligible number of years out of the workforce.
Read the full text of the bill here.
