1  

Give Caregivers Credit Toward the Retirement Security that They Have Earned

 

Social Security is the bedrock of economic and retirement security for millions of Americans. In 2011, our Social Security system kept more than 21 million people out of povertyi. Social Security is particularly important to both women and people of color. Instead of cutting our Social Security system, we should strengthen it, and make sure that it works even better for everyone, and in particular for those who rely on it the most. One way to strengthen Social Security is through the creation of a caregiver credit, which would recognize the critical work that unpaid caregivers do when calculating Social Security benefits.

A Caregiver Credit Would Help All Families

Caregiving is an essential element of family life and a vital service for children, the ill, the disabled, and the elderly. Many of us will rely on family members to forego work in order to care for us throughout the course of our lifetimes. Yet taking time out of the workforce to care for a family member and loved one can severely impact family economic security, both during the time a caregiver must reduce time in paid employment, and later in retirement. . The formula used to calculate Social Security benefits is based on a workers’ highest 35 years of earnings. As a result, because of lowered earnings or fewer years in the paid workforce, unpaid caregivers receive fewer Social Security benefits when they retire. The establishment of a caregiver credit would bolster the economic prospects of unpaid caregivers and would provide vital retirement security to vulnerable populations, especially women and low-income families.

A Caregiver Credit is Particularly Important for Women

Women are at greater risk of economic insecurity in retirement than men. This is the result of having more limited employment opportunities, lower wages, interrupted work histories, fewer sources of retirement income, and having a longer life expectancy. All of these factors contribute to women being more heavily reliant on Social Security while receiving lower average annual social security income than men, with women receiving $12,520 compared to $16,398 for men in

  2  

2012ii. The fact that women disproportionately take time out of paid workforce to care for loved ones is a significant factor in reducing women’s ability to have sufficient retirement income.

• In 2009, 65.7 million Americans provided unpaid caregiving services to family membersiii.

• On average, caregivers have spent 4.6 years providing careiv. 57% work at least part-time in addition to providing carev.

• Women make up 66% of unpaid caregivers. This contributes to women averaging 32 years in the workforce, compared to 42 years for menvi. Since Social Security benefits are based on the 35 highest years of earnings, women (and men) who do not have at least 35 years in the workforce will have reduced Social Security income in retirement.

• Older women are less likely to have retirement income, such as a pension fund, and have lower savings due to lower earnings. As a result, they are more reliant on Social Security in retirement.

How a Caregiver Credit Would Work

A caregiver credit would ensure people who provide unpaid care to a loved one will not be penalized in retirement. This would strengthen retirement security and support individuals as they provide important and needed caregiving services. A caregiver credit would:

• Provide an earnings credit in the Social Security benefit calculation while an individual was caring for a child under a certain age, a disabled family member, or a senior in need of care.

• Only those earning less than a set maximum level of income would qualify.

A caregiver credit will increase the retirement income from Social Security to those who have had to reduce their labor force participation and earnings due to caregiving, and would provide the most benefit to lower income workers.

                                                                                                                         iPaul  N.  Van  de  Walter  and  Arloc  Sherman.  October  16,  2012.  Social  Security  Keeps  21  Million  Americans  Out  of  Poverty:  A  State-­‐by-­‐State  Analysis.  Center  on  Budget  and  Policy  Priorities.  http://www.cbpp.org/cms/index.cfm?fa=view&id=3851    ii  Social  Security  Administration.  March  2014.  Social  Security  is  Important  to  Women.  Social  Security  Administration.  http://www.ssa.gov/pressoffice/factsheets/women.htm    iii  National  Alliance  for  Caregiving  and  AARP.  2009.  Caregiving  in  the  U.S.  Bethesda,  MD:  National  Alliance  for  Caregiving,  and  Washington,  DC:  AARP  iv  Ibid  v  Ibid  vi  Ibid