November 29, 2011
By John Jankowski, Research Analyst, Social Security Administration
Of the many effects that caregiving can have on the caregiver’s financial well-being, one of the most harmful—and often least discussed—is its effect on future retirement income. The typical caregiver spends a significant period of time outside of the workforce, which leads to a shorter work history and lower lifetime average earnings than those with uninterrupted work histories. As a result, caregivers often enter retirement with lower levels of private pension savings and, because Social Security benefits are based on the 35 highest years of indexed earnings (with anything less than 35 counted as ‘zeros’), a lower Social Security benefit as well.
Thankfully, Social Security’s spouse and survivor benefits (or “auxiliary benefits”) protect most caregivers by giving those with lower career earnings than their spouse a retirement benefit based on their spouse’s career earnings, rather than their own. Because of these benefits, many caregivers are able to spend a significant period of time outside the workforce and still receive a generous benefit (equal to 50% of their spouse’s benefit, or 100% if their spouse is deceased) from Social Security.
But what about the increasing number of caregivers—for example, those who have never married or were in marriages that didn’t last long enough to qualify for auxiliary benefits—who aren’t eligible to receive benefits based on the earnings record of a spouse? Unfortunately, the lack of any direct acknowledgement of unpaid caregiving activities in Social Security’s benefit calculation formula means that this group is in danger of reaching retirement with relatively low benefits and, consequently, a heightened risk of poverty in old age.
This lack of direct acknowledgement for unpaid caregiving in the US led me, in a paper published earlier this month, to look at how other countries help caregivers through their public pension systems. As with family policy in general, it should come as no surprise that Western Europe has led the way in protecting caregivers through a variety of measures in place within their pension systems. Among the most widely used of these policies are so-called “caregiver credits” (the focus of my paper), which, in most variations, replace years of zero earnings due to unpaid caregiving with a deemed wage determined by the government. In other words, years of caregiving are essentially awarded a salary when it comes time to determine an individual’s retirement benefit.
As I show in the paper, the specific design of caregiver credits varies significantly across Europe, with differences in the number of years an individual is eligible to receive the credits, how they are calculated, who is eligible to receive them (i.e., a mother, a father, or both), and whether the caregiver has to leave the workforce completely to be eligible. These differences have a significant impact on the number of individuals eligible to receive the credits, and, consequently, on how much they cost (a significant issue when considering their use in the US). Despite the wide variation in these programs across Europe, there is substantial evidence that these credits have significantly improved pension entitlements for caregivers (primarily women) in almost every country where they have been introduced.
As we continue to discuss reforms to the US Social Security system, it is important to focus not only on the financial sustainability of the system but also on ways to improve the adequacy of retirement benefits for the most vulnerable of our population. For this reason, policies that directly acknowledge unpaid caregiving activities should be given serious consideration as we look for ways to improve Social Security for the future.
Author’s note: The conclusions presented in this article are those of the author, and do not necessarily represent the views of the Social Security Administration.
1) Jankowski, John. (2011) “Caregiver Credits in France, Germany, and Sweden: Lessons for the United States,” Social Security Bulletin, 71(4): 61-76.
2) SSA’s Research, Statistics, & Policy Analysis website:
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Day 29: Protecting Caregivers through Social Security by John Jankowski, Research Analyst, Social Security Administration is licensed under a Creative Commons Attribution 3.0 Unported License.