Caring for an aging parent can put your own retirement under pressure. New AARP research puts family caregivers’ out-of-pocket spending at an average of $11,508 a year, a recurring expense that can force difficult choices about savings, work and investments.
That amounts to roughly $959 a month before accounting for unpaid caregiving time or lost earnings. For someone approaching retirement, the financial strain can arrive just as there are fewer working years left to rebuild savings.
For someone already retired, supporting a parent or spouse can mean drawing more from a portfolio that must also cover their own future care.
Caregiving Is Taking a Larger Share of Household Budgets
AARP’s study, released October 28, found that average annual out-of-pocket caregiving expenses increased from $7,242 in 2021 to $11,508 in 2026. That is a rise of $4,266, or approximately 59%.
The findings cover people caring for adult relatives or friends, including spouses and adult children. The headline figure is broader than the cost of caring specifically for aging parents, and it measures caregivers’ spending rather than the full cost of professional long-term care.
The comparison also requires context. AARP notes that the earlier survey occurred during the pandemic, when access to services and spending patterns differed. The latest survey added expense questions and expanded some descriptions, potentially affecting what participants reported.
Those differences mean the increase should not be read as a precise measure of caregiving inflation. Even with that qualification, the current spending level presents a substantial budgeting challenge.
Much of the money goes toward ordinary necessities. Housing and household expenses account for 42% of spending, while medical expenses represent another 29%. Together, those categories make up more than seven out of every ten caregiving dollars.
For families, that helps explain how the commitment can grow quietly. Paying for groceries, covering a utility bill and providing transportation may feel manageable individually. Together, repeated month after month, they can become a major household expense.
The Retirement Damage Can Extend Beyond the Bills
The direct expense is only one part of the financial exposure. Caregiving can also reduce the income available to pay those bills and the savings intended to support retirement later.
AARP found that 65% of working caregivers experienced at least one work-related disruption, including changes to their hours, time away from work or additional employment. Caregivers who retired earlier than planned because of caregiving reported average annual out-of-pocket expenses of $18,940. aarp.org
Those findings identify a difficult combination: higher spending alongside a possible reduction in earnings.
Consider a hypothetical worker who spends $11,500 annually supporting a parent and reduces retirement contributions by $6,000 to make the budget work. Over five years, the family would spend $57,500 on care and contribute $30,000 less to retirement accounts.
The $30,000 is a way of financing the household’s spending, so it should not automatically be added to the care bills as a separate cash cost. Its significance is what happens afterward: that money is absent from the retirement portfolio, along with whatever investment gains or losses it would have experienced.
A retirement projection that ignores the caregiving commitment can therefore overstate both future contributions and the assets available at retirement.
Three Ways Caregiving Can Change an Investment Plan
Larger Withdrawals Can Make Market Declines Harder to Manage
For retirees, a new recurring expense raises the amount their savings must produce.
Suppose a household has a $500,000 portfolio and planned to withdraw $20,000 annually. Adding $11,508 in caregiving expenses would bring the total to $31,508 if investments funded the entire additional amount.
That changes the starting withdrawal rate from 4% to approximately 6.3%. This is an illustration, not a recommended withdrawal rate, but it shows how a family obligation can materially alter an existing plan.
The pressure becomes greater if investments fall while those expenses continue. Selling more assets during a downturn leaves fewer shares available to participate in a recovery. A family’s ability to tolerate market volatility depends partly on how much money it needs to withdraw.
Retirement Withdrawals Can Carry a Tax Cost
A caregiving bill and the amount needed from a retirement account may be different figures.
Distributions from retirement accounts funded with pretax money generally count as taxable income. Consequently, a household may need to withdraw more than the care expense itself to cover both the bill and the associated tax. Withdrawals before age 59½ may also face an additional 10% tax unless an exception applies.
For example, if an additional withdrawal were fully taxable at an assumed 22% federal rate, approximately $14,754 would be needed to leave $11,508 after federal income tax. That simplified calculation excludes state taxes and assumes the same rate applies to the entire withdrawal.
The practical question is which account will fund the expense and what that choice does to the household’s overall tax bill.
Less Time to Rebuild Can Change the Retirement Date
Someone decades from retirement may have more time to adjust contributions or rebuild savings after a period of caregiving. A worker planning to retire within a few years has less room to absorb the same disruption.
That makes the timing of care expenses especially important. A temporary commitment might be manageable within an existing plan. An open-ended obligation, combined with fewer paid working hours, may require revisiting the retirement date or planned spending.
The relevant calculation includes how long the support might continue and what happens if the caregiver’s own health changes.
Medicare Leaves a Gap Families Need to Understand
One of the most consequential planning mistakes is assuming Medicare will pay for ongoing help with everyday activities.
Medicare generally does not cover long-term custodial care, such as assistance with bathing, dressing and other daily needs when that is the only care required. It can cover qualifying skilled care under specific conditions, but that coverage should not be assumed to finance an extended period of personal assistance.
Medicaid may help eligible individuals, subject to state requirements. Private long-term care insurance may also provide benefits, depending on the policy.
For an adult child helping a parent, the useful starting point is a coverage review. Identify what the parent’s existing insurance pays, what resources are available and which expenses could fall to relatives.
Doing that before a crisis gives the family more opportunity to compare arrangements and divide responsibilities.
Paid Help Can Sometimes Protect Retirement Savings
Hiring assistance introduces an obvious expense. Doing everything personally can carry a substantial financial cost as well.
If a limited amount of paid support allows a caregiver to retain a job, preserve employer benefits or avoid cutting working hours, it may protect more household income than it consumes. Whether that works depends on local care prices, the person’s earnings and the level of assistance required.
The comparison should include both sides of the decision. A home-care bill is visible on a statement. Foregone pay and missed retirement contributions can be easier to overlook.
This does not mean every family can afford professional help. It means a care arrangement should be assessed against its effect on the entire household, including the caregiver’s ability to remain financially secure.
The Developments That Could Change the Calculation
Families should watch changes in care needs as closely as changes in prices. AARP found average annual out-of-pocket spending of $15,846 among caregivers supporting someone with dementia, compared with $10,221 among those caring for someone without it. Greater care needs can change both the budget and the time commitment. aarp.org
Local service availability also matters. A plan that depends on affordable part-time assistance needs to be revisited if that assistance becomes unavailable or more expensive.
Policy relief is another area to follow. AARP is advocating measures including caregiver tax relief and broader access to support. Families should distinguish proposed assistance from benefits they can currently use, and build their budgets around resources already available. aarp.org
For investors, the most useful warning sign may be personal: the moment recurring caregiving expenses begin replacing planned savings or requiring withdrawals beyond the retirement budget. That is a reason to update the plan before the next market decline forces a hurried decision.
A Retirement Plan Needs Room for Family Care
Caring for a parent or spouse is a deeply personal commitment with measurable financial consequences. The annual bills matter, and so do the earnings, savings and flexibility a caregiver may give up.
AARP’s $11,508 average makes that exposure tangible. Families approaching retirement should account for the possibility that they will be supporting someone else while preparing to fund their own later years.
The strongest plan makes room for both people’s needs: the loved one receiving care and the person providing it.
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