What is the Caregiver Credit?

The “Caregiver Credit” is one way for time spent caring for a family member to be acknowledged within our Social Security system.

A worker’s Social Security benefits are based on her or his lifetime earnings. Actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. The Social Security Administration calculates the average indexed monthly earnings during the 35 years in which the worker earned the most. If she or he has fewer than 35 years of earnings, then years of zero earnings are included among the 35 averaged years, which brings down her or his lifetime average. A lower average means a lower benefit level.

For example, a 65-year-old who retired in 2010 with a lifetime of “medium” earnings (about $41,068 in 2009) would receive $16,800 a year. A retiree with “high” earnings (about $65,709) would receive $22,212. That’s a difference of about $5,400 per year between the “medium” and “high” categories—a potentially life-changing difference for a retired worker who is at the border between two benefit levels after taking off a few years of work to care for a sick relative.

Workers who take time out of the workforce or reduce their hours to provide care for someone thus face decreased benefits upon retirement.  A Social Security credit would be issued to workers for periods of time (up to 5 years) when she or he has no or reduced work hours for caregiving reasons.

The caregiver credit option is a responsible preventive measure—it would provide improved retirement security for millions of Americans–especially women, whom the caregiver role often falls upon–and recognize the valuable caregiving services that they provide for our country’s children and the growing elderly population.

For more information check out Caring for Those Who Care for Us.