Caregiver Financial Impact Calculator — Methodology

How This Calculator Works

Leaving work to care for someone costs more than the salary you forgo. This calculator models three separate effects and adds them together, because each one compounds differently over the years that follow.

1. Social Security reduction. Your benefit is based on your highest 35 years of earnings. Years out of the workforce enter that average as zeros, which lowers your Average Indexed Monthly Earnings and therefore your Primary Insurance Amount.
2. Retirement savings gap. Contributions you did not make, plus the employer match you did not receive, compounded at your expected return until retirement.
3. Career re-entry penalty. Returning workers often earn less than before, and a lower salary reduces earnings for the rest of your career, not just the gap years. There is no single reliable figure, so the size is your assumption (default 8% per year out).

Inputs and Assumptions

• Current age and salary: The baseline for both the savings gap and the re-entry penalty.
• Caregiving years: Years fully or partly out of the workforce.
• Contribution rate and employer match: What you would have been putting away.
• Expected return: Applied to the missed contributions from the year they would have been made until retirement.

Formula

// 1. Social Security — PIA from AIME, 2026 bend points
tier1 = min(AIME, 1286) × 0.90
tier2 = max(0, min(AIME, 7749) − 1286) × 0.32
tier3 = max(0, AIME − 7749) × 0.15
PIA   = tier1 + tier2 + tier3

// Caregiving years enter the 35-year average as zeros,
// lowering AIME and therefore PIA.

// 2. Retirement savings gap
missedAnnual = salary × (contributionRate + employerMatch)
gap = Σ missedAnnual × (1 + expectedReturn) ^ yearsToRetirement

// 3. Career re-entry penalty (your assumption, default 8%)
reEntrySalary = salary × (1 − penaltyPerYear) ^ yearsOut
lostEarnings  = (salary − reEntrySalary) × yearsWorkedAfterReturn

Data Sources

• Social Security Administration — the 35-year AIME formula and the 2026 bend points ($1,286 and $7,749).
• SSA Publication 05-10070 — how the Primary Insurance Amount is computed.

Limitations

• Historical earnings are not wage-indexed. The SSA indexes your past earnings to national wage growth before averaging. This calculator does not, so the Social Security figures are an approximation. For an official projection use ssa.gov/myaccount.
• Wages not earned are shown separately, not added to the total. They are your salary times the years out (capped at the years left to retirement), in today's dollars with no raises. The lost savings contributions in the retirement gap are paid out of those wages, so adding both would count them twice. The total itself mixes future-dollar savings growth with today's-dollar Social Security and pay figures; read it as an order of magnitude, not a single-year-dollars sum.
• Uses 2026 bend points. These are adjusted annually.
• Does not model Social Security spousal or survivor benefits, which can offset part of the reduction for married caregivers.
• Does not model unpaid-leave protections, state paid-family-leave programmes, or caregiver tax credits.
• The re-entry salary penalty is an assumption you set, not a measured figure; real penalties vary widely by industry, seniority, and length of absence.
• Assumes a constant contribution rate and expected return across all years.

Last Updated

July 2026 — Methodology page published (engine then used the 2024 SSA bend points).

October 2026 — Engine moved to the 2026 SSA bend points ($1,286 and $7,749), from the shared source src/lib/tax/data/social-security.ts.

October 2026 — The re-entry penalty is now described as your assumption. The 7-10% range, the industry ranges and the lifetime-cost figure we used to cite had no source we could trace, so they were removed.