As most of us prepare to gather with family, sharing meals and good times, we as a nation should look at how we value families and support the efforts made within families to provide for future generations. With limited financial assets, low-income communities have long relied on social and family resources to provide stability for children. When times get tough, extended family – typically grandparents – often step in to play an outsized role in caring for their grandchildren. Approximately 2.7 million grandparents in the United States are heads of households with grandchildren and more than one in five of them live below the poverty line.
This phenomenon is more common among households of color. According to a report published by the U.S. Census Bureau, Hispanics, African Americans and American Indians are two to four times more likely than whites to have grandparents as primary caregivers for grandchildren. Yet even as grandparent caregivers are doing all they can to provide a better future for their grandchildren, our nation offers little to help them succeed. Deep racial wealth inequality, reinforced by regressive tax policies, makes their challenging situations nearly impossible.
Data show that the racial wealth divide grows sharply as people age. White families in their 30s have $130,000 to $138,000 more wealth than African American and Hispanic families, according to a report by the Urban Institute. But that number explodes as heads of families near retirement age. Whites in their 60’s have approximately $900,000 more in average wealth than African Americans and Hispanics of the same age.
While many grandparent caregivers welcome the role of raising their grandchildren, there is no denying the economic burden. In most cases, these arrangements are unexpected, resulting from factors such as the death of a parent, illness, job loss, military deployment, substance abuse, incarceration and mental illness. Average family wealth for African Americans in their 60s is just $161,000 – barely enough to cover their own retirements let alone the cost of raising grandchildren.
A new report by the Corporation for Enterprise Development (CFED) and Generations United, which includes interviews with 20 grandparent caregivers in Trenton, N.J. and Chicago, shows the heavy toll these arrangements can take on financial well-being. As one Chicago grandmother put it: “By the time I finish paying the bills and I also tithe, I pray that nothing comes up because I have nothing to give. I’m just making it. Or, as they say, I’m robbing Peter to pay Paul.”
In many cases these grandparents are the only alternative to placing children in non-relative care where, research shows, they are less likely to thrive. But much more needs to be done to help them provide for themselves and their grandchildren on small incomes and minimal retirement savings.
For starters, local government agencies and non-profits need to ensure grandparent caregivers receive the full public benefits for which they are entitled. The CFED/Generations United report notes that just 12 percent of these “grandfamilies” are getting Temporary Assistance for Needed Families – even though nearly all are eligible. Additionally, many grandparents step in to keep their grandchildren out of the foster care system and consequently should be provided the same support as foster families, including much-needed health care and social services.
At a broader level, we need to take a hard look at our nation’s upside-down tax code, which invests little in these low-wealth families while providing the bulk of benefits to the wealthiest households through tax subsidies that primarily blossom during the retirement years. In 2013, an average taxpayer with income less than about $60,000 (in the bottom 60 percent) received $200 or less from federal tax spending on retirement plans such as IRAs, Defined Contribution and Defined Benefit plans. By comparison, the average taxpayer in the top 1 percent, who had income of $1.6 million, received more than $13,000 from these programs. Turning these upside down tax programs right-side up could provide caregiving grandparents with the extra financial cushion they need to support themselves and their families.
Hopefully this time of remembrance and thankfulness will inspire us as a nation to invest in the families and communities that do so much to ensure support for those who have extremely limited financial resources. Our national dialogue must pivot from solely talking about family values and through our investments value families. Low-income grandparent caregivers provide the stability and love their grandchildren desperately need. Our nation needs to do more to ensure that they – and their grandchildren – thrive.
Asante-Muhammad is the director of the Racial Wealth Divide Project and Singh is the associate director, both at the Corporation for Enterprise Development,