This supplement refers to a proposed Social Security Caregiver Credit which would be offered to parents who provided primary child care to dependent children under the age of 6. Per the Social Security Administration (SSA), which modeled such a credit, “The earnings credited for a childcare year equal one half of the SSA average wage index (about $36,128 in 2025).” This may also be considered a Social Security Child Care Credit or Parental Social Security Credit.
Notably, the design choice to keep such a credit limited to parents caring for their young children excludes those individuals who temporarily exit the labor force to care for an aged relative or a relative with a disability. The decision to offer a credit to individuals providing care for these groups is viable and worthy of consideration as an extension, though it would substantially change the cost calculation.
Cost
As the SSA models, a parent-focused Caregiver Credit of the proposed design would have a modest cost relative to the entirety of the Social Security Trust Funds. The annual cost would start small, and even by 2050 only reach 0.23% of taxable payroll. In real terms, this credit would increase Social Security payouts by roughly $1 billion per year in the first few years, $5 billion per year by 2030, and around $24 billion per year in 2050. By comparison, total current beneficiary payout is approximately $1.5 trillion annually. Notably, there would be some natural cost offsets because a portion of individuals benefitting from the Caregiver Credit will reduce their reliance on Medicaid, SNAP, and/or SSI. At present, no study has attempted to fully quantify the interaction effects.
The credit is self-targeting by design. It provides the largest benefit increases to workers with lower lifetime earnings and longer caregiving spells, and provides little or no benefit to higher earners with long careers, because their zero-earning caregiving years either don’t enter the benefit calculation or represent a smaller share of their earnings record. Per the AARP Public Policy Institute and Urban Institute, 84% of the benefits would flow to individuals in the bottom two quintiles of lifetime earnings.
Benefits of a Caregiver Credit
In addition to generally improving retirement security for those who choose to provide primary child care to their own young children, SSA estimates that a credit as designed above would reduce the poverty rate among seniors by 15% (or roughly 600,000 individuals a year) by 2050, with the benefits disproportionately falling to women.
Capita has created a calculator that allows modeling of what a credit would mean in real terms depending on an individual’s income, years of caregiving, and retirement age.