Filed under: Family Money, Personal Finance, Elder Care, Home Health Care
Many of the people who do the caregiving are adult children, often in the 50s or 60s -- and in most cases they aren't prepared for the toll it will take on their lives or their finances.
Nearly half of family caregivers spend more than $5,000 a year out of their own pockets on caregiving, according to a report from Caring.com, a website that helps people providing care to aging parents and others. Nearly one-third of those caregivers spend more than $10,000 of their own money on it a year.
"Many people need to pay for their parents' care, and they aren't prepared for it," said Andy Cohen, the founder and CEO of Caring.com. He says that most caregivers aren't financially prepared for that "startlingly expensive" obligation, which, over a couple of years, is equivalent to paying another year or so of college tuition.
3 Main Approaches
There are three main ways to provide care: giving parents the assistance that will let them keep living independently in their own homes; helping them move to assisted living; and bringing your parents in to live in your home. About half are choosing that final approach. "It's re-creating the multigenerational family," according to Cohen, "returning to what America was like 50 years ago."
But bringing elderly parents into your house may require installing ramps, grab bars and other devices to help them safely maneuver around. And the new living situation inevitably requires some significant changes to everyone's lifestyle -- in many cases, not long after people have adjusted to being empty-nesters, their "nest" is suddenly full again. This can be stressful, but as Cohen notes, it also lets you reconnect with and give back to your parents.
Whether your parents move in with you or stay in their own home, you may need to hire part-time help to assist in cooking, cleaning and other parts of the daily routine that you can't do because of your obligations at work and elsewhere.
Moving your parents into assisted living or nursing home is usually the most expensive option, but in some circumstances, it's the best one. Such facilities offer round-the-clock service, and that's something many of us lack the capacity to provide. About 20 percent of caregivers choose that route.
For many caregivers, a more subtle expense derives from the need to change work schedules to accommodate the care. Adult children may cut back on their hours, take family leaves, or shift to less demanding roles -- all of which can put a kink in your career arc just when you're in your prime earnings years, and in turn set back your retirement plans.
What Are Their Assets?
The other big takeaway from the Caring.com report is that there are many ways you prepare yourself for the emotional and financial role of caregiver. The first order of business is to have some frank discussions with your parents about their finances and how they want to spend the rest of their lives. This can be difficult for everyone involved. "Having those hard conversations is the first step," according to Cohen, "and the time to do it is when they're still healthy."
From a financial standpoint, you need to really understand what assets your parents have, so that you can plan for their needs. "Parents often have not saved as much as their kids believe they have," said Cohen.
He recommends that you thoroughly review their assets, including benefits that may be due from previous employers or from government agencies such as the Veterans Administration, and that you beat the bushes in search of hidden assets you may not know about. "We encourage people to phrase it that you want them to be able to make the best decisions for themselves. [That you want to] give them more control, not less. But it's a hard conversation."
Funding Choices
Once it comes time to spend money, Cohen says it's usually best the spend down your parents' assets first before dipping into your own savings. That's advisable for estate planning, in that it could limit inheritance or estate taxes. It could also become important in helping your parents become eligible for more government aid.
Other options include reverse mortgages for parents who remain in their own homes, or the sale of life insurance policies. You'll only get 70 to 80 cents on the dollar to sell those policies, but as Cohen notes, "you can't take it with you, and it may be better than going into debt."
