Joel Sartore /Getty Images
As our parents get older and begin to decline in vitality, many of us consider letting them move into our home. After all, it's easier to care for an elderly mom or dad in a nearby room, rather than one who's across town or even in another state.
But you should also be aware of the potential economic impact of such a move, particularly if your parents have limited resources. Experts say that the financial ramifications are often greater than most people anticipate.
Here are some key factors to consider — and to plan for — if you're contemplating such an invitation.
Remodeling or renovation costs
Your home in its current form may be just fine for you, but what about for Mom or Dad? If your home is modest, a lack of space is the first hurdle to overcome.
"Do you have the room to afford them the privacy they're accustomed to and to maintain privacy for you, your spouse and family?" asks Jack J. Hetherington, a certified elder-law attorney in Chalfont, Pa. "If there aren't enough bedrooms or bathrooms and only one kitchen, then those living arrangements can quickly prove inadequate."
The costs of fixing this problem depend on the solution you choose. Some people with homes that are too small buy entire new homes or build additions or in-law suites in the old one. The costs can be frightening: According to Remodeling magazine's 2011-2012 Remodeling Cost vs. Value Report, the national average cost for a midrange master suite addition is $106,196.
At the other end of the spectrum, having a home that's too large can be tricky, too. An aging parent with physical issues — like a bad back, faulty knees or a hip replacement — may not be able to climb the stairs in a two-story residence. Installing an electric stair lift for moving from floor to floor usually runs about $5,000 to $10,000, depending on the manufacturer.
Even if such major renovations aren't required, it's a good idea to plan on upgrading some basic areas, like your bathroom. Many older people require handicapped-accessible toilets, or showers and tubs with handlebars and grab rails.
Cost of hiring medical or professional help
All of us want to be there emotionally, physically and even financially for our parents when they need us most. But not everyone has the wherewithal to provide day-to-day care, such as bathing, feeding or dressing an aging parent who may be frail, forgetful or physically ailing.
Since the average cost of a home health care aide is about $21 an hour, experts at the MetLife Mature Market Institute put the average cost of a parent's in-home care with a home health aide at about $21,840 a year. For boomers on the cusp of retiring, or those already in retirement, spending several thousand dollars a month on a parent's care simply isn't economically feasible.
Perhaps that's why a recent survey by AgingCare.com found that an estimated 34 million Americans are personally providing care for older family members.
Many are paying for part of the care, too. The AgingCare.com survey revealed that 34 percent of caregivers spend $300 or more per month out of their own pocket for caregiving expenses. Typical expenses include anything from groceries and household goods to prescription drugs or medical copayments made on behalf of a parent.
Staggering reductions in income
One final, often-overlooked consequence of bringing a parent to live with you is that the arrangement could diminish your income in dramatic ways. If you're forced to provide care yourself rather than hire professionals, that typically means losing time from work.
AgingCare.com reports that 43 percent of caregivers have had to take time off work due to caregiving responsibilities, and 48 percent say they are earning less money as a result.
For women caregivers age 50 and above, the total amount of lost income due to leaving the labor force early and/or reduced hours of work because of caregiving responsibilities is $142,693, according to MetLife.
Plus, total Social Security benefits are $131,351 lower due to the lost income. And a very conservative estimated impact on pensions is approximately $50,000.
So MetLife officials conclude that an average individual female caregiver ultimately takes an astounding financial hit of $324,044 in terms of lost wages and lower retirement income. For male caregivers age 50 and older, the total figure is $283,716.
Government aid lowered
Then there's the potential impact on benefits an aging parent may be receiving, such as Supplemental Security Income. "Unless the parent is paying rent, if that parent is getting SSI benefits they're going to be reduced by one-third," says Hetherington. That's because SSI treats free room and board as "in-kind support and maintenance."
For this reason, Hetherington says it's best for many families to have a rental agreement under which parents pay fair market rent. Plus, if the adult children are going to be caregivers, it's always best to put everything in writing.
By not charging rent, "people think it's a good, humanitarian and loving thing," Hetherington says. "But my job is to tell them the consequences of their options. And frankly, it will be to your detriment financially to have no written agreement," Hetherington says.
Why? "The law presumes that immediate family members doing things for each other and taking care of one another without an agreement did it out of love and affection," he says. That could impact a parent's eligibility for government benefits, like Medicaid.
Besides, other thorny issues could arise. "Suppose the children have a failed marriage. What's the position of the parents after that? And what happens if the adult children divorce, but the parent has invested money into the home?"
Tax breaks available
Fortunately, if you take in a parent under your roof, it doesn't always mean money will constantly flow out of your pocket. You may even get some financial benefits.
For example, you might be eligible for cash payments or tax deductions for expenses like dentures, hearing aids, walkers and the cost of transporting the parent to the doctor. Also, if you pay more than half of an elderly parent's expenses for food, housing and medical supplies, you may qualify for a deduction worth thousands of dollars, by claiming the parent as a dependent, according to AgingCare.com.
There are also some circumstances where you may be eligible for direct cash payments or federal income tax breaks.
The key is to keep good financial records, and have a caregiver agreement that demonstrates that your parent is paying for your services, and not merely receiving care as a gift. Don't be sentimental — put it in writing!
Next ArticleRead This