New York Times bestselling author and AARP financial ambassador Jean Chatzky knows a thing or two (or three!) about money. She joined AARP family caregiving expert Amy Goyer on Facebook for a live chat with AARP's Family Caregivers Discussion Group. (You must join the group to read or post questions.) Here is an edited transcript from the chat.
Can you take a parent, that is housebound and lives with me, as a dependent if they also get Social Security?
— from Tami VanGorder
Jean Chatzky: Tami, let me just tell you (and everyone) that I'm not an accountant. So some of these heavy tax questions will be best directed to a CPA or someone with that experience. But in this case, I do have an answer. And it's sometimes. In order to claim someone as a dependent, a number of things have to be true.
- Relationship: Neither you nor anyone else is claiming him or her as a qualifying child dependent.
- Income: They earned a gross income of less than $4,150, for tax year 2019, which you'll report on your 2020 tax returns. For tax year 2020, the income limit to qualify is $4,300. There are some exceptions for dependents who have a disability.
- Support: You must have provided more than half of their support during the year, unless you have a multiple-support agreement for the dependent with another person, or the dependent is a child of divorced or separated parents, or is a victim of kidnapping.
- Filing status: If he or she is married and files jointly, you can't claim him or her as a dependent.
- Legality: Your relationship to the dependent doesn't violate local law.
Amy Goyer: And I want to make sure people are aware of the fantastic AARP Tax Aide program — free help with taxes!
Can I claim my mom, 83, and son, 33 with TBI and home, in my taxes as dependents?
— from Ella Sullivan
Jean Chatzky: Ella, see the answer above. It's basically the same. Thanks!
When planning this senior care journey out, what is the best advice you can give to someone that wasn't thinking they would end up looking after a loved one, who had nothing in place for this time in their life?
— from Allen Johnson
Jean Chatzky: Allen, the best advice I can give you is to let other people help you. There are many resources available to you from AARP's caregiving community, but also — I'm guessing — from your own community. A good place to start is with your local area agency on aging or state area agency on aging. And then you have to make time to take care of yourself. Think about the oxygen mask instructions they give you on the airline: If you are unable to breathe yourself, you won't be of any great use to your loved one. We are all rooting for you.
Amy Goyer: To find your local area agency on aging, go to the Eldercare Locator at www.eldercare.acl.gov.
Are long-term care policies worth the cost? There are so many loopholes/exclusions now. What is the best way to prepare for the care we will need as we age?
— from Nicole T-Rock
Jean Chatzky: Long-term policies may be worth the cost — but the devil is in the details of both the policies themselves and your own financial situation. I have a few thoughts. First, in general, long-term care insurance makes sense for a specific group of people with liquid assets of between about a half million and several million. That's because if you have less than about a half million in liquid assets and you need care you will very quickly spend those assets down and qualify for Medicaid. If you have more money than several million you should be able to invest your money and use the proceeds to pay for your own care. In between, buying insurance makes sense — as long as you have enough money to pay the premiums long term. Second, you don't have to insure for what you think may be 100 percent of your need. You can decide that you have a certain amount of money to pay for your own care, but you're going to buy insurance to cover the rest. And third, and finally, there are a lot of hybrid products on the market these days and they may make sense — particularly for people who don't like the notion of paying for insurance for years and never using it (although, that's the definition of insurance). There are, for example, permanent life insurance policies where the benefits can be used to pay for long-term care — but if you don't use them for that purpose, the insurance will pay your heirs upon your death.
Amy Goyer: Jean Chatzky also wrote this great and very helpful article on the AARP site!
Karen Horrigan: Jean Chatzky, this is really great info, thanks.
What aren't we asking financially that we should be?
— from Yolanda Kellum Greer
Jean Chatzky: Yolanda, I assume you mean what are we not asking our parents financially that we should be? If that's the case, the answer is — well — a lot. Many caregivers don't talk to the people they'll be taking care of about how they (the people needing care) are situated financially until it's too late. It's important to try to ascertain how your parents (or other loved ones) are situated financially — how much do they have in assets, what form (stocks, a house, etc.) are those assets in, do they have long-term care or other insurance that can be drawn upon — as well as what your loved one wants in terms of their preferences for care. If you can draw out this information before you're in a crisis, all the better. If, however, I've misinterpreted your question and it's a general finances question, I'd say we don't ask for enough details. The language of finance (and specifically of financial costs) can be so cumbersome many of us just nod our heads and agree to what people put on the table. The most important lesson to remember is to never buy or agree to anything financial that you don't completely understand — and there is no shame in asking the same question multiple times. Trust me. In my life as a financial reporter I can't tell you the number of times I've said to a source, “I'm sorry, but I don't get it. Could you try to explain it again another way?"
Heidi Sternheim: Thank you, Jean, this is super-helpful advice.
Yolanda Kellum Greer: Jean Chatzky, thank you for this detailed response. Also, curious about the best resources/programs for caregiver financial assistance or credit.
Amy Goyer: Here are some tips for those difficult family conversations — money is a tough topic to discuss for many families!
My question is far more simple than lawyers, beneficiaries ... it is just surviving financially ... so many costs not covered by insurance or anything and have to be bought or paid for.... These years working and managing the care and home front have set me back forever.... I'll never be able to retire myself ... just reality.
— from Judy Comer-Schultz
Jean Chatzky: Judy, I hear this a lot and I empathize. Many people don't realize the huge cost that comes with being a caregiver. MetLife put the cost in lost wages and Social Security credits and pension contributions at about $340K. And that doesn't count the average $7,000 a year that caregivers come out of pocket for day-to-day things. I'd like to encourage you to — if you can — sit down with a financial planner and see if you can come up with some sort of a road map that gives you hope for the financial future, a checklist of sorts of things you can achieve that make you see that you're making progress. I also want to say that working even a few additional years more than you originally planned has been shown to make a surprisingly large difference in your retirement stash at the end.
Tina Rodriguez: Can claiming my mother as a dependent negatively affect her Medicaid benefits? I am in Texas.
Amy Goyer: Tina Rodriguez: Claiming your mother as a dependent won't affect her Medicaid eligibility. But claiming her as a dependent is complicated. Be sure to work with a tax professional to determine if your situation qualifies for the IRS rules around claiming an older parent as a dependent. This article outlines the things that have to be true in order for you to claim her.
What options, other than family or friends, are available to serve as a money manager or power of attorney?
— from Jo Ellen Skelley-Walley
Jean Chatzky: Hi, Jo Ellen, I just wrote a column for AARP The Magazine on this as well (maybe Amy Goyer can post?). Meanwhile, there is a whole association of people called daily money managers (the group is called the American Association of Daily Money Managers) and they are people you can hire to pay bills and take on other day-to-day money management tasks. As far as giving someone power of attorney, you can also look to people in your life who are fiduciaries (bound to act in your best interest) like attorneys and accountants. Good luck!
Jean Glenn: Great question. We don't have children so don't know what our elder years will look like as far as who will make sure we're cared for if need be.
Amy Goyer: This article Jean Chatzky wrote is also helpful on this topic of money management if you or your loved one can't do so.
Amy Goyer: Jean Glenn, indeed! See the article I posted on “solo agers” that Jean wrote recently!
Jo Ellen Skelley-Walley: Jean Chatzky, thank you.
What financial advice can you give the sandwich generation that is struggling in caring for their parents as well as their own kids, but are still hoping they can save some money for their own retirement?
— from Amy Goyer
Jean Chatzky: It is a very difficult tightrope to walk, that's for sure. When we think about the three competing priorities — college for our kids, retirement for ourselves, and our older parents’ needs, two of the three have wiggle room. There is financial aid for college. Our own retirements can be pushed down the line. But our parents, when they need help and no longer have income-producing abilities of their own, often can't wait. This is why I think the best thing we can do for ourselves is — as far in advance as possible — try to gauge what those upcoming needs from our parents are likely to be. If we are looking at a scenario where they seem to be spending down too quickly, get them some financial advice sooner rather than later to buy them a few more years of liquidity. Then play with the other legs of the stool. Approach financial aid for your college-age kids as a job, encouraging them not only to apply to their dream schools but schools that will be so grateful to have them that they'll increase the merit aid. Do as much as you can to keep contributing to your own retirement and make sure that you're using all of the resources that exist, like benefitscheckup.org and those AARP provides, to keep your head above water.
Amy Goyer: Lots of great info in AARP's “Money” section of the website, including many of Jean Chatzky's columns!
What type of financial resources/opportunities are there for full-time family caregivers that have to leave the workforce to attend to their loved ones?
— from Amy Goyer
Jean Chatzky: There are more legit work-from-home opportunities than I've ever seen before. I'm not talking about the envelope-stuffing variety, but becoming — for example — a part-time virtual assistant, or working on a sales team but from your home base. At HerMoney.com we have a number of stories on side gigs and other at-home opportunities, and my friends at ThePennyHoarder.com often write about these things as well. We both have (free) newsletters that you can subscribe to to stay up to date.
Amy Goyer: And here's a great article from the AARP Caregiving site with more info about leave policies, flexible work options, etc. Remember that caregivers who leave the workplace for caregiving stand to lose on average about $300,000 in benefits and wages — so it's a big decision to leave work. Sometimes flexible options like part-time, flex schedules, telecommuting or taking leave, etc., can be helpful.
What advice could you give a caregiver, so they aren't crippled financially with the burden of taking care of a loved one?
— from Amy Goyer
Jean Chatzky: First, look at the available support resources from your state, the government and your community. Start again with benefitscheckup.org. If the person was a military service member, make sure you are accessing all veterans benefits as well. And talk to someone (on the actual phone, if not in person) about what is available from your local agency on aging and other resources. Second, even when you are the primary caregiver, there are often other family members who — because they are not being asked to do the day-to-day caring — are willing to step in and offer monetary support. They may need to be asked, but you should not shy away from asking. And then asking again.
Amy Goyer: Always a good idea to determine if you can get paid for providing care to your loved ones, too!
Amy Goyer: How can a former caregiver begin to recover financially from the burden of caregiving?
Jean Chatzky: Step by step. Start by figuring out (a) where you are now and (b) where you want to go. Did caregiving put a crimp in your retirement savings, for instance, and if so, how many years did it set you back? Had you set goals for yourself that you are now unsure you'll be able to achieve? There are two levers that you can pull on when it comes to bumping up your rate of accumulating assets for retirement — saving more and spending less (actually there are three, but I wouldn't suggest the third — taking more risk in your investments). Give both of those levers a good look. Would downsizing sooner rather than later allow you to save more and recover the ground you lost? Would working an additional year or two do the trick? I think this is an excellent time to sit down with a financial adviser and map out a plan. If you don't have one, you may be able to access one for free through the administrator of your work-based retirement plan. Or you can find one through NAPFA.org, or the Financial Planning Association.
Amy Goyer: This is the phase I'm going through right now, and caregiving for my parents and sister has been financially crippling for me, too. I'll be meeting with my financial planner for sure!
Amy Goyer: Looks like our time is up for today! Thank you so much, Jean Chatzky, for joining us in the group today and sharing your financial expertise! Your knowledge can really make a big difference for so many people. Group members: This thread will remain in the group as an announcement so it's easy to find if you want to go back to it or for those who weren't with us live today. Let me know if you had a burning question that wasn't answered — either by doing a new post or by messaging me — and I'll be sure you get a reply. Have a great day, everyone!
Jean Chatzky: Thanks, Amy Goyer and AARP, for having me! And thanks to everyone who submitted questions! Have a great rest of the day!