En español | What do your retirement goals look like? Extended travel, more quality time with your children and grandchildren, picking up hobbies or personal pursuits, owning a beach cottage or mountain cabin? Before you start putting money aside for that RV, be sure to contemplate caregiving as a part of your post-retirement years.
It turns out that approximately 80 percent of older adults have at least one chronic disease and 77 percent have at least two. At some point in the progression of these illnesses, these people will need caregiving assistance. On top of this, many older adults are caregiving for a spouse or adult child with an illness, disability or special needs. So, the majority of us will both need care and provide care in our 60s and beyond.
The reality is that illness and aging are expensive. Caregivers can expect to spend as much as 20 percent of their income on out-of-pocket caregiving expenses. Long-term care costs anywhere from $50,000 to $100,000 per year. Home health aides cost an average of $20 an hour. Hospital bills can pile up quickly after a major medical event. It's a bad bet to take a “wait and see” approach to whether you or your caregivers will have enough assets to cover your needs. Instead, developing a long-range plans ensures you and your loved ones have strong support and less overall stress when the time comes.
If you need a caregiver
Whether you already have a diagnosis or disability, or you're as healthy as a horse, incorporate caregiving-supportive tools into your longevity planning. Run the numbers through retirement and benefits calculators and work with advisers to guide you on the different options available. This may include:
Saving and budgeting
Calculate the amount of money you expect to need in retirement, in times of good and poor health — and budget for both. Save or earmark certain assets specifically for caregiving needs. At some point, you may wish to simplify your finances to meet this goal. The older you are, the more likely you'll rely on both paid and unpaid caregivers for assistance. Downsizing your living space at a certain age may open up assets to bring in paid help, such as aides or housekeepers. Or you may consider some home modifications that will let you live at home independently with less reliance on caregivers and without moving into an assisted living or nursing facility. If you already have a diagnosis, research the costs of your treatment and potential future needs to determine how expensive your care will be in the long term.
Purchasing insurance or annuities
These policies can be significant financial contributors if you are facing extraordinary medical needs. But options like this may not be available to you after diagnosis of a chronic disease. Don't wait for the ship to sail if you can comfortably afford premiums for insurance or annuities that will offset the costs of long-term care or disability.
Public benefits planning
Will you be able to privately pay for long-term care or will you require public benefits, such as Medicaid or veterans’ assistance? It is possible to have some assets and income and still qualify for benefits. Tools like personal services contracts will allow you to pay your loved one who is taking care of you. Other techniques like reallocating income or assets, paying off certain debts and purchasing allowable Medicaid spend-down items, or setting up trusts can help maintain the maximum amount of assets for your spouse and provide extra support to you in your retirement years.
If you will be the caregiver
One in 5 caregivers experience significant short- and long-term financial strain. I am one of those caregivers. Out-of-pocket expenses wiped out my savings. I lost my income when my job let me go at the end of family medical leave. Suddenly, my family could not pay our mortgage or other fixed monthly bills, like student loans. We weren't making ends meet in the day to day and certainly weren't saving for the future. Years later, we are still nowhere near where we want to be for our projected retirement goals.
Younger caregivers are more likely to feel more financial impacts, like reducing savings, taking on debt, and having trouble with expenses. But caregivers in their 50s and 60s are most likely to deplete their savings, right on the cusp of their own retirement.
So, whether you become a caregiver at age 35 or 65, you have to account for your personal financial strength when you undertake the job. Mitigating the impacts and pitfalls that caregivers face will help you maintain future security.
Understanding your expected contributions
Knowing what your care recipient will expect — or need — from you is the first step. Figuring things out during a medical crisis can result in hasty decisions. Although people can be uncomfortable talking about money, it's a necessary conversation. If you work together, you may find ways to minimize your personal outlay.
Securing your future financial strength
If you have been saving toward your own retirement, it's important to preserve those assets.
I can't stress this enough: Learn which bills you are — and are not — responsible for. For example, you are not responsible to pay another person's medical debts. Be sure you have the proper legal documents in place so you can help your care recipient without assuming any of their financial obligations.
Think twice before tapping your own retirement accounts to cover expenses. Your retirement accounts are protected assets, and taking money from them early or unnecessarily can come with tax consequences, penalties and a reduction of your future well-being.
Weigh the advantages of continued employment versus stepping away to take on caregiving. People experience lost wages, pensions and benefits when they are caregivers during their working years. If you are deliberating reducing your work hours (and therefore, work pay) or are leaving the workforce to take care of a loved one, run the numbers. Will paying for help provide you more job security and assets in the long run? This may require a change of employment, possibly to an employer who offers caregiver-supportive benefits, like paid family leave or respite care.
Whether you're thinking about caregiving or being cared for, a family plan is helpful for everyone on both sides of the equation. If you don't have one yet, you're not alone. Almost 44 percent of caregivers report that their care partner has or had no plans in place for future care. And only 2 out of 5 caregivers have any plans in place for themselves. But caregivers whose care partner has done this planning report less overall caregiver stress. And who couldn't use less stress?
Starting with family conversations about expectations, objectives and contributing abilities is a good first step. Working with a qualified financial adviser, insurance professional and elder law attorney can create a comprehensive longevity strategy that will make a more comfortable retirement for you and your family, no matter what the future holds. And just maybe it can include that RV too.