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5 Steps to Avoid Economic Pitfalls of Caregiving

Be considerate but smart in protecting your own money

chatzky caregiving chart

Joel Holland

En español

When you fly as much as I do, you can recite the safety briefing by heart, especially the part about putting on your own oxygen mask before you help anyone else. The same sort of warning should be given to the estimated 48 million American adults who are caregivers for an adult family member or friend — particularly when it comes to their own finances.

Twenty percent of family caregivers have to take unpaid time off from work because of their caregiving responsibilities, a 2021 AARP analysis found. A 2011 Met Life study estimated the average lifetime cost to caregivers in lost wages and reduced pension and Social Security benefits at $304,000 — that’s $388,000 in today’s dollars.

And that doesn’t count the more than $7,200 that most caregivers spend out of pocket each year, on average, on housing, health care and other needs for loved ones in their care, according to the AARP report.

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“How do you give up that much and still retire yourself?” asks Ken Dychtwald, CEO of AgeWave, a research and consulting company that focuses on age-related issues.

If caregiving looms in your future — and it likely does if you’re a daughter, an only child or the one (if you are, you know what I mean) — take time now to protect your financial life.

Step 1: Calculate the gap

Think you or your parents won’t need long-term care? Guess again. The U.S. Department of Health and Human Services estimates that 70 percent of adults who live to age 65 eventually do, and nearly half require paid care.

That’s a pricey proposition. The average cost of a full-time home health aide is nearly $62,000 a year, according to the latest data from insurer Genworth Financial. A semiprivate room in a nursing home runs about $95,000.

Ask your parents about the size of their nest egg, how quickly they’re spending it, whether they have long-term care insurance and how much equity they have in their home. If they won’t discuss this, a compassionate financial adviser may be able to bring you together.

Compare your parents’ assets against their projected expenses and you have your gap.

Step 2: Fill the gap without going broke

Look for free resources: Use the National Council on Aging’s BenefitsCheckUp tool to find federal, state and private benefit programs that apply to your situation.

Make a budget: Figure out what you can contribute, physically and in dollars, toward closing the gap. A 2018 Northwestern Mutual study found that 48 percent of future caregivers don’t plan at all for the financial burden. AARP’s Long-Term Care Calculator can help you estimate potential costs in your area.

Ask your siblings what they can pitch in: Just because you’re delivering the care doesn’t mean you have to foot the entire bill. Every dollar you don’t spend can be put away for the future, so you don’t perpetuate this cycle with your kids.

Step 3: If a gap remains, consider Medicaid

Medicaid can cover long-term care, but your parent or parents may need to spend down assets to qualify. In most states, a single nursing home resident can have only $2,000 in countable assets; for a married couple who are both applying for coverage, it’s $3,000.

If only one parent is in a nursing home, the other spouse can generally keep one-half of assets, up to a total of $137,400 (not including their house). But rules differ by state, and the calculations can get complicated. Contact an elder-law attorney for help. You can locate one on the website Elder Law Answers or in the National Academy of Elder Law Attorneys’ (NAELA) online directory.

Step 4: Regardless of the gap, look into getting paid

If your parents have sufficient resources, consider talking to them about paying you for caregiving. But talk to a lawyer first about drawing up a contract, advises Miles P. Hurley, a certified elder-law attorney in Atlanta.

This document should address issues such as the number of hours a day you’ll spend on providing care and whether doing so will require you to quit a job, Hurley says.

It’s important that the caregiving agreement is written carefully so that it doesn’t violate Medicaid regulations about spending down assets. (Without documentation that payments from a parent to a child are for care services, Medicaid might consider the money a gift rather than a legitimate transfer of assets.) Again, you’ll want to involve a lawyer, preferably from the state where your parent lives.

Government programs offer another potential way to get paid as a family caregiver, especially if your parent served in the military.

The U.S. Department of Veterans Affairs (VA) operates two programs that provide financial support and resources for military caregivers — the Program of Comprehensive Assistance for Family Caregivers (PCAFC) and the Program of General Caregiver Support Services (PGCSS). You can get information about these programs at their websites, or by calling the VA caregivers support line at 855-260-3274.

Medicaid can also pay family caregivers in some circumstances, but eligibility and benefits vary from state to state. Contact your state's Medicaid program for information.

Step 5: Protect your own earning ability

If you’re midcareer, it’s very challenging to leave a job for ​family responsibilities such as caregiving and then step back into the workforce at the same salary, notes C. Grace Whiting, executive director of NAELA.

“Sometimes, physically caring for someone in need may seem to be your only option,” she acknowledges, but it may make more sense to keep working while fulfilling your caregiving responsibilities.

"The pandemic and the Great Resignation have made clear how important it is to ​accommodate employees who are caring for someone," Whiting adds. "Employers are realizing they should focus on the long-term picture rather than taking a 'penny wise, pound foolish' approach that ignores the value of having workers who also take care of people in their lives.”

Research by the Society for Human Resource Management has found that it costs six to nine months’ salary to replace an employee, so it’s not surprising that many employers believe it’s less expensive to make an accommodation.

“Saying to your employer, ‘I’m a family caregiver,’ is not as taboo as it once was,” says Lisa Winstel, chief operating officer at the Caregiver Action Network. “Employers are realizing that many employees juggle both work and caregiving responsibilities — caring for spouses, parents or even children with significant health needs.”

Jean Chatzky is an award-winning personal finance journalist and best-selling author of books including Women with Money: The Judgment-Free Guide to Creating the Joyful, Less Stressed, Purposeful (and Yes, Rich) Life You Deserve.

Editor's note: Patrick J. Kiger contributed reporting to update this article, originally published Nov. 27, 2017. It has been updated with more recent data on the economics of caregiving.

How Family Caregivers Can Avoid Financial Stress