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 43 million American adults who are family or friend caregivers, particularly when it comes to their own finances.
According to a 2011 study, the average lifetime cost to caregivers is $304,000 in lost wages, pensions and Social Security. That doesn’t count the $7,000 in cash that 7 out of 10 caregivers pay each year (on average) from their own pockets to cover other costs. “How do you give up that much and still retire yourself?” asks Age Wave CEO Ken Dychtwald. 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
The average cost of a full-time home health aide is $49,000 a year; a semiprivate room in a nursing home: $86,000. Think you and your parents won’t need long-term care? So do 63 percent of people over 50, notes Age Wave. Yet 70 percent will, a clear disconnect. So 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. Go to benefitscheckup.org, set up by the National Council on Aging, to learn about federal, state and private benefits programs that apply to your charge.
Make a budget for what you can contribute, physically and in dollars. (Shockingly, 50 percent of caregivers don’t track what they’re spending.) Then 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
An unmarried parent may need to spend down assets to qualify (nursing home residents can have only $2,000 in countable assets in most states). If your parent is married, it’s more complicated; in general, the healthy spouse can keep one-half of assets, up to $120,900 (not including the house). Call an elder-law attorney for help. You can locate a lawyer through elderlawanswers.com or naela.org, the site of the National Academy of Elder Law Attorneys.
Step 4: Regardless of the gap, look into getting paid
Two government programs — one from Veterans Affairs, the other from Medicaid — offer additional financial support that can be used to pay family caregivers. If your parent is a veteran (or spouse of one) who served at least 90 days of active duty with at least one day during a period of war, check out what the VA has to offer. Be forewarned: Waiting lists for some Medicaid programs are so long, you might never see any money.
Have your parent pay you if assets are available. But first talk to an elder-law attorney about drawing up a contract, notes Miles P. Hurley, a certified elder-law attorney in Atlanta. This document, he says, should answer questions such as “Is this child going to quit a job to provide the care?” and “How many hours a day is the child supposed to be providing the care?” It’s crucial to do this in a way that doesn’t jeopardize Medicaid eligibility, which is why you want to involve a lawyer, preferably from the state where your parent lives.
Step 5: Protect your own earning ability
If you’re midcareer, it’s very challenging to leave a job for caregiving, then step back into the workforce at the same salary, explains C. Grace Whiting, chief operating officer of the National Alliance for Caregiving. “Sometimes physically caring for a loved one may seem to be your only option,” she acknowledges, but it may make more sense to continue to work while supporting someone else who provides care. It can also be a good idea to ask for more flexibility from your employer. Given that it costs six to nine months’ salary to replace a management-level employee, it’s not surprising that many employers believe it’s less expensive to make an accommodation. Adds Lisa Winstel, COO at the Caregiver Action Network: “Saying to your employer ‘I’m a family caregiver’ is not as taboo as it was five or 10 years ago.”
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