If you think you might end up caring for Mom or Dad in their twilight years, be aware of an issue that catches many caregivers off-guard: The big hit to your own pocketbook.
More than two-thirds of caregivers (68 percent) report providing financial support related to their role, according to Northwestern Mutual’s 2018 C.A.R.E. Study. A third spend at least 20 percent of their own monthly budget on caregiving-related expenses such as medicine and medical supplies ($273), food ($159) and personal-care items ($151).
“There’s an alarming financial impact from being a caregiver,” said Kamilah Williams-Kemp, vice president of long-term care at Northwestern Mutual. “For some people, those costs can take up a lot of their financial budget.”
About 41.3 million people age 15 or older provided unpaid eldercare during 2015 and 2016, according to the Bureau of Labor Statistics. As it stands, about a third of adults have taken on the role of caregiver, while 22 percent expect to in the future, the Northwestern Mutual study shows.
Of the respondents who already have stepped into that position, nearly half (47 percent) say their new role was unexpected.
“If caregivers haven’t planned ahead of time, they end up make some rash decisions about how to absorb their caregiving costs … like withdrawing from savings or working more,” Williams-Kemp said. “Those can have long-term repercussions for the caregiver.”
The element of surprise involved shows the importance of families taking time to discuss how an aging parent envisions fulfilling their future care needs, Williams-Kemp said.
For instance, many people want to age in place, yet they have not had a conversation with family about how to make that work.
“So often, individuals make assumptions about their [future care], but they aren’t necessarily sharing that with their children,” Williams-Kemp said. “Before you’re in the situation of needing care, talk with your family members about it.”
For adult children — many of who might already be caring for their own children — it’s worth the conversation, too. While it can be a tricky conversation to have if your parents aren’t the ones to start it, the more information you’re armed with, the better prepared you can be.
For example, depending on your parent’s financial resources, insurance could minimize certain costs that caregivers might otherwise bear in terms of money or time.
While Medicare is typically available to everyone once they reach age 65, it generally does not pay for long-term care. That is, if someone needs help with daily living activities such as bathing or getting dressed, those costs are not covered.
Long-term care insurance can be an option. As with many types of insurance, the younger you are, the less expensive the policy typically is.
For instance, a 55-year-old man would pay an average annual premium of $1,870 while a 65-year-old pays $2,460, according to the American Association for Long-Term Care Insurance. Women pay more: $2,965 for age 55 and $4,270 for age 65. Married couples usually get a discount.
You also run the risk of not qualifying once you’re older because you’ve developed health problems. About 23 percent of long-term care insurance applicants in their 60s are rejected coverage due to health issues.
Another type of insurance that’s growing in popularity is a hybrid insurance policy that combines a traditional death benefit with a long-term care feature. In simple terms, you can use the money from the policy to pay for long-term care.
Waiting until you have an immediate need also is unwise.
“Once you’re in the caregiving situation, your options will be more limited,” Williams-Kemp said.
If money is tight and paying for insurance premiums is unrealistic, it’s still worth sitting down with your parents and having a gentle conversation about how they are planning for their future needs. The idea is that the better prepared you are for the cost of caregiving and are aware of all available resources and options, the less disruptive the care will be to your financial situation.
It also can go a long way toward mentally girding yourself for the emotional upheaval that some caregivers experience when they find themselves in the parent-child role reversal.
“You have to be able to divvy up caring for yourself and caring for the person in a way that gives you the best balance,” Williams-Kemp said.
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