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Financial Aspects You Need To Consider Before Becoming Your Parent’s Caregiver

erdikocak / iStock.com
erdikocak / iStock.com

The responsibility of caregiving often falls on women. According to the latest available stats, an estimated 66% of caregivers are female, and female caregivers may spend as much as 50% more time providing care than male caregivers. While the time needed to dedicate to care — an average of 20 hours per week — is something women need to consider before taking on this role, they also need to consider the financial implications.

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In this “Financially Savvy Female” column, we’re chatting with Arvette M. Reid, client services director of Lifecare Affordability Plan, about the financial aspects women need to take into account before committing to becoming a parent’s caregiver, as well as what their other options may be.

What money matters should women consider before taking on the role of caregiver to an aging parent/parents?

You may want to take on a caregiver role, or it may be a decision of last resort before hiring a professional caregiver. No matter your situation, one of the first decisions to make invariably involves the choice about continuing full- or part-time work while caregiving.

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Studies have shown a cumulative lifetime earnings gap for women partly due to lower salaries and time spent out of the workforce to care for children, aging parents or ill spouses. This causes lower lifetime Social Security payments. An average woman spends 44% of her adult life out of the workforce compared to 28% for a man.

Some important questions to ask yourself include: Can you afford to lose your income? How much? Where will you make adjustments in your budget to account for the deficit? What is the plan, if you are still working, as your parents need more help over time?

Another point to consider is that women tend to outlive men. As the adult daughter caregiver, make sure you have a realistic understanding of the caregiving timeline, especially if you plan to hire other caregivers to assist during your working hours.

Due to women’s longevity, studies show the average woman is likely to have higher health costs than the average man in retirement. Women pay an additional $195,000 due to living longer, having more health problems later in age and relying on formal long-term care in later years.

What steps can women take if they unexpectedly need to take on the role of a caregiver to ensure this doesn’t cause financial issues?

Women need to align caregiving with their values, priorities and bottom line. If they unexpectedly become a caregiver, first, they need to “have the talk.” It’s in your best interest to have a frank conversation with your parents and spouse about finances. While the conversation may be uncomfortable, it can head off financial issues before they become overwhelming.

Next, get organized. Gather all the documents [that involve] money [or are] money-adjacent, like investments, pensions, wills, trusts, life insurance policies, power of attorney documents, etc. That is the best way to give you a complete picture of your finances and your parent’s.

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Third, educate yourself about long-term care costs. While it’s not ideal to do this once you’ve become a caregiver, learning more sooner than later can prepare you for what comes next. Contact your local area agency on aging, an aging life care manager, or even plan a visit to a nearby assisted living community to get current pricing and an understanding of what’s out there.

Finally, surround yourself with a team. It’s essential to have a team of professionals well-versed in the many care options to help guide you through determining affordable care options for your parents. I tell my clients that long-term care planning is like a three-legged stool that must include healthcare, legal and financial professionals, and clear communication is the key to keeping the stool from wobbling.

How can women best create a financial plan that ensures their parents are cared for without sacrificing their own financial well-being?

Making a financial plan when in the sandwich generation may seem overwhelming. You are not alone! Fifty-four percent of Americans in their 40s are caring for both aging parents and children, according to the Pew Research Center. Helping your parents with their care may be your priority, but it’s essential not to lose sight of taking care of your family and planning for your retirement.

According to Bienvenue Wealth, “set healthy money boundaries. Decide what you will and won’t pay for, and don’t be afraid to communicate those guidelines to your family. Consider the short- and long-term impact of these decisions and prioritize your goals first so that you can help those around you.” It’s important to set a budget of what you can contribute to your parent’s care each month and stick to it.

For example, if you leave the workforce to care for your parents, how will you replace that income? If you can move in with your parents and are no longer paying rent, this may make up for the salary you are no longer receiving. Some states have programs allowing family members to be modestly reimbursed for caregiving.

However, it’s important to note an example from Fidelity about Laura, age 56, who left a $70,000-a-year job to care for her mother for three years. It cost her $216,000 in lost salary and $67,000 in lost Social Security benefits, for a total of $283,000. She also lost the opportunity to contribute to a 401(k) plan and receive contributions from her employer. All of these factors need to be considered when creating a new financial plan for your caregiving role.

If you cannot afford to become a caregiver, what other options are available?

Give yourself some grace if you cannot afford to become a caregiver. You must align caregiving with the practical nature of your life and what you are capable of giving emotionally, mentally and financially. Talk to your local Area Agency on Aging and senior center to see what resources are available, such as Meals on Wheels or volunteer companions. There may be affordable programs that provide some activity or supervision for a few hours each day. Additionally, you may consider Medicaid planning for your loved one with an elder law attorney. You can find accredited lawyers through the National Academy of Elder Law Attorneys.

More From GOBankingRates

GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.

This article originally appeared on GOBankingRates.com: Financial Aspects You Need To Consider Before Becoming Your Parent’s Caregiver