How to care for aging family members — without harming your own financial security
Caring for an older parent or an ill spouse can be a labor of love, but it can also take a toll on you emotionally, physically and financially. While many caregivers are not fully prepared for their new role, it is important to understand the impact that caregiving may have on your own pocketbook and retirement savings — and how to plan ahead so you can avoid bankrupting your financial future.
It’s the start of a new year and with January’s Financial Wellness Month, this is a great time for current and future family caregivers to face the financial facts about caregiving.
Retirement and Women: The Longevity Factor
A report released in December, 2010 conducted by the Society of Actuaries (SOA) and co-sponsored by the Women’s Institute for a Secure Retirement (WISER) found that while half of women age 65 will likely live beyond age 85, 92 percent of female retirees do not have retirement plans to cover that 20-year period. That means that family caregivers will most likely be picking up the tab for loved ones who don’t have a solid long-term care plan in place.
“This SOA report underscores the need for women to understand the full-blown drama of retirement,” said Cindy Hounsel, president of WISER. “For most women, there is little room for error and being unprepared for nearly a third of their lives will have consequences.”
Since the average caregiver is a 48-year-old woman caring for her 74-year-old mother, the female factor becomes even more important when planning for caregiving and your retirement.
The Caregiving Cost Drain
Since the economic downturn, 63 percent of America’s 65 million caregivers who were also working were saving less for their own retirement. Four out of 10 had their pay or work hours cut and one in six lost their job, according to a survey by the National Alliance for Caregiving (NAC). Losing not only income but benefits such as 401K plans, pensions and health care coverage can be devastating — but even more so if a loved one’s ongoing care depends on the caregiver’s financial well-being.
In fact, another NAC study found that more than half of the nation’s caregivers spend on average 10 percent of their annual income on care-related expenses such as prescription drugs, home safety modifications, in-home services or Adult Day Care, food and meals, household goods, transportation and legal fees.
Retirement Planners Should Speak “Venus” and Not Just “Mars”
While all these statistics can cause anxiety, Larry Slabotsky, president and CEO of the Society for Lifetime Planning and creator of the “Women Alone” financial planning seminars for women age 60+, encourages women to find a financial advisor who understands what women face in retirement — especially caregiving, a life event many women will encounter.
“One of the biggest mistakes that financial planners make, especially with female clients, is to not ask questions about their client’s lives and income strategy for retirement,” said Slabotsky. “Too often, planners are focused on selling products, and not focused on understanding things such as the caregiving equation that many women will face in retirement. That can make a huge difference in the types of services and products best suited for that client.”
Tips for Creating a Retirement Plan That Considers Caregiving
- Be empowered. Find a financial planner who wants to listen to your lifestyle and life stage plans.
- Create a plan. Have a dialogue with your financial planner about your income strategy and what you face in retirement – particularly the possibility of having to also care for an older parent or ill spouse.
- Consider working longer. Since women live 3-4 years longer than men, they should also think about remaining in the workforce longer. Not only will you reap continued benefits for 401K and health care coverage, but by retiring at age 65 instead of 62, you will increase your monthly Social Security benefits by 20 percent. In addition, some employers offer caregiving and elder care assistance through work-life benefits or employee assistance programs (EAPs) that can support you while you juggle career and caregiving.
- Don’t rely solely on Social Security. Statistics show that four out of 10 women over age 65 rely solely on their Social Security benefits in their retirement. These benefits alone will not guarantee your current lifestyle, and will be woefully low if you also are helping to care for an older parent.
- Understand your loved one’s long-term care coverage. It’s better not to wait until the crisis hits to know what your parents have planned for their long-term care and what costs you may be facing to continue to care for them.
Many of us wait until an event occurs which thrusts us into our caregiving journey. In order to ensure you are not tied to the railroad tracks waiting to be run over, understand the costs of care, the care coverage your loved one has and what impact that may have on you financially. That’s the first step in balancing “self care” and “caregiving” that will make your journey a smoother and more pleasant ride.
Editor’s Note: Sherri Snelling, founder and CEO of the Caregiving Club, is a nationally recognized expert on America’s 65 million family caregivers. She is Chairman of the National Alliance for Caregiving (NAC), the leading caregiving advocacy nonprofit organization based in Washington, D.C. Sherri has appeared on many news programs, including the CBS Evening News with Katie Couric, ABC World Evening News, MSNBC, and CNN, and has been interviewed by the New York Times, USA Today, PARADE, and Prevention, among others.