The Hidden Costs of Caregiving

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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

  1. Be empowered. Find a financial planner who wants to listen to your lifestyle and life stage plans.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

4 comments so far.

  1. avatar Chris Glass` says:

    As a long term caregiver there is no adequate way to fully prepare for all the things that might happen in life. I’ve been caring for a husband with Myasthenia for over twenty plus years. I am lucky that he wants to help himself and does. I cared for my mother when she had lung cancer with the help of siblings and hospice. My father-in-law’s dementia was crushing to us.
    He never tried to help himself and was manipulative. During the years we cared for him in our home he broke two of my ribs and cracked my hip at another point in a fit of anger. He rarely slept through the night. The best thing we ever did was enroll him in the VA system for his medical care. It took a huge financial burden off from us because Medicare did not pay all of his bills.
    We had plenty of criticism as his caregivers from people who never offered to help. They were certain we were profiting from him even though we never used his money and I helped to get him a pension from old war injuries. Some of the family was highly critical when he went in a Veteran’s Home after nearly wrecking my health and that of my husband.
    The best thing any caregiver can do is to find a support group even if it is online so they can talk freely to people in the same situation. A lot of us find that family is not supportive when the unthinkable happens and someone is diagnosed with a long term illness or dementia. We did have long-term care coverage for my husband before it was terminated by his employer.

  2. avatar dlantrip says:

    It takes a support network!

    Caregiving is all too often experienced as a personal or solitary task, when it really can be shared with those who love you and would like to help – if they knew how. Of course, we’ve all experienced the chaos of random acts of kindness, the additional stress needed to manage well-meaning helpers, and the disappointment when help doesn’t come. However, there are online tools that can make asking for and coordinating the activities of others less of an additional burden than you might think and the result will make everyone involved – including you – feel better about the situation and themselves.
    We can’t do it all and we can’t do it alone!

  3. avatar Helene J. Powers says:

    The financial costs of caregiving are very real. I appreciate Sherri Snelling’s clear article, as well as all those who advocate for incorporating the financial reality of caregiving into better supports in our culture and health care system.

    I also agree with both Chris’s and dlantrip’s comments about seeking support. Most people don’t understand the extent of caregiving unless they’ve done it themselves. It’s a relief to be in touch with those who understand.

    My own family received life-changing practical, emotional and spiritual support from an organized caregiving group while my spouse was dealing with a rare cancer.  

    The experience inspired me to write a booklet and blog posts with links to free and low-cost resources to create and sustain organized caregiving groups.

    Organized caregiving groups are a wonderful model for community. I’ve since participated in groups to help friends going through major surgery, cancer treatment, family deaths, etc. 

    Thank you to all who continue increasing awareness about caregiving and working toward ways to make it more manageable for all involved.

  4. avatar Mark Rowe says:

    I quit my job 3 years before I could retire. That was over 10 years ago now. When one takes on this ever changing challenge, remember that it is a job itself. And 24/7 ! But when one is able to do this for your parents, one can learn so much. Not only about life, but about the parnet themselves. All of a sudden they will start talking about somthing that just came to mind, and may be lost just as fast. It is a job done only by the strong, but the rewards are 10 fold!