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Calculating the Financial Implications of Caregiving

Deb Hipp
By Deb HippJuly 24, 2018
Calculating the Financial Implications of Caregiving

Editor’s Note: Diane’s name has been changed to protect her family’s privacy.

A recent survey by SCAN Health Plan found that 34% of family caregivers had to cut back on discretionary spending and 20% had to dip into personal savings to provide care for a senior loved one. Another 8% racked up credit card debt.

Does this situation sound familiar to you? Learn more about the financial implications of caregiving and see how you can become a paid family caregiver for a parent or senior loved one.

Family Caregiving and Finances

Nine years ago, Diane moved her parents, who were in their seventies, from St. Louis to Los Angeles to live with Diane and her husband. At the time, Diane’s father could no longer take care of his wife, who has Alzheimer’s disease, and the couple had accrued so much debt that they ran out of money every month.

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That $3,000 moving expense was Diane’s first taste of how costly taking care of her parents would be. Since then, Diane and her husband have spent tens of thousands of dollars on the myriad expenses that accompany caregiving. Research shows they’ve got plenty of company when it comes to the financial implications of caregiving.

In Diane’s case, the hours she spends caregiving for her parents caused her to cut back on the number of jobs she can take as an American Sign Language (ASL) interpreter, which reduces her income. Meanwhile, she and her husband pay higher grocery costs and utilities and shell out cash for parking fees at doctor’s offices, personal care items and whatever else her parents need beyond what their combined social security incomes can cover.

“My husband and I take on the burden of added expenses,” says Diane, whose caregiving duties are now 24/7. “There’s no extra money to pay someone to come in.”

Far-Reaching Financial Implications of Caregiving

Caregivers’ finances are affected in numerous ways, says Jennifer FitzPatrick, author of “Cruising Through Caregiving: Reducing the Stress of Caring for Your Loved One.” Local caregivers may feel the need to pay for lunch or foot the bill for groceries they picked up. Long-distance caregivers have travel expenses.

“If you’re trying to be a supportive secondary caregiver and want to help your mom who lives 100 miles away, there’s gas, tolls and mileage on your car,” says FitzPatrick. If you must fly for visits, add in airfare, rental cars, taxi or Uber costs.

Thinking about leaving your job to become an unpaid caregiver? If so, you’ll be giving up benefits like health insurance, life insurance, long-term care insurance and paid time off, says FitzPatrick. It may also be difficult to re-enter the workforce, especially at the same rate of pay, after your loved one passes away.

“Quitting or even going part-time may limit your ability to contribute to a retirement account like a 401K,” says FitzPatrick. “If you quit in favor of caregiving, and you don’t have enough money to pay for the care you could eventually need, it may put a strain on your adult children someday.”

Caregiving’s financial strain is typically a slow-building crisis, says Michael Guerrero, Senior Benefits Advisor at Elder Care Resource Planning, a benefits planning firm in San Francisco. Paying for in-home care, respite and out-of-pocket expenses such as diapers and wipes, pill dispensers, special sheets, walkers… or other home modifications adds up, says Guerrero.

Still, most caregivers want to take care of their loved one’s immediate needs and worry about money later. “If they’re employed, they’ll use their primary earnings and take paid and unpaid time off,” says Guerrero. “However, at some point, the caregiver’s responsibilities may exceed the patience of the employer and they’ll have to part ways.”

Quitting your job temporarily to be a caregiver can leave you in a vulnerable position later, says Guerrero. Caregivers in their 50s or 60s, whose earnings are peaking, will especially feel the pinch later of not contributing to a 401(k) or social security, even if only for a couple of years.

“Most people feel torn between doing the right thing and realizing it’s going to cost them down the road,” says Guerrero.

How to Become a Paid Caregiver for a Senior Loved One

Most of Guerrero’s clients are looking for financial benefits to help them get through caregiving for their parent or another senior loved one without draining their retirement account. “People we talk to aren’t desperate but are going month-to-month, making ends meet,” says Guerrero.

One strategy to help financially is for the primary caregiver to become a paid caregiver. Many states have the option, through Medicaid, to hire a family member to do the caregiving, says Guerrero. California’s In-Home Supportive Services Program and Illinois’ Community Care Program are a couple of good examples. Veteran-Directed Home and Community-Based Services also allows qualified veterans to hire a family member as a personal care aide.

“That way, a parent can hire a son or daughter to do the caregiving work they’re already doing,” Guerrero says.

State laws vary, but if you’re curious about whether you might qualify to be a paid caregiver for a loved one, you can start by taking this short questionnaire at Paying for Senior Care. However, a senior benefits advisor is a better choice to direct you to state and other paid caregiver programs.

Senior benefits advisors are not attorneys or certified financial planners. However, “We’ve spent a great deal of time as a collective gathering policy and programs to help pay for care,” says Guerrero.

Diane, who contacted Guerrero to find out about benefits she or her parents could receive, recently qualified to become a paid caregiver for her parents through California’s In-Home Supportive Services Program. The pay, determined by her California county’s minimum wage, isn’t great, however – around $11 an hour.

Diane’s father, a wartime veteran, also qualified for the Veterans Pension Benefit to help pay Diane as his caregiver. Diane will have to pay taxes on the income, so she’ll still be contributing to social security for her own retirement.

“If a parent is not eligible for public assistance, it’s still a good idea to put into place a written personal care agreement to pay the adult child as a formal caregiver,” says Guerrero. “The money that they spend on paying a family member will help them move towards financial eligibility in the future.”

What other suggestions do you have for calculating the financial implications of caregiving or for becoming a paid caregiver? We’d like to hear your tips in the comments below.

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Deb Hipp
Deb Hipp

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