Caring for an aging parent is a juggling act. There are lifestyle adjustments to make, health conditions to manage, errands to run, schedules to arrange (and rearrange) and lots of emotions to process. What often gets lost in the shuffle is talking about — and managing — finances. How can you navigate paying for all of the above — especially if caregiving cuts into your own work schedule?
“Aging is a complex process requiring many health and financial decisions that need to be made earlier in life,” says Genevieve Waterman, director of economic and financial security for the National Council on Aging, who holds her doctorate of social work.
Unfortunately, whether you’ve been busy with another chapter of life or simply procrastinating, that often doesn’t happen. As a result, you’ll probably have a lot to think about on the fly. If you’re beginning to care for an aging parent or hiring a senior care provider for them, here’s what you need to know to protect your financial well-being.
What are the most common expenses incurred by caregivers?
“Many caregivers find themselves covering basic necessities such as food, clothing, utilities and out of pocket medical expenses,” says Waterman. If you live far away from your loved ones, you may also need to cover travel expenses or pay for other caregivers who can be present when you’re not.
According to a 2021 AARP survey, caregivers spend an average of $7,242 each year looking after a loved one.
Caregiving can cost you in lost wages, too. One-third of people who responded to the AARP survey experienced job-related strains like sacrificing paid time off, changing work schedules or taking a leave of absence. That can push the typical cost of caregiving to over $10,000 each year.
“The first thing to look at is whether your parent is eligible for any government benefits or programs that can help pay for care.”
— Kendall Meade, a financial planner at SoFi
How can you save money on expenses as a family caregiver?
From federal benefits to employer assistance, here are some ways you can try to save on the costs of caregiving:
Research any and all benefits
“The first thing to look at is whether your parent is eligible for any government benefits or programs that can help pay for care,” says Kendall Meade, a financial planner at SoFi.
“If your parent qualifies, these services may cover all or part of their medical costs. If not, they will at least reduce the amount you need to spend out of pocket.”
The options include:
- Medicaid: Free or low-cost health insurance is available to elderly people with limited incomes, although the extent of Medicaid coverage varies from state to state.
- Medicare: People who are 65 or older qualify for this health insurance, which is largely funded by federal revenue. The different types and costs can be confusing, but you can call 1-800-MEDICARE (633-4227) for advice.
- Social Security: The amount of your loved one’s benefits will depend on the amount of Social Security taxes they’ve paid over the years. A separate program, Supplemental Security Income (SSI), offers separate financial support to people 65+ who live with a disability that limits their income and resources.
- Veterans’ assistance: U.S. military veterans are eligible to receive a host of benefits, including disability compensation, pensions, and home loans.
Balance working and caregiving
“Many people end up quitting their jobs to take care of their parents, but this can jeopardize your own finances and retirement,” says Meade. Consider hiring home-based care or finding an adult day care that suits the needs of your aging loved one so that you can keep working. You could also consider talking with your manager about working from home or switching to a more flexible schedule.
Explore other ways your employer can offer support
Besides flex time, your company may be able to help out in other ways. For instance, some employers may offer emergency caregiver backup care or allow you to pool PTO (paid time off). They may also have mental health or financial wellness resources so you can take care of yourself while you’re caring for your loved one. Contact your company’s human resources department to understand the benefits that are available to you.
Advocate for yourself
You may need your boss’s approval for a significant change like working from home. To best advocate for yourself, collect data and insights on the benefits before scheduling a meeting with any higher-ups. Although sharing personal information in the workplace may feel awkward, try to be transparent about your caregiving responsibilities. That will help your boss fully understand the reason for your request.
Look for ways to cut food costs
If your loved one is living on a fixed income, they may qualify for SNAP benefits, which can help lower their grocery bill. Meal services, which may be free or operate on a sliding scale, are an option, too. For instance, when Meade’s family cared for her grandmother, they signed up for Meals on Wheels. “They delivered a few hot, nutritious meals per week, which were meals that our family didn’t have to cook,” she says.
Get expert support
You’re not expected to be an expert on caregiving resources, so ask for help from people who are. For instance, the National Council on Aging’s BenefitsCheckup can help you understand which benefits your parent is eligible for and how to apply for them.
Join a caregiver support group
Caregiving can feel overwhelming at times. A “It can be very helpful to talk with others to know you’re not alone and share ideas,” Meade says. You can find groups through organizations like the Caregiver Action Network; on Facebook; or in-person at local hospitals and community centers.
Create your own care team
Set up a team of family members, friends, co-workers, and neighbors to manage stress and expenses, recommends Jennifer Fink, the creator of the “Fading Memories” podcast who spent 20 years caring for her mother living with Alzheimer’s.
“Write down a list of all the tasks needed to run your household and care for yourself and your loved one,” she suggests. “Make sure to include appointments and chores. Then, write down a list of everyone you know well and the skill each person has to tackle an item on your list. This way, when someone asks, ‘Is there anything I can do to help?’ you’ll have an accurate answer.”
Relying on friends and family can save you money on caregiving agencies — and peace of mind if you get sick or have an injury.
Ways to protect your investments and savings as a family caregiver
As a caregiver, you want to not only keep your expenses low, but protect the money you already have. Matthew W. Odgers, an estate planning attorney with Opelon LLP in Carlsbad, California, is regularly asked if he has financial tips for caregivers. Here’s what he suggests:
1. Create a budget
It can be tough to find a spare moment to sit down and assess the money you have going out and coming in, but doing so can really pay off. Outlining your income, expenses and savings goals can help you track your spending. It can also allow you to concretely identify the areas where you can cut costs.
2. Review your insurance coverage
Regularly go over your insurance policies, including health insurance, long-term care insurance, life insurance, and even auto insurance. You want to ensure that you’re not paying for more than you actually need.
“Reviewing policies can help identify opportunities for cost savings, such as consolidating policies, adjusting coverage limits, or exploring alternative insurance providers who offer more competitive rates,” says Odgers.
An insurance broker can help you make sense of your options. Don’t forget to ask about any potential discounts. Being a veteran can save you money, as can bundling multiple policies or being a loyal customer.
3. Maintain emergency funds
“Saving up three to six months of expenses can provide a safety net in case of emergencies or unexpected financial challenges,” Odgers explains. To make this goal feel less intimidating, start small and be consistent, he advises. “Even a modest amount can add up over time.”
Set up an auto-transfer from your paycheck to a savings account so you don’t have to remember to do it manually. At the same time, prioritize paying down high-interest debts like credit card balances or home loans. “Reducing debt can free up more money for saving,” says Odgers.
“Long-term care insurance, personal savings and Medicaid planning can help protect your finances from the high expenses of care services.”
— Matthew W. Odgers, an estate planning attorney
4. Plan for long-term care
Long-term care can be costly. The annual median cost of a home health aide is nearly $75,504. A private room in a nursing home costs over $116,800. Think ahead as to how you may be able to afford different scenarios for your parent. “Long-term care insurance, personal savings and Medicaid planning can help protect your finances from the high expenses of care services,” says Odgers.
A long-term care insurance policy helps you pay for the cost of daily services and supports, whether in a home or other facility. Since most policies require medical underwriting, it’s a good idea to sign up for long-term care before your parent needs it. An insurance broker or financial planner can help you figure out the best policy.
5. Keep an eye on your parent’s finances, too
Many financial scams target seniors. Regularly review your parent’s bank statements, credit card bills and other accounts for any mistakes or unauthorized transactions.
6. Consult with a financial expert
“Seek guidance from financial advisors, accountants or estate planning attorneys,” says Odgers. “They can provide personalized advice and help you navigate complex financial matters.”
For example, financial advisors can assist in creating a comprehensive financial plan that considers your income, expenses, and long-term goals. They can offer strategies for investment management and retirement planning. And in complex financial matters, they can provide guidance on navigating intricate tax laws, managing assets or establishing trusts to effectively protect and transfer your wealth.
Word-of-mouth recommendations are a great way to find an advisor or attorney. Ask family, friends, or co-workers if they work with someone they trust.
7. Know your legal tools
It’s wise to have certain legal documents in place when you start caring for a parent. “Estate planning documents provide clarity and control over the distribution of assets, protect against financial abuse, minimize taxes and expenses, maintain privacy, shield assets from creditors, and allow for the designation of trusted individuals to make medical decisions,” explains Odgers.
The papers to prioritize include:
- Power of Attorney (POA), which enables you to make legal and financial decisions for your parent if they’re unable to do so.
- Health Care Proxy or Medical Power of Attorney, so you can make medical decisions on your parent’s behalf if they can’t.
- Living will or advance healthcare directive, which lets your parent outline their desires about medical treatments and end-of-life care.
- Health Insurance Portability and Accountability Act (HIPAA) authorization, which allows your parent’s doctors to speak to you about their care.
- Revocable trust, which explains how your parent’s assets should be managed if they’re incapacitated as well as after their passing.
Can you pay yourself to care for your aging parent?
The answer is yes, “but it varies depending on the situation and can get quite complex,” says Meade.
For instance:
- If your loved one has Medicaid, they may be able to hire you as a paid caregiver. (The requirements vary from state to state.)
- Through the Veteran Directed Aid Program, military veterans who need daily care can hire a family member to offer in-home care.
- Other state and local agencies may also provide resources. The ElderCare Locator, a public service of the U.S. Administration on Aging, can help you find options in your area.
Are there any tax breaks which you can get for being your parent’s caregiver?
“If you paid more than half of your parent’s support for the year and they made less than $4,400, then you may be able to claim them as a dependent,” says Meade.
If you itemize your expenses, you can then claim any medical bills you paid for your parent.
The Child and Dependent Care Tax Credit also helps reimburse you for the cost of care for your parent while you (and your spouse, if filing jointly) are at work.
“Based on the amount you spend, you can claim up to $3,000 in caregiving costs for one [parent],” Meade says.
To receive this credit, you must meet certain qualifications. For instance, your parent must have lived with you for at least six months and they must be physically or mentally incapable of caring for themselves. Consult with an accountant or financial planner to see if your situation qualifies.
The bottom line on managing your finances as a family caregiver
When it comes to managing finances as a family caregiver, there are rarely one-size-fits-all answers. That can be frustrating, but you don’t need to figure everything out on your own. Tap into organizations for free assistance and information, hire experts to guide you through complex situations, and lean on family and friends for ongoing support. Caring for your loved one may feel overwhelming at times, but there are many opportunities to manage the cost over time.
