Caregiving can be an emotionally trying experience. More than that, it can put considerable financial strain on a caregiver’s wallet.
Last week, we discussed the topic of caregiver stress and the importance of keeping a healthy mindset through potentially trying and exhausting caregiving efforts. In this post, we take a look at possible ways to relax that burden by providing financial support for caregivers.
Make no mistake, the well-being of caregivers and the ones they care for is the most important aspect. But there’s also the monetary issue to consider. The costs of caregiving add up, and so it’s important that you understand how to be prepared for all situations.
The financial burden of caregiving
- According to data supplied by AARP, 62% of caregivers report making adjustments to their work schedules in order to administer care for a friend or loved one. Many of them reduce their hours, decline promotions, or take early retirement in favor of caregiving.
- As a result of this, the reduction in wages leaves missed opportunities and diminished funds in both savings and investment accounts.
- AARP also reports that caregiver household incomes are less than non-caregiving household incomes.
- The same report shows a trend in declining health regarding caregivers, citing that employers paid about 8% more for the health care of caregiver employees compared to non-caregivers. The result of this is a potential cost of $13.4 billion to U.S. businesses annually.
Financial support and tips to prepare you as a caregiver
Design a budget: This is the best place to start. Spend a few weeks tabulating your expenses: food, transportation, hobbies, bills, clothing, etc. After a few weeks, you’ll be able to establish patterns in spending while spotting areas in which you may be able to eliminate wasteful spending.
Once this has been done, calculate your total income and divide the sum by 12 to calculate your monthly income. Subtract your monthly bills and other expenses in order to find the money that could be used for caregiving without spending money you don’t have.
If you must leave your job, or reduce your hours: Make sure you familiarize yourself with your company’s policies. If you intend to stay at your job and reduce your workload, take the time to understand how this could impact your 401k or profit sharing.
If you have to leave your job or switch to part-time, look into ways you can get health coverage (if needed).
Consult your family on the financial strain of caregiving: When assuming the responsibility of caregiving, it is recommended that you talk to your family about the time and money required of this process. See if they are willing to share some of the monetary burden.
If your family is willing to contribute monetarily, see if they would be willing to pay for your services as an independent contractor. This would benefit you as a caregiver because you could then establish a small-employer type pension plan, such as a Simplified Employee Pension (SEP).
Secure your retirement: Caregiving can be costly. And while the well-being of the cared individual is always most important, you will want to plan for your own future as well. List out all your income sources: retirement income from Social Security, pension, and savings so you know what to expect in your senior years.
You may also calculate your net worth in order to figure out how much you will have post-retirement.
Extra help for caregiver adults: There are programs intended to help seniors with health care needs. If a senior under your care requires prescription drug therapy, Medicare Part D plans can meet those needs. Furthermore, beneficiaries may enroll in a Medigap plan to accommodate the coverage gaps left by Original Medicare (Part A and Part B).
Depending on what kind of coverage is required, a Medicare beneficiary may be better off joining a Medicare Advantage plan, such as an HMO or PPO, because these plans are required to provide the same coverage as Original Medicare but usually include extra coverage such as vision, hearing, and/or dental coverage.
Talk to the individual under your care about these Medicare programs so that they understand their available options. These plans can help reduce the out of pocket costs around prescription medications, and the potentially costly coverage gaps in Original Medicare.
Additionally, seniors with very low incomes may be eligible for Medicaid assistance alongside their Medicare coverage. In these situations the senior or caregiver can call their local state-run Medicaid agency and inquire about benefits eligibility.
Finally, seniors may worry that they could outlive their life savings. This is a concern for not only the senior but also their caregiver(s). In these situations, an annuity can warrant careful consideration. An annuity is an insurance contract where a lump sum payment is paid to the contract provider in exchange for a series of monetary disbursements beginning at a prearranged date.
Wiserwomen.org also covered this topic.
Are you or someone you know a caregiver? Explain how you practice financial responsibly in the comments below.
Medicare hasn’t approved or endorsed this information.