3 Questions About Adult Caregiving

A decision to take care of a family member who needs help is difficult on many levels. There is the compassion driven by wanting to do the right thing. Then there are realities of life. This combination can make “the right thing to do” tough to discern.

According to the Center for Retirement Research at Boston College, adults who provide care to their aging parents spend an average of 77 hours per month doing so. That’s equivalent to almost two weeks of full-time work every month! In addition to being a considerable time commitment, adult caregiving can also carry significant financial costs.

Consider Liz, age 55, whose 85-year-old mother just had a stroke. Mom wants to continue living at home but cannot do it without daily help.

Liz is a manager with a $65,000 salary. Liz thinks that hiring a caregiver would be too expensive. She could adjust her working schedule (such as going into the office late or leaving early) to reduce her hours if her employer agreed. She could reduce her hours by half to part-time status, although that would require she give up her management responsibilities and her health insurance. Both paths would mean lower earnings and fewer opportunities for promotion. Finally, there is the option of leaving her job altogether and becoming a full-time caregiver.

Let’s say Liz decides to quit her job. If Mom needs care for three years, Liz will have lost nearly $202,000 in salary (the calculation assumes a modest 3.5% annual raise). As high as that number is, it’s just the beginning of calculating the full cost of the decision. Liz will lose her employer-covered health insurance, the opportunity to make contributions to the 401(k) or other retirement plan, and the partial matching contributions from her employer. Liz will also be reporting no taxable earnings for three years, so her Social Security benefits will be affected (unless she is able to work longer). Most people don’t do this math before making the decision.

What should you think about as you consider your responsibility towards family members who need care?

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Your aging parents may need help in a variety of ways. One way to think about those needs is by breaking them down into categories.

Skilled nursing care, such as complex wound dressing, tube feeding, or monitoring the health status of a patient whose condition is unstable.
Physical therapy, which includes massage, heat treatment, and supervised exercise.
Help with activities of daily living (or ADLs) which include bathing, dressing, toileting, transferring, continence, and feeding;
Other activities that are critical for independent living, including grocery shopping, food preparation, managing finance and driving to and from medical appointments
Quality time with human companionship.

Consider your full range of options.

Now that you understand the combination of needs, how can they be met?

This is a challenging question. “I can do it all myself!” might look like an easy answer, but it’s rarely the best course of action. Instead, consider meeting the needs via a “basket” approach. Perhaps a trusted adult caregiver can assist with ADLs, while your brother drives Mom to medical appointments, and you step in to help with grocery shopping, food preparation and managing the finances.

If the family decides that one person should leave his or her job and act as a primary caregiver, consider setting up an independent contractor arrangement and having the family pay that person. It will allow him or her to show a stream of earnings for Social Security benefits calculation. A Simplified Employee Pension Plan (SEP) or an IRA can provide an opportunity to continue building security for retirement.

h2>Understand the financial consequences of your< decision.

No matter how you structure the solution, it will have a financial cost. Take the time to study and understand the relevant insurance policies (such as health insurance, Medicare, long-term care, policy loans on cash value plans, and accelerated death benefits in term life insurance policies). Know what resources are available. Think carefully about your own financial future before you offer your reserves and savings.

Check your care budget with an elder planning CPA. Then make appropriate edits and be sure that all family members and caregivers understand the overall care budget. Those in the role of the primary caregiver might think it best to just pick up a new bottle of supplements or pay for a walker when one is needed. However, those are real expenses that can add up to tens of thousands of dollars and cut into your ability to save for emergencies and retirement.

Finally, consult with the elder planning CPA to match identified income sources with the care budget needs to meet both the costs and the deadlines for the spending needs.

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