Published March 21, 2019|6 min read
People are living longer than ever, thanks to modern medicine and advances in technology. By 2050, one-fifth of the U.S. population will be 65 and older, up from 12% in 2000, according to U.S. Census Bureau.
Children born of older parents are faced with an unexpected cost down the road: becoming a young caregiver. One in four family caregivers are millennials, according to AARP.
Taking care of your parents is not an easy role. Marguerita Cheng, a certified financial planner, said being a caregiver, even if you're not the one directly providing the care, can lead to emotional and financial stress.
Some of the financial consequences of supporting aging parents include having to take off work and paying extra expenses like medicine, transportation and hospital costs.
“It’s a second full-time position,” said Cheng.
The cost of care can be extremely expensive. Talk with your parents about what services they may need.
Nearing retirement? Here's how to avoid going broke during your golden years.
Some of the basic senior care available includes:
Home health aides: These are helpers that give at-home assistance with basic services like administering medications, changing bandages, and checking your temperature. They are typically not registered medical practitioners, but have often received some sort of training. Rates can run between $8 and $15 per hour.
Respite care providers: Unlike a home health aide, respite care providers (known as personal care aides) do not administer medical treatment. They take over any of your caregiving duties while you’re away, like meal prep and general household tasks. Typically covered by long-term care insurance. Costs range between $8 and $15 per hour.
Visiting nurses: These nurses can visit your parent at home to administer care. May be covered by Medicare or Medicaid. Costs range between $25 and $60 per hour.
Continuing Care Retirement Communities: Costs can range anywhere from $100,000 to $1 million to purchase a spot, and an additional $3,000 to $5,000 per month for maintenance, according to AARP. Fees vary based on location and amenities.
Assisted living facilities: For seniors who can’t live on their own, but only need a minimal amount of care. Assistance would include help with medication, meals and housekeeping. Residents would live in their own apartments with staff on call. Assisted living homes typically have many social activities available. Costs range from $2,000 to $6,000 per month, according to SeniorLiving.
Nursing homes: These facilities provide nursing services 24 hours a day, and are therefore catered to seniors who require a higher level of assistance. Some nursing homes are short-term, but residents typically share a room in short-term situations. SeniorLiving reports the average cost of a semi-private room is $225 per day, or $82,128 annually. Private room costs can reach up to $90,000 annually.
Hospice nursing homes: These facilities are typically low-cost or free, covered by a combination of government funds, donations and Medicare.
Residential care homes: These facilities provide more hands-on care than assisted living homes. Residents may either share a room or have a private room with live-in caretakers and staff. Residential care homes offer a higher level of care than assisted living in a home setting. SeniorLiving says they can cost as much as $7,000 a month.
The first thing to do is get organized. Sit down with your parents as early as possible to plan a future roadmap for care.
“The sooner you plan the more choice you have,” said Cheng. “It is crucial to plan everything out before a loved one can no longer take care of themselves. Preferably before their retirement age.”
Many parents may not believe they’ll need long-term care, Cheng said. Another myth is that Medicare and Medicaid cover any long-term care (Medicare doesn’t at all. Medicaid can, but only if you meet a certain income threshold.) Getting educated before your parents become too old is important in finding affordable care.
After you figure out how much care for your parents may cost, you should do is work with them to figure what is covered under their current health benefits. And if you're covering a lot of the costs, you should consider buying a life insurance policy so they're still protected if you die unexpectedly.
If your parents are over 65, Medicare can help with their medical bills.
Medicare Part A helps cover inpatient care in hospitals, hospice care and home health care, among other things. Usually, your parents won’t have to pay a monthly premium for Part A if they paid Medicare taxes while working. If not, they can also buy into Part A and pay a premium.
Medicare Part B helps cover services from doctors and other health care providers, outpatient care, durable medical equipment, home health care and some preventive services. Most patients pay a standard monthly premium for Part B.
Medicare Part C, known as Medicare Advantage, includes the benefits under Parts A and B, and also typically includes prescription drug coverage (also offered under Medicare Part D). It may include additional services for an extra cost. Learn more about what Medicare covers.
Medicaid helps with medical costs for people with limited income. Each state has different eligibility requirements (view our state-by-state guide to Medicaid). Medicaid covers things like doctor visits, hospital stays and preventive care.
Some people qualify for both Medicare and Medicaid. Find out more about those benefits.
Lastly, you may be able to use some of your flexible spending account money toward your parent’s care. A dependent care FSA lets you use pretax dollars for expenses related to a dependent (in this case, your parent). You may also take a dependent care tax credit when you file your federal income taxes. Learn more about filing your taxes.
Medicare and Medicaid don’t entirely cover the cost of aging. This is where long-term care insurance comes in. It’s private insurance that typically covers costs associated with chronic illnesses or other ailments. This type of insurance pays for the costs of nursing homes and in-home nursing care (which Medicare and Medicaid typically don’t cover).
Long-term care insurance can be expensive, especially if you buy it when you’re older. A 55-year-old couple purchasing long-term care insurance could expect to pay around $2,446 a year in premiums, according to the American Association of Long-Term Care Insurance. If that couple waits until they’re 60, their premiums could be around $3,381 a year. Costs also depend on where your parents live. The price gets more complicated as you age: Premiums can increase up to 3% each year to keep pace with inflation, but the amount of coverage you have stays the same. So if you need long-term care for many years, your policy may not cover it all.
This was the type of insurance Cheng encouraged her mother and father to purchase. At the time, her father was 67 and her mother was 53. Cheng pitched in for the premiums. When her dad became sick at 78, he was prepared.
Her father’s annual medical bills for the next couple of years were upwards of $58,000 a year. Insurance covered them all.
“It wasn’t easy to sit my parents down and talk about this kind of stuff,” she said. “But your parents will be glad you did it.”
Long-term care insurance is not for everyone. Cheng recommends talking to a financial planner with your parents before purchasing additional insurance. After you work through your parent’s health insurance options, you should start weighing your options where they’ll live if they can’t continue to live on their own.
Cheng said many parents, including her own, want to live at home for as long as possible, but still need some assistance. She transferred some of her nanny’s hours to help take care of her parents. At the time, her daughter was 8 years old and didn’t need much child care. Cheng also lived right down the street from her parents, which made it easy to check in on them.
“They felt safe and cared for,” she said. “And that’s the most important thing.”
Feeling overwhelmed? Here are some final tips from Cheng that can keep you grounded while you’re starting to figure out your caregiver duties.
1. Don’t quit your day job Leaving your job means giving up a steady source of income and benefits, including health insurance and paid time off. Though quitting may seem like the best idea for taking care of your parents, think about negative long-term financial effects on both you and them. If you need to cut back on your hours, make sure you work enough to receive benefits. Cheng recommends talking to your human resources department to see if they offer assistance for caregivers.
2. Track your spending Though your parents may have a safety net to cover their expenses, consider a budget to keep track of your caregiving expenses, said Cheng. Get started with this easy downloadable spreadsheet.
3. Tap a financial adviser If you are overwhelmed with medical bills, it may be time to get help from a professional. A certified financial planner can go over what budget is best for you and how to anticipate any future needs.
Though caregiving can be a daunting and financially draining task, Cheng said there are positive impacts as well.
“There’s a feeling of giving back care to someone who raises you,” she said.
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Image: Rob and Julia Campbell
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