One in five adults currently provides uncompensated caregiving for their families. The economic value of that care was $600 billion in 2021 not including out-of-pocket costs, lost wages, or the cost of more complex medical/nursing care. The need for care and associated expenses are also escalating every year as more people retire and live longer. Unfortunately, many of us will have to address this issue during our lifetime. As a result, it is critical to factor in the financial impact of caregiving for ourselves and loved ones when engaging in financial and retirement planning. Here are a few issues to consider.

Who will provide caregiving?

Most people who are married and/or have children envision that their spouse or child will provide care if they need it. However, that may not be realistic. The individual may have their own health, family, or financial problems or live far away. The one needing care may also require skilled care.

Individuals who don’t have a spouse or children must determine if there is anyone who can provide at least some level of care and plan accordingly.

Everyone should consider alternate scenarios for caregiving. What happens if no one can provide care for you or you cannot be a caregiver for a loved one for whatever reason?

Hiring homecare aides and/or moving to assisted living or a nursing home is costly and the sooner you can plan for such expenses, the better.

What are the costs of family caregiving?

The out-of-pocket cost of caregiving by a family member may be less than private care, but the caregiver still suffers financially. Many end up paying for items like medical care, housing, home modifications, and transportation.

Often, caregivers are still employed and are juggling multiple responsibilities. They may need to take time off, reduce work hours, or even quit their job, which may affect their ability to pay their own bills so they take on debt (with interest). This lost income and employment also has a long-term impact because it affects the caregiver’s ability to save for other things (buying a house, sending kids to college, retirement, etc.) and reduces future social security payments. It also can adversely affect their career prospects.

The burden of caregiving more often falls on women who already tend to have lower salaries, fewer years in the paid workforce, and longer lives. Thus, the financial impact of caregiving hits them the hardest.

How will you or your loved one pay for care?

Everyone should have an aging plan that considers caregiving costs. Ideally, families should have these conversations well before care is needed to understand who agrees to provide care (including alternate caregivers) and what resources are available for long-term care. Families should know how much money exists to pay for care, whether to compensate a loved one or for private care.

It is important to investigate assistance programs that may be available from employers, the government, or nonprofits as well. This may include employee assistance programs (EAPs), social workers, free/discounted transportation, Meals on Wheels, reduced property taxes and utility bills, help with home modifications, and other programs.

It is also advisable to speak to a financial planner to develop a comprehensive financial plan. This plan can help determine how much you or your loved one can afford to pay for caregiving, how to save more money, and options for paying for care, such as long-term care insurance.

Consulting an estate planning or elder law attorney is recommended. Legal documents, such as a will, power of attorney, healthcare proxy and possibly a trust are essential. An attorney may also recommend Medicaid planning to help pay for care.

A daily money manager can also offer financial assistance. I help clients develop a budget, keep track of expenses, pay bills, handle paperwork and insurance claims, and manage other tasks for caregivers or their loved ones who are no longer able to manage their money. This may ease both financial and emotional stress.

Don’t wait to address these issues when caregiving is already needed. Plan for the financial impact of caregiving for the good of yourself and your loved ones.

If you need assistance with day-to-day financial tasks, contact me for a free consultation.