Are you prepared for a family healthcare emergency?
Caring for an aging parent, friend, or loved one can be overwhelming. When you factor in the amount of time, money, and stress involved, it can force major life changes for caregivers not prepared for this eventuality. Baby boomers and their parents are growing older, so take some time now to plan. Communicate with your parents, understand their financial situation and personal wishes, and plan accordingly. If you’re the parent, have a similar conversation with your children.
Caring for the people who cared for you is a difficult transition
AARP reports that more than 42 million Americans provide some level of caregiving for a parent, and 17 million Americans spend more than 10% of their income on caregiving. Without adequate preparation, this means less money for your family today and retirement tomorrow. If you haven’t thought about parental care, you’re not alone. A recent Northwestern Mutual survey found that 38 percent of respondents hadn’t planned for the financial costs of caring for aging family members.
The costs can be staggering
A MetLife survey reported some national average costs for various types of adult care. The results are surprisingly high, and costs will only go up:
Type of Care Annual Cost
Adult day services $18,000
Assisted living $42,000
Nursing home – private room $87,000
Then you’ll need to add in costs for doctors, medicine, hearing aids, wheelchairs, etc. If I’m scaring you, it’s time to start planning.
Don’t make a very expensive mistake
Imagine having one parent left who needs constant care. If the money isn’t available to pay a care-giver or facility, the children have to sacrifice their own valuable time, and potentially their jobs, to provide that care. This adds even more stress and financial burden.
Start planning today by holding a family meeting:
- Understand your parents’ financial situation. Are there any issues that may cause an additional burden?
- Confirm that the right documents are in place, including wills, living wills, and powers of attorney.
- Ask the tough questions, like whether your parents prefer to be taken off the respirator, to avoid sibling arguments later.
- Investigate all financial options, including current savings as well as insurance products.
- Document your decisions so everyone can review later if needed.
Is long-term care insurance the right option?
Statistics vary, but about 10% Americans have long-term care insurance coverage. Rising costs and exclusions make it less appealing now than it was even a few years ago, and fewer insurance companies are offering it. You need to be confident that the insurance carrier you choose will be around when you need the care (hopefully) many years down the road.
Purchasing coverage sooner generally means that your rates will be lower, simply because you’ll most likely pay premiums for a longer period of time. Some new hybrid policies are springing up with different coverage rules, so it’s wise to shop around. Ultimately, you’ll need to make this decision based on your family’s unique financial situation.
You’re not alone. We can help
There are plenty of places to turn for information and support. Talk to an attorney, financial advisor, or a CPA (like me) with some experience in elder care. Note that Bach, James, Mansour & Company does not sell insurance, so we can be a neutral source of advice. There are also potential tax ramifications to consider, as caregiver expenses, medical expenses, and even long-term care insurance may be deductible for qualifying individuals and couples. Give us call and let’s set up a time to review your options.
Neal Bach, CPA