When we think of long-term care, the image that often comes to mind is moving our loved ones out of their home and into an assisted living facility or nursing home. There, facility staff will be the primary care-takers for their needs. And we’ve all seen, and had sticker shock, over the growing cost of that care (as we mentioned in a recent post, this average has topped $100,000 nationally according to recent data released by Genworth).
However, the reality is that there are many levels of long-term care, including a scenario where your loved one never leaves their home, but still need care. In these situations, inevitably some of that care is provided by family members. Though long-term care provided by family members may seem “free,” on the contrary, there is a financial impact to consider. Below is a great article originally posted by U.S. News and World Report detailing several financial and other misconceptions about in-home care.
The takeaway is that for both the caregiver and the care receiver, identifying and planning for financial consequences in the case of care given at home is a must for the security of your retirement plan; the sooner discussed and done the better.
By Rachel Hartman
The financial aspects of caring for an aging loved one are often a gray area. It can be difficult to predict upcoming health-related expenses and estimate how much help will be needed. Yet the costs of caregiving tend to run steep. The value of family and friend caregiving amounts to about $470 billion each year, according to an AARP Public Policy Institute report.
If you are currently providing care for an elderly relative or plan to do so in the future, filtering through the financial details as early as possible can save time and money later. Here are some common misconceptions surrounding the costs of caregiving, as well as the realities to expect.
Your loved one will stay at home and not have caregiving expenses. Your aging relative may never move to an assisted living facility, but other care-related costs could still come up. “Many adult children assume responsibilities for their aging parent very gradually,” says Matt Stagner, senior special needs consultant for Voya Financial’s Voya Cares Program. “It could start with driving Mom to the bank or grocery store and accompanying her to regular doctors’ appointments.” There may be costs for home maintenance, such as cleaning, plowing snow or mowing the lawn. Eventually you may need to bring in skilled nursing support or in-home care. “Even if your loved one doesn’t ever reside outside of his or her own home, responsibilities like these define the role of a caregiver, and the costs can increase over time,” Stagner says.
All home help will be covered by insurance. For assistance at home or nurse visits, it’s easy to assume health insurance or Medicare will pay for the costs. And in some cases, such as giving shots or checking blood pressure, you might find insurance provides coverage. However, in most instances, you'll need to find other funds for daily help at home. "Health insurance and Medicare never pay for custodial care, which is the day-to-day sitting,” says Patrick Simasko, an elder law attorney and wealth preservation specialist at Simasko Law in Mount Clemens, Michigan.
You can quickly calculate how much help at home will cost. The exact amount your loved one or family will spend on bringing in home assistance can vary greatly. “The actual cost of care depends on the intensity of the need and varies according to how much care is actually needed,” says Phyllis Ettinger, president of Royal Health Care Services in New York. “It also depends on whether or not a patient has long-term care insurance or any other form of long-term insurance, where they live and whether or not they qualify for Medicaid.” It can also vary based on the family situation. If some relatives help during the weekend or on certain days, you might only pay for a few hours of help during the week.
The cost of caregiving is only financial. If you are spending hours every week caring for a loved one, you may face struggles in other areas of your life. “You can’t pour from an empty cup, but caregivers across the country are trying to do just that,” Stagner says. You might find you have limited time for other family and friends, sleep, doctor’s appointments or exercise. These can lead to non-financial costs such as increased stress, health problems of your own and the emotional drain of caring for an aging relative.
You can’t afford a caregiver, so you're not going to get one. Perhaps your loved one has few financial resources, or other family members are unable to help pay for professional care. It may still be beneficial to research what’s available. You could find that just a few hours a week make a big difference for your own health and also your loved one's quality of life. The national median cost for a home health aide is $22 per hour, according to the 2018 Genworth Cost of Care Survey.
Caregiving won’t affect my finances. Helping a loved one often involves extra physical demands, and these can impact your career over time. “We have seen caregivers work less hours, pass up promotions, change jobs or even leave the workforce,” says Brian Walsh, manager of financial planning at SoFi, a personal finance company. And if your relative lives with you, you could pay higher utility bills or have to remodel certain rooms of your home.
A conversation about finances can wait until care is needed. If your loved one is currently in good health and living at home, it can still be prudent to set up a plan. That way, if a crisis such as a fall or an unexpected hospital visit happens, everyone is prepared. “Anyone who has tried to move quickly through the Medicaid application process or push through power of attorney documents in an emergency situation will tell you that conversations about how your parents will live out their lives should occur long before there are any physical or mental health issues,” Stagner says.
If talking about finances feels uncomfortable, consider starting with a few simple questions. You might ask for guidance for your own retirement. You can then listen to what resources your loved one has accumulated and suggests using, such as a health savings account or long-term care insurance. “Paying close attention to asset ownership and beneficiary designations are key steps in the process,” Stagner says. Also talk about the power of attorney. Ask who your relative would like to make medical and financial decisions if he or she is unable to do so.