Dealing with aging parents is not only tough emotionally, but financially. A Caring.com report found that nearly half of family caregivers spend more than $5,000 a year on caregiving, and 30 percent spend more than $10,000. Your parents may need help. Are you ready?
A recent Newsday article, titled"Money Fix: The cost of caregiving," tackled this tough issue and offered some financial and non-financial advice to help with providing care for aging parents.
Here are the pointers Newsday recommends implementing:
Communicate. Speak with your parents. You may need to ask some hard questions: Do they have a strategy in place to pay for long-term care expenses? The answer could be as easy as purchasing long-term care insurance or devising a Medicaid plan.
Create a strategy. A PNC Financial Services Group survey found that 30% of pre-retirees who plan to care for a parent or another loved one will work longer to afford such care.
Build a cash reserve. The original article says that experts really do not recommend using your retirement funds to pay for this care. However, if needed, Roth IRA contributions can be withdrawn tax and penalty free.
"Unearth all possibilities." That is the descriptive phrase the original article uses for the type of creativity and imagination one should have when thinking about the budgeting and affording the added expense of a loved one's care. For example, if your father passed away and was in the military—even if it was a long time ago—your mom might have a claim to some veteran's benefits.
Another key point is that if your parent or loved one needs to be placed in a nursing home, Medicaid will "look back" five years for any gift made in an attempt to reduce assets to become Medicaid eligible. Gifts of that sort, the original article cautions, can trigger a waiting period before Medicaid would pay for nursing home care.
We are talking about a lot of money—$5K to over $10K a year to provide care for your parent or parents. Start to think about this sooner rather than later. Talk to your siblings and work with an experienced elder law attorney to make the right moves and to develop a strategy for this possibility.
Reference: Newsday (October 5, 2014) "Money Fix: The cost of caregiving"