Personal Finance

Caring for Mom or Dad often comes as a surprise. Beware of the hit to your pocketbook, too

Key Points
  • Nearly half of caregivers did not anticipate stepping into that role.
  • The top monthly expenses that arise from their new duty are medicine and medical supplies ($273), food ($159) and personal-care items ($151).
  • Experts recommend having a conversation with your parents about how they envision their future care if they end up needing help with daily living activities.

If you have an aging parent and haven't had a conversation about their future care, you might want to plan one.

Nearly half of caregivers (47 percent) say they did not anticipate taking on their new roll. On top of that, 68 percent report providing financial support related to their role, according to Northwestern Mutual's 2018 C.A.R.E. Study.

"There's an alarming financial impact from being a caregiver," said Kamilah Williams-Kemp, vice president of long-term care at Northwestern Mutual. "For some people, those costs can take up a lot of their financial budget."

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About 41.3 million people age 15 or older provided unpaid eldercare during 2015 and 2016, according to the Bureau of Labor Statistics. As it stands, about a third of adults have taken on the role of caregiver, while 22 percent expect to in the future, the Northwestern Mutual study shows.

A third of respondents spend at least 20 percent of their own monthly budget on caregiving-related expenses such as medicine and medical supplies ($273), food ($159) and personal-care items ($151).

"If caregivers haven't planned ahead of time, they end up make some rash decisions about how to absorb their caregiving costs … like withdrawing from savings or working more," Williams-Kemp said. "Those can have long-term repercussions for the caregiver."

Also, the surprise over stepping into the role shows the importance of families taking time to discuss how an aging parent envisions fulfilling their future care needs, Williams-Kemp said.

Where the care-giving dollars go

Item Ave. monthly cost
Medicine/medical supplies$273
Personal care$151
Medical care$107
Profession advisors (lawyers, accountants, etc.)$32

Source: Source: Northwestern Mutual's 2018 C.A.R.E. Study

For instance, many people want to age in place, yet they have not had a conversation with family about how to make that work.

"So often, individuals make assumptions about their [future care], but they aren't necessarily sharing that with their children," Williams-Kemp said. "Before you're in the situation of needing care, talk with your family members about it."

For adult children — including many who are also caring for their own kids — it's worth the conversation, too. Sure, it can be a tricky topic to broach if your parents aren't the ones to bring it up. Yet the more information you have, the better you can prepare.

For example, depending on your parent's financial resources, insurance could minimize certain costs that caregivers might otherwise bear in terms of money or time.

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While Medicare is typically available to everyone once they reach age 65, it does not pay for long-term care. That is, if someone needs help with daily living activities such as bathing or getting dressed, those costs generally are not covered.

Long-term care insurance can be an option for those who can afford it. As with many types of insurance, the younger the applicant is, the less expensive the policy typically is.

For instance, a 55-year-old man would pay an average annual premium of $1,870 while a 65-year-old pays $2,460, according to the American Association for Long-Term Care Insurance. Women pay more: $2,965 for age 55 and $4,270 for age 65. Married couples usually get a discount.

People also run the risk of not qualifying once they're older. About 23 percent of long-term care insurance applicants in their 60s are rejected coverage due to health issues.

Another type of insurance that's growing in popularity is a hybrid insurance policy that combines a traditional death benefit with a long-term care feature. In simple terms, you can use the money from the policy to pay for long-term care.

Before you're in the situation of needing care, talk with your family members about it.
Kamilah Williams-Kemp
Vice president of long-term care at Northwestern Mutual

Waiting until you have an immediate need also is unwise.

"Once you're in the caregiving situation, your options will be more limited," Williams-Kemp said.

If money is tight and paying for insurance premiums is unrealistic, it's still worth sitting down with your parents and having a gentle conversation about how they are planning for their future needs.

The idea is that the more you can prepare for the cost of caregiving and find out about all available resources and options, the less disruptive the care will be to your financial situation.

It also can go a long way toward mentally girding yourself for the emotional upheaval that some caregivers experience when they find themselves in a parent-child role reversal.

"You have to be able to divvy up caring for yourself and caring for the person in a way that gives you the best balance," Williams-Kemp said.

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