Caregiving for parents by their adult children is a hidden expense few see coming.
The retirement of many Americans is getting pushed back because of an unexpected expense–caring for their elderly parents.
The survey from Caring.com shows that 46 percent of family caregivers spend more than $5,000 per year on caregiving expenses. Some seven percent spend $50,000 or more a year. Caring.com CEO Andy Cohen says not preparing for caregiving costs can be detrimental to current finances and can also derail retirement plans. The caregivers are mostly in their 50s and 60s helping their parents in their 80s and 90s, he says.
“The good news is people are getting care and the bad news it’s coming at a big financial cost for their family caregivers, which in turn will delay their retirement,” Cohen says. “It’s completely eating into their retirement. It’s going to cause them to work many more years because this was an unbudgeted major expense that they’re finding themselves responsible for.”
Cohen says 16 percent spend from $5,000 to $9,999; 11 percent spend from $10,000 from $19,999; 7 percent spend from $20,000 to $29,999; 5 percent spend $30,000 to $49,000; and 7 percent spend $50,000 or more a year. Another 21 percent don’t know how much they spend, Cohen says.
The children are helping their parents in some cases pay for assisted living and in-home care, groceries, medical bills, medications and other bills, Cohen says.
“Family caregivers, especially baby boomers, run the risk of derailing their retirement plans if they don’t prepare for the costs associated with caregiving,” Cohen says. “Almost half of caregivers spend $25,000 on caregiving in just five years–that’s a significant chunk of money that could delay retirement by a couple of years.”
Caregiving not only has an effect on finances, but it can also impact current employment and future retirement plans, too. One-third of family caregivers (33 percent) spend more than 30 hours per week on caregiving, making it almost the equivalent of a full-time job. Half of caregivers have made changes to their work schedule to accommodate caregiving, while 30 percent often arrived late or left early and 17 percent missed a significant amount of work.
A family caregiver is defined as someone who takes care of a family member or friend, but is unpaid for their services.
“Caregiving can be a startlingly expensive endeavor that most people aren’t financially prepared for,” Cohen says. “Yet only three in ten caregivers have spoken to their loved ones about how to pay for care. Having an open and honest conversation about finances is a sensitive—but necessary—discussion to have.”
Twenty-five percent of those surveyed say they aren’t helping at all.
Cohen says it’s great that people are helping, but the concern is a lot of these people weren’t planning to help. They weren’t budgeting for senior care, and they were hoping their parents would be able to care for themselves, he says. It’s because people are living longer, many parents aren’t set up to pay for their own care, and the burden is falling on their adult children.
“I think it’s a good news-bad news situation,” Cohen says. “The good news is people are living a lot longer than they were. Forty years ago, the life expectancy was 65. Now it’s 83. Kids born today are going to live to be 100. People are outlasting their savings. All this great medical technology is keeping people alive longer, but they often need care. The burden for that as they spend their assets falls to their adult children.”
Cohen says that will worsen the problem in coming generations. People should be saving as part of their retirement planning and saving for their own care. They should investigate long-term care insurance and understand all the benefits that are out there. If they’ve served in the military, there are VA benefits. If they have been a state or public sector employee, there may be state benefits, he says.
“What they don’t realize is Medicare doesn’t cover long-term care. They will have to cover it on their own,” Cohen says.
Among other results of the survey: For 43 percent of family caregivers, deciding on a senior care or senior housing option took only one month. But for 21 percent of caregivers, the decision process took six months or more. Some 20 percent of people being cared for live in assisted-living center, nursing home or other living community.