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By Real World Health Care Editorial Staff  |  Sep 20, 2023

What is the Cost of Caregiving?

Caregiving for an elderly or ill loved one is a labor of love that can have plenty of rewards for both the caregiver and the care recipient. However, it also can come with some real costs. In fact, AARP estimates that family caregivers spend an average of 26% of their income – about $7,242 annually – on caregiving activities.

About half of caregivers surveyed by AARP say they used their own money for their loved ones’ household-related expenses. Thirty percent covered rent or mortgage payments, while 21% financed home modifications. Medical costs accounted for 17% of caregiver spending.

Amy Goyer

Amy Goyer

“Family caregivers are largely unprepared for the costs and amount of money it takes over the long term,” says Amy Goyer, AARP’s Family & Caregiving Expert. “The strain is compounded when you consider that most family caregivers also work, and about half of them need to make work adjustments that can cut into their income.”

The AARP survey found that about one-third of caregivers report two or more work-related strains, such as having to change their schedule or take leave, which leads to an average annual outlay of $10,525. Goyer says those who quit their jobs to be a full-time caregiver can risk losing about $300,000 on average in lifetime benefits and wages.

What happens when family caregivers experience financial setbacks related to caregiving? They may have to curtail their spending, dip into personal savings, or cut back on retirement contributions. In Goyer’s case – caring for multiple family members over a long period – the result was filing for bankruptcy.

“More and more people are caring for multiple family members,” Goyer said. “They’re doing more, spending more, and having to make more sacrifices than ever before.”

A Plan to Navigate the Financial Challenges of Caregiving

Goyer recommends that caregivers make a plan for their loved ones’ finances as well as their own, to help manage the costs and responsibilities of caregiving. Have critical conversations with your loved ones and their financial managers early, she says, so everyone is ready for rising costs as the level of care they need increases.

“People are living longer, even with chronic illnesses, and they often outlive their savings,” she says. “Even if your loved one has investment income, a pension, robust health insurance, or even long-term care insurance, it may not be enough.”

The financial plan should start by assessing the loved one’s income/assets and expenses, including debt. Next, learn about the costs associated with hiring paid caregivers or health aides to provide in-home care as well as costs associated with long-term care or assisted living facilities. AARP offers a Long-Term Care Cost Calculator to help families compute the costs of long-term care.

“Create a budget that includes their income and all regular and intermittent, fixed, and variable expenses, as well as the cost of care,” Goyer says. “Is there enough to cover the cost of their care, adhering to their wishes for where they want to live and the care they want to receive?”

Goyer stresses the importance of getting a handle on all the legal and financial paperwork involved, including a power of attorney for finances; special powers of attorney for individual banks, investment companies, Social Security, Medicare/Medicaid, and Veterans Affairs, if applicable; as well as documents such as wills, living wills, and living trusts. One power of attorney typically does not suffice for all needs.

“Act only in your loved ones’ best interests, and keep their money, property and assets separate from yours,” Goyer cautions. “Keep good records and be sure to communicate clearly and regularly with your loves ones and other pertinent family members about your loved ones’ financial status.”

Goyer says a bill management service from an accountant, a geriatric care manager, an aging life care expert or an organization like SilverBills can help ensure that deposits are made, bills are paid, insurance claims are submitted, and taxes are prepared. These services also can help look out for financial frauds and scams.

“As a caregiver, your finances are vulnerable too,” she says. “Consult with a financial advisor, take a money or financial management class to hone your skills, and make a conscious effort to protect your own financial security now and in the future.”

Maximize Income and Resources

According to Goyer, families may be able to access additional income and benefits to help pay for caregiving expenses. Find out if there is a long-term-care insurance policy that can be activated. Apply for any benefits the loved ones may be eligible for, including food, utilities, health, and veterans’ benefits. Get them screened for Medicaid eligibility as well as for Medicare Part D Extra Help for prescriptions.

Help with prescription copayments may also be available through drug manufacturers and nonprofit organizations like the HealthWell Foundation, which provides grants to eligible individuals living with certain health conditions.

Search out free or reduced-cost services, suggests Goyer. Contact your state and area agencies on aging to ask about eligibility requirements and any services that are free or offered on a sliding fee scale. If you are caring for a veteran, contact the VA Caregiver Support Program to ask about eligibility for services.

A wealth of financial information, resources, and peer connection groups are available through AARP’s Family Caregiving site, including a Financial Workbook for Family Caregivers, a practical guide focused on health, housing, and money management. Each set of worksheets in the guide is designed to help caregivers capture the essential information needed to manage the complex responsibilities of caregiving. AARP recommends that caregivers make a copy of the completed guide to give to a trusted relative, colleague, or friend in the event you are unable to care for your loved ones.

Goyer also encourages families to get creative in maximizing income and resources by investigating if a reverse mortgage, home equity loan, home equity line of credit, or an income-generating house-sharing arrangement are viable options.

“Recruit volunteers to help where appropriate, including friends, neighbors, faith communities, and volunteer organizations,” she concludes. “And remember that when caring for someone, expenses are about more than their health, they’re also about their quality of life.”

Categories: Caregiving
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