Recent research indicates that 20 percent of those caregiving a family member or friend due to illness or age have been forced to use retirement funds to cover the cost. While these acts of sacrifice are understandable, they are often done without looking into alternative resources that can ease the financial load.
The Transamerica Institute study, which was released in September 2017, outlined the economic hardship of those who provide care for a loved one. Of the 3,000 people surveyed, one in five said they had been forced to take a personal loan or withdraw funds from a special savings account to pay for that care.
Many caregivers spend from $150 to $1,000 per month of their own money to cover their loved one’s expenses. This causes financial harm that is oftentimes irreparable. Aside from quickly using up any savings, taking care of someone also interferes in a person’s ability to work and earn a living. This makes asset preservation difficult.
Thirty percent of carers have had to use sick days and vacation time to be at home for their relative or have resorted to cutting their work hours completely. This results in a tense relationship with an employer, which can lead to disciplinary action or even being fired.
There are ways to reduce the negative economic impact of caregiving, according to Sandy Adams, who works in Southfield, Michigan, at the Center for Financial Planning. She said the first thing people in those situations tend to do is panic and start spending their own funds when they should be getting help from other sources.
Adams added that when it comes to a loved one, decisions are often made from an emotional rather than a rational place, and this is where the trouble begins. Any financial change can have long-term consequences, which is why being prudent from the start is so important.
One major issue is many caregivers just are not aware of the resources available to them. A veteran with a low income may be eligible to receive an Aid and Attendance Pension benefit that can also be used by immediate family members. In addition, the person receiving the care may have funds that can also be used for expenses, which can avoid the need to dip into retirement funds.
Another approach is to file a claim on a long-term care insurance policy. Adams said people pay high premiums for such policies then wait too long to use them. There is no reason for this.
In the end, the best method for asset preservation is consulting with a financial planner, a care manager or an attorney who specializes in elder law. These experts can help caregivers use their recipient’s money in the right way and save on taxes. A care manager will help a concerned family member wade through the complexities of the health system and get the most out of it.
Adams said caregivers should be honest with their employers and tell them exactly what is going on and what the impact of the situation will be. It may be possible to work flexible hours or telecommute three days per week.