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Most older people who require long-term care rely exclusively on family and friends for their care.[1] While caregiving can bring many satisfactions, it can also create stress and family discord. It can also take a huge financial toll on family members, particularly on your female clients, given that fully 60% of caregiving is provided by a woman.[2] Advisors can help clients meet these challenges by laying out a clear strategy for executing a financially sound caregiving plan.
Start with a conversation
The sooner your clients talk with their parents about caregiving, the better. While it can be hard to broach the topic, by doing so early, your clients can plan more prudently for potential costs and challenges. Your client should ask her parent or parents if they have plans or preferences for being taken care of later in life, and if they've thought about how to pay for it. Encourage clients to involve other family members when appropriate, and determine who is willing to help, and in what capacity. It may be worthwhile to make a written agreement to manage potential conflicts. If the parent is resistant to having the conversation, consider stepping in, with your client's permission, and talking to the parent as a neutral third party.
Prepare for the costs
One of your clients’ biggest caregiving challenges is keeping track of two sets of finances—their own, and those of the person they are caring for. It's crucial for your clients to determine the state of their parent's finances, and what resources, if any, the parent has set aside for caregiving costs. Work with your client and her parent to budget for these expenses, and help her determine whether she's likely to have to dip into her own assets to pay for her parent's care.
Consider the challenges
Caregiving can be physically and emotionally draining, and even retired clients may find themselves spending more time on it than they'd expected. The average caregiver spends more than 24 hours a week taking care of her loved one, and a quarter spend more than 40 hours a week.[3] It's no surprise, then, that nearly a third of caregivers get paid help.[4] For clients who can afford it, this option can relieve stress.
There are other financial considerations to factor in, though. If your client's parent stays in their own home, modifications such as ramps, remodeled bathrooms and enlarged doorways may be necessary. Safety locks for dangerous appliances may be required for people suffering from dementia. And no matter how many precautions your client takes, medical expenses become more likely the older her parent gets. Make sure your client has a thorough understanding of her parent's healthcare plan, and encourage her to budget for unexpected health- and safety-related costs.
Find ways to ease the burden
There are a number of ways your client can reduce the financial burden of caregiving. State and local agencies offer free or low-cost benefits for the aging, including various levels of respite care. If your client's parent has long-term care insurance that provides for in-home coverage, your client can receive payments in some situations. Help your client determine if tax deductions related to caregiving are available for her. Finally, if your client is providing the bulk of her parent's care, she should consider asking any siblings who are not providing care to compensate her for her work.
No matter your client's exact situation, a well-rounded financial plan that incorporates a variety of income sources, from growth stocks to Social Security, can help her take care of the financial side of caring for an aging parent. Variable annuities can strengthen your client's portfolio and bring her the satisfaction that comes with a lifetime guaranteed income[5]. What's more, annuities can provide a safety net that can protect against damage caused by unexpected caregiving costs.
Talk with your clients at the next opportunity about developing a caregiving strategy.
[1] Pamela Doty, "The Evolving Balance of Formal and Informal, Institutional and Non-Institutional Long-Term Care for Older Americans: A Thirty-Year Perspective," Public Policy & Aging Report, Vol. 20, No. 1 (210), January 2010.
[2] "Caregiving in the U.S." AARP , June 2015 (www.aarp.org)
[3] ibid
[4] ibid
[5] Any guarantees are based on the claims-paying ability of the issuing insurance company.
