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By Michael Schoonmaker
Providing long-term care for a loved one is the norm for many. It’s estimated that over 40 million people in the U.S. care for an aging relative or friend. While family caregivers willingly expend their time and energy, a majority may sacrifice their own finances and retirement security. But there is hope, and it starts with family conversations and a solid plan—ideally before care is needed.
As more of the U.S. population ages, you could find yourself in a caregiving position at some point, if not already. Or you may be charged with helping a loved one make long-term care decisions. Either situation requires conversations and careful planning. The most recent statistics about caregivers gives us this profile:
Unfortunately, the financial brunt caregivers experience can be significant—not just today, but also for their futures. Most of that directly relates to how time spent giving care affects jobs, earnings and career paths, which also affects the ability to save for retirement.
According to a report by the U.S. Government Accountability Office, 68% of working caregivers experience job impacts. That includes not putting in full workdays and taking time off. The report also found that caregivers have less in retirement savings and lower incomes than their peers.
Many caregivers quit jobs, take part-time or lower salary positions, or retire sooner than planned. All of these can reduce Social Security benefits. In addition, caregivers tend to stop saving for their own retirements or tap into their savings to cover expenses.
Is it possible to take care of yourself and those your love? Yes, especially if you can plan ahead. The need to care for a loved one can happen suddenly, and many people wait until that moment to start thinking about what they will do. Change that course by taking care of your own finances now.
Before a caregiving need arises, work on getting your personal finances in shape. That could mean a financial cleanup.
If you have time, plan how to pay for care. Check out potential tax breaks if a loved one becomes your dependent. Also consider your own potential long-term care needs and how it may affect your children, spouse or friends in the future.
Long-term care insurance is one possibility. It’s important to note that Medicare does not cover long-term health care costs, and Medicaid typically only does for lower income individuals.
Try to keep savings and leave what you have intact. It’s tempting to take the money for needs today but doing so may result in a precarious future. Look for other resources, which could include private or government services.
Every state is different, so it’s best to know the options where you live. Sometimes, caregivers can get paid for looking after a loved one’s needs, too.
Planning for your assets is only part of the estate planning equation. It can also cover your own or a loved-one’s long-term care needs while still living. Your plan should also include medical directives or end-of-life plans so that everyone is clear beforehand.
A long-term care plan can help guard your finances and retirement. The ideal time to start planning is before an emergency arises. Start with crucial family conversations and decisions about:
The plan. The majority of Americans don’t have a will or trust in place, but it’s a good place to start. Encourage loved ones to develop an estate plan and to let family members in on the details.
The finances. Is money ever easy to talk about? When it comes to caregiving needs, it’s essential. Is there a plan for long-term care costs? What other resources are available? Who will handle the finances if they can’t? Where can you find their financial information? Who’s on the team—advisor, accountant, attorney?
The wishes. Talk to your loved ones about their living scenarios—home, a care facility, living with you? What changes would you need to make? What role will each family member play? Who will take charge of medical needs, financial needs, day-to-day care? Is the plan realistic for them, you, and the finances?
If you already find yourself caring for a loved one and you didn’t have time to prepare, you can still make planning decisions now. Just don’t go it alone. Find people to help, including financial advisors and caregiver alliances that provide education and connect you with support.
Care needs can happen suddenly, and many people wait until that moment to make decisions. Protect your future by getting finances in shape and planning ahead. It starts with family conversations.
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This information is for educational purposes only and is not intended as estate planning advice. Please consult an estate planner or attorney for advice regarding your situation.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
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