Financial planning is a crucial aspect of caregiving that often gets overlooked. As caregivers dedicate their time and energy to supporting their loved ones, it becomes imperative to have a well-thought-out financial plan in place. From managing medical expenses and daily caregiving costs to ensuring long-term financial stability, caregivers need to navigate a complex landscape.
This introduction explores the importance of financial planning for caregivers. It highlights key considerations and strategies to help them achieve financial security while providing the best possible care for their loved ones.
To shed some light on the same, we interviewed a home care industry expert to bring his perspective on financial considerations for family caregivers.
Scott Bown is a Certified Financial Planner™ with over two decades of experience in financial services, insurance, and wealth management. He is an accomplished personal financial professional who has transitioned his collective experiences to focus on being an advocate and resource for senior family caregivers.
He’s a seasoned professional, community builder, and aspirational guide with a mission to present you with information, education, and community to have the knowledge, confidence, and support to help those you care for to live your best life.
Let’s get started with knowing what our expert thinks of the home care industry:
As with most things financial, there are two primary aspects to consider when family caregivers plan for home care: income and expenses. Home expenses will certainly include basic expenses such as utilities, mortgages/rent, and groceries. Some of these may vary as our loved one’s situation changes, such as health. A change in health may be physical, mental, dietary, or a combination of all three. So, the first major additional expense of in-home care is the type of healthcare services needed.
The types of home health care services that can be received are varied and range from maintaining a comfortable living environment to monitoring chronic conditions such as COPD (Chronic Obstructive Pulmonary Disease). The level of expertise that assists our loved ones wishing to Age in Place includes Home-Health Aides that help with household chores to physicians who provide advanced diagnosis and treatments. Many home care agencies offer hourly rate services that start around $26 per hour to full-time care services costing $4,957 per month (based on 44 hours of weekly care).
Additional expenses may include prescription drugs, medical supplies, and increased transportation costs. Initial home modification repairs may include bathtub handrails to more advanced wheelchair ramps and lifts.
The income side of home health care begins with our loved one’s basic income, such as social security, pensions, investment assets, and perhaps disability income. In addition, there may be additional support from Medicare, Medicaid, or long-term care insurance. Medicare provides health insurance coverage. Medicaid covers personal care aspects such as a home health aide. Both Medicare and Medicaid are government health insurance programs and may help cover costs after you have met certain deductibles and copays, and in Medicaid’s case, income requirements. Long Term Care insurance is provided through private insurance companies. It can cover a wide range of long-term expenses, such as help with activities of daily living (i.e., bathing) and more in-depth help from physicians.
As a caregiver assisting your aging loved one to remain at home, commonly known as Aging -in -Place, you will quickly discover an ever-evolving set of challenges. Remember, you do not have to become a financial expert to be a great senior caregiver. You can always hire an expert or find free services to assist you. Do some basic research, get organized, plan as best as possible, and always find and tap into all the many resources available.
As a family caregiver, you are responsible for managing the finances needed to care for your loved one and your own finances. Many common pitfalls that family caregivers run into are related to their own personal finances.
First, depending on the level of care you are providing, it may result in a loss of your income. You are, on average, taking over 20 plus hours a week above and beyond your standard work week, which can result in stress, physical ailments, and feelings of isolation. Any of these is a high factor in most family caregivers having job performance issues such as higher absenteeism rates, needing flexible time off, and fatigue. Because of these factors, many family caregivers quit, impacting their current incomes, insurance coverages, career growth, and future retirement scenarios.
Many family caregivers do not anticipate the additional out-of-pocket expenses to support our loved ones. You may anticipate these additional out-of-pocket expenses for any children you provide care for; however, you do not tend to anticipate the average of $7.000 in additional costs per year you may incur as a family senior caregiver.
Preparing to be a caregiver is the best way to avoid the many potential financial challenges you may incur. So, talk with your family, employer, friends, and whoever else you feel can help you in the role of caregiver. Ask questions, accept help, and build those support networks.
As life happens, though, there is not always time to prepare for being a caregiver and managing your loved ones finances. Under this scenario, prioritize getting your loved ones finances organized, create a budget and find the help and support you need. Keep track of expenses, income, medical insurance copays, and deductibles, to name a few. Create a budget so you can see the expenses and when they are owed, the income sources, and where/when they come from. There are many types of budgeting tools available now, such as Mint. Often a pen and paper are all you need. Finally, make building your support network a priority. As a caregiver, you will need help so reach out to local resources, neighbors, government assistance programs, professionals and support groups.
Being a caregiver is often like playing a game of “Whack-a-Mole.” Things happen quickly, you do your best to anticipate where the challenges will arise, and you will get some things right. But in the end, you will make some mistakes and wish for a second chance to do something differently. Allow yourself some grace and be good to yourself. Caregiving is one of the most demanding roles to play.
As a family caregiver, helping your loved ones live at home as long as possible is one of your greatest gifts. Offering this stay-at-home option requires research, due diligence, and much work. To best answer this question, as most of this is about the process and getting information, putting it all down on a checklist is probably the best for you.
The following is a brief checklist to help you in preparation for setting up your loved ones for success to remain at home.
1) Assess your needs and identify the type and amount of care services needed:
2) Research local providers:
3) Do they meet the necessary regulations and standards in your region?
4) Understand what the services cost:
5) Compare costs:
6) Understand their insurance and payment options
7) Always seek referrals and research online reviews
8) If you will need home care services for an extended period:
9) Always read contracts carefully:
As a caregiver, you are asked to make a wide variety of decisions that range from financial to medical. You can see that preparing to help your loved one stay at home covers the entire range of topics. Be organized, persistent, and passionate; you will help make the right decisions for those you love.
Being a caregiver is not always like “jumping on a public bus,” where you can choose when and where you become one. We are often thrust into a journey without any preparation or awareness. The question of how a family caregiver can best plan for the long-term financial impact of extended periods of home care will be based on when your caregiver journey begins.
Now, without question, the earlier you recognize you will be supporting a loved one, the more time you have to discuss the situation, get organized, research options, and plan. So, if you find yourself fortunate to have that time, please do not allow this gift of time to slide by.
No matter where you begin the journey as a caregiver, you will need to fully understand key parts of your loved one’s situation to plan for home care’s long-term impact. These key parts are initially broken down into Legal, Personal Finances, Medical needs, and home environment.
First are Legal aspects. You will make medical and financial decisions for your loved ones as a caregiver. You must call financial institutions to get information, talk with pharmacists, and do many other tasks and professionals. Do you have the legal capacity to make these decisions and to have access to the information you will need legally? You must consult a lawyer to review Financial and Medical Powers of Attorney, Wills, Trusts, Advanced Medical
Directives, and possibly guardianships. If these are not in place when you begin your caregiving journey – be prepared for some frustration and additional time requirements of getting the proper legal documents in place.
Personal finances must be viewed from an income and expense aspect – or as inflows and outflows. Where will the money come from to pay for the expenses? Income can be from many resources such as work, investments, social security, pensions, government assistance programs, and insurance companies such as medical or long-term care insurance, to name a few. Outflows – what costs or expenses must be paid weekly, monthly, quarterly, annually, or something else? Consider utility bills, rent, mortgage, groceries, insurance premiums, outstanding loans, and more. Getting this information in place may require research: finding and reviewing bills, checking accounts, tax returns, and other resources. You may need to put your detective hat on and dig in.
Medical needs are another aspect of what you need to understand to plan for the long-term financial impacts of home care. Are the medical needs shorter-term in nature? Will the medical needs stabilize or will multiple anticipated medical challenges exist?
Will your loved one be able to perform the medical tasks required, such as organizing and taking medications, or will a third party require assistance? Will any assistance be billed by the hour or on a contract basis?
Finally, the home environment must be understood when determining the long-term financial aspects of home care. What types of home repairs are needed based on your loved one’s current medical needs and physical and mental capabilities? Is it as simple as putting in bathroom handrails, or will a new wheelchair ramp need to be placed by the front door?
Once you have addressed and decided whether the home environment is safe or can be modified to make it so, you will need to do your best to anticipate future needs and requirements. For example, putting in a chair lift now to assist your father in getting to the full bathroom on the second floor may be adequate now. But what about when that becomes too much, and there is no shower or bath on the first floor? Is it affordable to put one downstairs? Is the house designed so that certain home remodels are possible?
Once you understand the Legal aspects of what you can or can not do as a caregiver, the sources of the financial inflows and outflows, the current and anticipated medical needs, and the home environment, you can begin to plan for the long-term financial impacts of home care. All the puzzle pieces will be in front of you to put together the best plans of action to help your loved ones remain at home as long as possible.
As with most examples of stories, the most remembered are the problems and challenges that arise when unprepared. In contrast, I will share one quick story where not having the correct legal paperwork in place caused an issue, and then I will share a sad but successful financial planning story.
First, when working for a larger investment company, I was trying to assist the daughter of one of our clients who was calling to get information and transact on her mom’s accounts. The daughter indicated that her mother had dementia and needed some assistance with managing her financial matters. The daughter shared that her mother had met with a lawyer, created a financial power of attorney naming her as the agent, and asked what she needed to do to get the legal document to us. I shared with her that our company had also created our internal legal forms that needed to be completed by her mother for us to be of long-term help and that this still needs to be completed. So, I had to instruct her that she needed to complete one of our forms, including a doctor’s signature verifying her mother’s medical condition, be notarized and mailed back before we could assist. So, this caught the daughter off guard by causing additional work and, more importantly, delayed the time frame to access the funds to pay for some expenses.
Now, I will share a story of a sad ending that was made somewhat better because of financial planning. A couple with one small child hired me to help them work through a comprehensive financial plan to provide them with guidance and advice on their financial picture. We reviewed the financial plan and discussed what was working and areas that could be improved. As is common, there was a life insurance shortage, and the couple decided to have the husband take out some additional coverage. About a year later, the husband was found to have a very aggressive form of cancer and, unfortunately, passed away relatively soon after the diagnosis. Knowing the insurance was in place helped alleviate some of the husband’s concerns about his family’s ability to move forward, creating space for a homecare environment focused on family.
Whether done on their own or by hiring a Certified Financial Planner™ for assistance, financial planning is an essential tool for caregivers to ensure their well-being and the well-being of their loved ones. By proactively addressing financial challenges and incorporating long-term strategies, caregivers can alleviate financial stress and create a solid foundation for their future. Whether it involves budgeting, seeking financial assistance, or exploring insurance options, caregivers can make informed decisions to protect their finances and provide quality care. By prioritizing financial planning, caregivers can focus on their caregiving responsibilities with peace of mind, knowing both their own and those they are caring for, financial futures are secure.
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