Is Your Family Set Up for Caregiving Success?

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I need to talk to those of you in your 50s and 60s about what you need to do today to make sure you protect your loved ones from caregiving financial distress.

Without making conscious choices today when you are young and healthy you increase the odds that your loved ones will end up having to make financial tradeoffs later on to care for you. They will do that out of love. But when they do that, they also create the ingredients for one day becoming a financial drain on their kids. It’s a vicious cycle I know you never would want for them.

So let’s take a deep breath together and understand what’s at stake and how to navigate this challenge.

More than one in five people recently surveyed by the Employee Benefit Research Institute report they are providing caregiving help to a family member. More than half of the caregivers also reported that they provide financial help to that person.

And it can often be a very large sum. More than half of the caregivers providing financial assistance said it amounted to at least $5,000 over a 12-month stretch, with nearly 1 in 4 of the financial contributors sharing that they used more than $11,000 of their own money over the year to help care for a loved one.

For many of those caregivers, providing financial assistance comes at a great cost to their own well-being. Many reported taking on new debt, borrowing from friends or family, or reducing their contributions to retirement plans.

I know you never would wish that financial stress on loved ones, but this is such a stand-in-your-truth-challenge.

The first step is to be open to the idea that at some point in your life you will need some help managing the day-to-day stuff. As I explain in detail in The Ultimate Retirement Guide for 50+ (newly updated in 2023) the cost of part-time at-home care is something you need to save for today. That’s how you protect your loved ones.

And once you seriously think about the potential needs of your much older future self, my hope is that it will make it easier to consider all the choices you can make today to save more for the future and to protect your loved ones from needing to upend their financial future to take care of that older you.

Some possibilities:

• Downsize. Do this sooner than later and it could give you an extra financial cushion for your later years. And take a careful inventory of your current home. If it has many steps, no large bathroom on the first floor, and is not near friends and family, that’s not going to be a great place for a much older you. Some accessibility issues can be solved with remodeling, but isolation can’t.
• Save more now. There are lots of ways to save extra money. Right now, anyone at least 50 years old can contribute as much as $30,000 to a 401(k) this year. Save in a Roth 401(k) and that’s a lot of tax-free income you will have in retirement. Maybe $30,000 is too steep a goal for you. That’s fine. But you need to push yourself to save more. Don’t give yourself the excuse that you can’t find more money to save. It is the rare household that doesn’t have some “wants” it can eliminate, or trim, to free up more money for savings. It's just a matter of making that a priority.
• If you don’t have a workplace retirement plan, I sure hope you are saving in a Roth IRA; the 2023 limit for anyone at least 50 years old is $7,500. The eligibility cutoff this year is $138,000 in modified adjusted gross income for individuals and $218,000 for married couples filing a joint tax return.
• Consider a long-term care insurance policy. As I explain in The Ultimate Retirement Guide, an LTCi policy with an annual premium that costs a few thousand dollars a year can be a terrific financial move once you consider that at-home care or assisted living can cost that much for one month. And don’t just consider this as a way to protect you, but as a way to protect your loved ones from needing to provide financial assistance as you age.

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