Taking care of an aging parent used to be discussed with clients in their 40s or older. But with couples having children later in life, it’s not unusual to see someone in their 30s dealing with this reality of life.
Making decisions for an aging parent can be overwhelming. You’re juggling emotions and financial decisions, in addition to dealing with young children of your own.
If your parents are married (and not necessarily to each other – maybe a second marriage), usually the healthier spouse takes care of the spouse with physical or cognitive decline. Your help may be needed to support the spouse who has become the caregiver. See our post, “Five Ways to Help Your Parent Who’s Become a Caregiver.”
However, if your parent is single, then you may be the one that needs to intervene.
If you notice your parent declining in physical or cognitive ability, they may need some type of long-term care service. There are different care options available such as adult daycare, in-home non-medical care, and in-home medical care.
These options are the first step before moving them to a nursing facility. Which option you choose may depend on how much your parent and you can afford.
Follow these steps to calculate if your parent can afford long-term care services or if you’ll need to supplement the cost.
1- Estimate the annual cost for long-term care.
Begin by contacting several providers to find out how much they charge. Some providers may have minimum requirements. For example, there are adult day care centers that offer daycare with a three-hour minimum and others that require a full day.
2- Determine if your parent’s insurance will cover this cost.
Once you estimate how much long-term care will cost, find out if your parent has long-term care insurance or a long-term care rider on an insurance policy. This type of insurance covers these services. If there is a policy or rider, contact the insurance representative to understand limits and caps on payment.
Also, check if your parent has a life insurance policy with an accelerated death benefit rider. Usually these riders have an age limit and can be used for terminal, chronic, and/or critical illnesses. These policies can be confusing. Contact the insurance representative to confirm your understanding of the accelerated payment.
3- Calculate out-of-pocket cost.
Take the estimated annual cost for care (#1) and subtract the amount covered by insurance (#2). The resulting amount is how much will need to be paid from your parent’s money or from your finances.
4- Calculate how much your parent has available for out-of-pocket costs.
List your parent’s sources of income, such as Social Security benefits, pension, investment accounts, rental property, etc.
Next, list their expenses. Look for monthly bills but also ask about bills they may pay once or twice a year (e.g., car insurance).
Subtract their expenses from their income. If there is a positive number, then that money can be applied for long-term care.
If there is a negative number, then review their expenses. Identify expenses that can be eliminated or reduced.
What to do if there’s not enough money?
If there is still a short-fall, analyze your finances to calculate how much you can contribute. Also, it may be time to reach out to other family members for their help. Because you’ve completed the above steps, you’ll have detail information to solicit help.
Your parent may need to move in with you or another family member to free-up money for long-term care. Another option is to discuss with an elder law attorney Medicaid eligibility for your parent.
Taking care of an aging parent is complicated, especially when there isn’t enough money to pay for care. Unfortunately, Medicare does not cover long-term care, and the cost falls on the individual or their family. There are support groups that can help you with options for care. And your CFP® professional may have more ideas to help you through this financial obstacle. Reach out to these resources, don’t go it alone.
ABOUT THE AUTHOR:
Niv Persaud, CFP®, CDFA™, RICP®, CRPC®, is the Founder of Transition Planning & Guidance, LLC. Life is more than money. It’s about living the lifestyle you want and can afford. For that reason, Niv consults with clients on money, life, and work. Her approach capitalizes on techniques she learned throughout her career, including as a management consultant, executive recruiter, and financial advisor. Her services include developing spending plans, comprehensive financial plans, divorce financial reviews, retirement plans. Niv actively gives back to her community through her volunteer efforts. She believes in living life to the fullest by cherishing friendships, enjoying the beauty of nature and laughing often — even at herself. Her favorite quote is by Erma Bombeck, “When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left and could say ‘I used everything you gave me.’”