Protecting Retirement as a Caregiver | Financial Planning for Caregivers

As your client’s parent’s age, it’s likely that they will find themselves with mounting healthcare and general caregiving costs. Whether these caregiving costs are predictable or unexpected, your client may think that accessing their own retirement plan to help ease the burden is a good idea, and rightfully so. A couple retiring today is looking at $280,000 in health care costs during retirement. Here are some tips to help them address these expenses so that they don’t feel like they have to jeopardize their own retirement in the process of caring for aging parents

Living with Family

If the client is open to the idea, suggest having parent(s) move in with them. Family struggles are real issues for some, but if an amicable relationship exists between your client and their parents, this can be a straightforward way to reduce the expenses paid by children and parents alike. Some cities are starting to legalize and encourage the construction of accessory dwelling units (aka “Granny Flats”) to accomodate this type of cohabitation. It’s a happy medium that allows access and care while still affording independent space.

Aging in Place

Having an extended family situation may not be best for your client, if that’s the case, it’s almost certainly more cost-effective to have them live in their home. There will be costs associated with retrofitting an existing house to better care for an elderly adult such as first floor bathrooms, grab bars, and ramps. However, these costs will likely be less than 24-hour care from an assisted living facility. If the parents need additional help, make sure your client investigates programs like Meals on Wheels, or state and county programs set up to assist aging in place.

Tax Breaks

Depending on the level of care, income, and monetary commitment, your client may be able to claim their parent as a dependent. This can offer the option of writing off large portions of care for parents and keep clients from using their retirement accounts to shore up funds. Similarly, some FSAs (flexible spending accounts) allow for pre-tax dollars to be spent on care for elderly parents.

No matter the route that your client goes, one thing is for certain, care will only get more expensive. Now more than ever, it’s important to have a plan for dealing with costs so that your client doesn’t feel the need to risk their own retirement to help their parents.

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