Twenty-three year-old Emilie Lima Burke has started to save $20 per day.
It’s not for a vacation or her retirement fund. Instead, she’s preparing for the moment she expects she’ll need to take care of her aging dad and all his expenses. Burke, who runs the site BurkeDoes.com, a financial, health and career resource for millennial women, says that her parents used to joke that she and her sister would be “their retirement plans.”
But that’s seems no longer a laughing matter.
“My dad has struggled with long bouts of unemployment…He has no money saved at all,” says the 23 year-old. “I know that at some point I will be [his caregiver]. When there is no retirement fund or any assets for aging parents to fall on, you just have to make a plan.”
We’re living longer these days, which means that many of us have the great fortune of growing older with our parents. The number of Americans ages 65 and older expected to nearly double by 2050, according to the U.S. Census.
With longevity, though, comes the increasing responsibility and financial pressure to care after our aging family members, especially, if like Burke, our family doesn’t have a financial plan already in place. The average working household has “virtually no retirement savings.”
It’s no surprise then that about one in four Americans (with parents ages 65 and older) is helping a parent with his or her affairs, offering financial help or caring after them.
And not to cause alarm, but more than half of the country – 29 states – have so-called “filial support” or “filial responsibility” laws that could potentially require adult children to pay for their parents’ care if they don’t have the means to do so for themselves.
If you’re struggling to support a family member or anticipate needing to care after a loved one down the road, here are some ways to help make your efforts more affordable.
Know Their Bottom Line
If a family member is turning to you for help, particularly financial help, then it’s more than appropriate to have a candid money talk – no matter how uncomfortable it may be. Ask to see how much they have in the bank, as well as what other streams of income they may be receiving (e.g. social security, a pension, insurance payout, a portfolio distribution, etc.). Create a budget to pay for as much as possible with your parent’s income and assets before tapping your own bank account.
“I see people who take on credit card debt or stop paying their own bills to care for their parents, but a much better option is to first exhaust all of the resources that the parents can have access to,” says Belinda Rosenblum, a financial strategist at OwnYourMoney.com.
Having a paper trail of statements showing income and expenses will also prove helpful if your parent needs to apply for Medicaid, the health insurance program designed to help those with little money. Here’s where you can learn more about Medicaid eligibility. Care facilities sometimes have a Medicaid expert on staff to assist with your application, too.
Reach Out to Local and National Resources
When business coach Amanda Abella’s grandmother was diagnosed with Alzheimer’s a year ago, her family needed to find a way to pay for her extra care. The adult day care alone, she estimates, would have cost $100 per day.
For guidance, they turned to her grandmother’s doctor and the social worker at the hospital and discovered the Alliance for Aging, a Florida-based private, not-for-profit that provides a range of services to older people, including personal care, legal help, transportation, meals, etc. After several rounds of interviews and almost a year of being on the wait list, Abella’s grandmother succeeded and now receives free nursing care.
The lesson: Never assume that you have to go it alone. Help is out there. Local and national resources offer grants and support to seniors. To start your search for funding visit: Family Caregiver Alliance and Paying For Senior Care.
Also worth mentioning: If your aging parents are veterans look into the Department of Veterans. “Often veterans overlook or are not aware of the benefits they are eligible for such as medical care or prescriptions, especially if they’ve been separated from the military for a long time,” says military money life coach Lacey Langford.
Look Into The Family and Medical Leave Act (FMLA)
If you need to take time off work to care for a family member, be it a parent, child or even yourself, but worried about losing your job in the process, you may benefit from the Family and Medical Leave Act (FMLA).
The federal law grants certain workers up to 12 weeks of unpaid leave per year with the promise of getting their jobs back. You can also keep your company health benefits during your time off. Some states such as California, New Jersey and Rhode Island allow qualified workers to earn at least part of their paycheck during this time.
Remember the Tax Deduction
Track expenses and if you afforded more than half of your parent’s needs during the tax year (including utilities, medical bills, food and general living expenses) and he or she earned less than $4,050 (not counting social security), then you may be able to claim mom or dad (or both) as a dependent on your 2016 tax return. Doing so offers you additional tax benefits. You can find more information on how to claim a parent as a dependent on TurboTax.com.
Keep in mind that whether or not your parent qualifies as a dependent, you might be able to deduct the medical expenses (including prescriptions and doctor visits) you paid for on his or her behalf from your taxable income. The IRS requires the total of these expenses to be more than 10% of your adjusted gross income in order to claim the deduction.
Consider Long-Term Care Insurance
If your parents have yet to reach the age where they may need some assistance, see if they’ve looked into long-term care insurance. This can come in handy if they think you may need to afford a nursing home or at-home care later down the road. (And about 70% of Americans who reach age 65 will likely need some time of long-term care before as they age). Medicare does not cover these costs and they can be very expensive.
For example, the average cost of a home health aid, which long-term care would cover, can be anywhere from $34,000 to $57,000 a year depending on where you live. If your parents don’t have enough saved to cover this, it may fall on your shoulders. It’s just as beneficial to you for them to seriously consider long-term care.
You may decide to purchase a policy yourself and have your parent(s) be the beneficiary.
Keep in mind that the ideal time to buy long-term care is when your parents are in their 50’s and 60’s (specifically between 52 and 64). The younger and healthier the beneficiary is, the more likely he or she will qualify (and the lower the monthly premium). For a couple in good health applying for long-term health care in their mid-50s, the average annual cost is about $2,350 (or less than $200 a month).
Create a Family Fund
Finally, like Burke, it pays to start saving early for the financial what-ifs surrounding our family members.
You can hope for the best, but should also prepare for the worst. Tucking away even $10 or $15 a week for the next five or ten years while your parents are still able to take care of themselves could yield an essential nest egg for everybody when life takes a turn.
Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected] (please note “Mint Blog” in the subject line).
Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.
Learn more about security