Are you a Millennial worried that you’ll soon be taking care of your elderly parents, both physically and financially? You’re not alone. In 2018, AARP released a study showing that out of the 40 million U.S. adults who provide care for their elderly parents, about one in four is part of the Millennial generation.
Providing appropriate care for an elderly parent takes time, energy and money – which can in turn, enact a mental toll. According to the AARP study, those Millennials who are also their elderly parents’ caregivers dedicate an average of 27 percent of their annual income on caregiving costs. That’s a higher percentage than any other generation.
Carrying the financial burden of health costs is a very real challenge for a growing number of young adults. Realistically, there aren’t many good solutions for lifting it, outside of having the hard conversations now and planning early.
The AARP study found that the Millennials spend an average of about $6,800 a year on out-of-pocket caregiving expenses for their aging relatives. This covers everything from rent and mortgage payments for their elderly parents to home modifications, food and transportation costs.
The challenge here is that elder care, especially housing and healthcare costs, is extremely difficult to budget for. That’s why it’s so important for parents and young adults to create a plan to handle these costs before the care is needed.
“It is unfortunate that elder care costs so much,” said Mark Charnet, founder and Chief Executive Officer of American Prosperity Group, a retirement and estate planning company in Pompton Plains, New Jersey. “These costs can be devastating to young people who are looking to build their own financial future.”
The costs of elder care
It’s not easy to determine the full cost of elderly parental care. The price tag will strictly depend on your parents’ age, their health/medical needs and where they live.
The Genworth Cost of Care Survey, released each year, provides a good estimate for the some of the most common needs.
Home services: The 2018 Genworth survey reported that it costs an average of $4,004 every month for homemaker services and $4,195 to hire a home health aide. The cost of home health aides was up 2.33 percent from 2017.
Adult day care: Genworth found that it costs an average of $1,560 a month for adult day care.
Nursing home stays: Caring for the elderly gets especially expensive when older people must leave their homes. According to Genworth, it cost an average of $8,365 a month or more than $100,000 a year for a private room in a nursing home. That figure stood at $7,441 a month or $89,297 a year for a semi private room.
Assisted-living facilities: The average yearly stay in one of these facilities rose 6.67 percent in 2018. Assisted living now costs an average of $4,000 a month and $48,000 a year.
Steven Stern, President and Senior Financial Partner with Abel Financial in Towson, Maryland, said that the cost of elder care is becoming more prohibitive in part because people are living longer.
“Younger adults are stepping in to help their parents with health issues as they get into their mid- to late 80s. That leads to questions about how to help them financially,” Stern said. “Then there’s that ‘a-ha!’ moment when you realize you don’t know much about your parents’ financial situation. It’s the details, and not knowing them, that can cause a lot of stress.”
Here are some solutions to try if you find yourself overwhelmed with the burden of providing financial care for your older parents.
Get into the details early: The best move is to act quickly. As your parents age, meet with them to discuss their finances. Determine how much money they’ve saved and how much they can spend on healthcare and housing. You can determine whether your parents need to sell their home or whether they have enough to afford a stay in assisted living.
This might be a time for your parents to draft a power of attorney document, too. This document will give a specific person – often a child – the right to make financial or medical decisions – or both – on their parents’ behalf.
Tap the friends and family bank: ShirleyAnn Robertson, a financial advisor with the Schaumburg, Illinois, office of Prudential, said that many parents and adult children still don’t talk with their parents about finances and long-term care. These adult children might then find themselves facing an emergency situation when they suddenly need both resources and extra dollars to help care for their aging parents.
This is when it’s time to reach out to family members and friends for help with either finances or time. Maybe a sibling can’t provide much financial assistance. But that person might be able to spend several hours a week checking in on aging parents. Another relative might be willing to provide a bit of financial assistance each month.
“If you can’t give your financial resources, maybe you can give your talent or treasures,” Robertson said. “If mom and dad are in need of care and you are scrambling to find dollars, you have to first exhaust the family and friends bank.”
Find local help: Robertson said that many local governments provide financial assistance for seniors. The challenge, of course, is that every community is different. Robertson recommends calling your local city or village government to discover what resources are available.
Research Medicare: Once your parents turn 65, federal Medicare can help cover their medical bills. The challenge is that Medicare doesn’t cover everything. Your parents will still be responsible for plenty of medical costs even after Medicare kicks in. The biggest gap? Medicare does not cover stays in assisted-living or other long-term care facilities.
Consider Medicaid: Medicaid will help cover the costs of assisted-living and long-term care facilities depending on your state.
There are challenges, though. Your parents will have to meet certain income requirements. This federal program is designed to assist people with low income. If they have too much income or assets, they might not qualify for Medicaid.
And if your state doesn’t offer the option of using Medicaid to pay for long-term care this option is unavailable. Here is a list of the different Medicaid benefits that states offer.
Long-term care insurance: Long-term care insurance is private insurance that covers many of the costs that come with chronic illnesses, such as nursing home stays. The catch is that long-term care insurance itself can be costly, especially for consumers who sign up for it later in life. What‘s also challenging is that not as many providers offer this insurance today.
The American Association of Long-Term Care Insurance says that a 60-year-old couple who purchases this type of insurance can expect to pay about $3,381 a year for the premiums.
Credit cards: Charging some of your caregiving costs could be trouble, unless you use your credit card wisely. Maybe you help your parents with their groceries each month. Charging these groceries to a rewards card that offers rewards points for grocery store purchases could pay off, but only if you pay off your balance in full each month.