Many people in their 40s or 50s find themselves raising children while also caring for their aging parents. Sometimes, they even need to fund or orchestrate their parents’ long-term care. The costs of caring for an older adult can easily outweigh those of bringing up kids.
“This is the sandwich generation—caring for children and parents,” says Catherine Valega, a certified financial planner with Green Bee Advisory in Winchester, Mass. “The best way to deal with costs is to have had parents who have saved and planned; ideally, they bought long-term care insurance. If not, then we have to work with what we’ve got, balancing their care with the need to avoid imploding your own [retirement] plan.”
If you’re at the beginning of this journey, you may have no idea what will be involved or how you can plan for it. It can help to understand what lies ahead.
Cost of Care Averages per Month
For parents who need financial assistance for their children, the government offers a variety of programs and free services, including tax credits and Medicaid. Unfortunately, the same can’t be said about care for seniors. While Medicare covers medical treatment, it doesn’t support long-term care. The available programs are only for people who are impoverished and ill.
In 2020, the government reported that the average cost of raising a child from birth to age 17 in the United States is nearly $234,000, equating to $19,500 per year. While inflation will impact this statistic, it’s a far cry from the out-of-pocket costs for an older adult with long-term care needs.
According to a 2021 Cost of Care Survey by Genworth, a private room in a nursing home costs an average of $9,034 per month, while a semi-private room will run about $7,908 per month. That represents an annual cost of between $108,408 and $94,896.
Financial and Emotional Costs Add Up
Other costs can include elder proofing the home and caregiving support, says Marguerita M. Cheng, a certified financial planner with Blue Ocean Global Wealth in Potomac, Md. Cheng recommends taking advantage of caseworkers provided through work-provided employee assist programs (EAPs).
“It is true that the employee may still need to cover the cost associated with care, but the vetting is very helpful,” says Cheng, who is caring for her three children and 80-year-old dad at the same time. “An EAP case manager can provide vetted resources and providers to an employee based on their unique situation. For example, if it’s not safe for mom or dad to be alone, case managers can help identify providers for you.”
Patti B. Black, a certified financial planner with Bridgeworth Wealth Management in Birmingham, Ala., helped care for her mom and dad before they passed away.
“Many older adults want to stay at home, but I encourage my clients to give permission to their adult children to make a different decision later if circumstances change,” she says. “Home care costs $20 per hour in Birmingham, Alabama, which may seem reasonable when only a few hours of care are needed each week. But, when care is needed 24/7, that cost is $175,000 a year. A move to a retirement community may be more cost-effective at that point.”
Caring for an aging parent can also be stressful and overwhelming. In some cases, people quit their jobs or take a leave of absence. Under the Family and Medical Leave Act, employees may be eligible to take up to 12 weeks away during a 12-month period. While the time is unpaid, it allows you to keep your health insurance and return to work. If your parent is a veteran, you could be eligible for up to 26 weeks away.
Facilitating Care Without Compromising Your Retirement
Before you drain your own savings, discuss your parents’ situation as a family, suggests Valega.
“We sometimes say that clients can have the best plan themselves, and their parents are the black hole of their own plan,” she says. “Sometimes siblings can agree to have parents move in and sell their home for expenses. Or even kids move in with parents and agree to care for them and possibly receive the home upon their demise. But speak honestly and openly as a family. Use an impartial moderator if need be.”
If your parents are good candidates for in-home care, Cheng says a reverse mortgage can be a good vehicle for paying its costs. While this option will reduce your potential inheritance, you won’t be forced to tap into your own retirement savings. You may also not have to take time away from your job, which could jeopardize your career as well as your contributions to your retirement plans.
While caring for aging parents can be overwhelming, there are resources available that can help you make the right decisions. A good start can be to contact your local Area Agency on Aging, public or private nonprofit organizations designated to address the needs and concerns of older persons, to find out what’s available in your state.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.