Plan ahead for the financial burden of caregiving

September 14, 2000

Plan ahead for the financial burden of caregiving

By KEVIN CLAPP / Staff Writer

Paying to take care of aging parents is a financial minefield littered with escalating costs. For the unprepared, it can create a mountain of debt.

Because the aging of America is a relatively new phenomenon, there are few strategies to use. A rainy-day fund may not be enough, especially when caregiving can be more like a monsoon.

According to Bill Gustafson, director of the Center for Financial Responsibility at Texas Tech University, now is the time to start planning, since children are likely out of school and parents are hopefully still in good health.

"If you look at government data on the financial family life cycle, these are the peak earning years," he says. "You shouldn't have quite the level of expenditures, so for most people, ages 45 to 64 is the period when you have more resources than in the past."


It has always been wise to tuck extra cash away in order to enjoy retirement. However, Gustafson says, saving has taken on added importance because caregiving has the potential to last longer as the population lives into their 80s and 90s.

His mother, for instance, is 91, and he is helping to pay for her care, a task made easier because his son is out of school and on his own.

Assuming someone begins working at age 20, retires at 65 and lives to be 90, they will spend more than half their working lives - 25 years - in retirement.

Without proper planning, those years can create a financial hardship on multiple generations as everyone tries to do their part to care for loved ones.

Gustafson advises middle-agers and their parents to investigate long-term care insurance policies, which help pay for care of loved ones in the case of a drawn-out illness.

Medicare and Medicaid may not pay a lot of the costs if, for instance, an elderly relative has Alzheimer's disease. Long-term care insurance can help defray costs, and the key is to purchase it now, while healthy, when it is more affordable.

Research is key. Internet sites exist with tips and advice for self-education, but Gustafson also recommends consulting professional planners to make informed decisions.

Fred Otto, executive director of Washington County Commission on Aging, echoes Gustafson's tip. No one knows if or when they may need to pay for care of elderly relatives.

"We don't just let things happen to us," Otto says. "You try as much as possible to anticipate."

In middle age, with kids out of school and the mortgage paid off, people will have more disposable income. Instead of buying a new car every year, or taking an extravagant vacation each summer, squirreling some of that extra cash can make caregiving run smoother in the future.

And if the money is not needed, it will always be available down the road.

"It used to be you got your picture in the paper if you had four generations. That's going to happen more regularly," Gustafson says. "If the parents hadn't saved for retirement and the person hasn't saved for retirement, there's a hard-core financial burden coming down the road."

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