Financial Impacts of Being a Caregiver

Feb 17, 2023 4:23:40 PM

Did you know that National Caregivers Day takes place every year on the third Friday in February? National Caregivers Day is an opportunity to celebrate the people who dedicate their time to caring for others. Being a caregiver is no easy task—and there are financial impacts, too.

What Are the Costs of Caregiving?

Caregivers often look after members of their own family who are elderly or struggling with a long-term illness. In this capacity, the caregiver may be providing financial support as well.

The AARP estimates that 48 million people are providing unpaid care for an adult family member or friend; and of those caregivers, around 80% pay for caregiving expenses out of their own pocket. From home modifications to medical costs, these expenses come in at an average cost of $7,242 per year. In order to cover this spending, caregivers may need to dip into their personal savings accounts, reduce their contributions to a retirement account, or put off loan repayments.

Further adding to the financial burden is the fact that caregiving can be a significant obligation in terms of time and energy—leaving less physical and mental space in the day to earn a salary. Caregivers may need to cut hours at work, refuse a promotion, take unpaid leave, or quit their job altogether.

Where Does the Money Go?

The expenses of caregiving vary widely based on the wants and needs of the person receiving care. Some common costs associated with caregiving include:

  • Transportation: If the person receiving care lives at a different location, gas or public transport will need to be factored into the budget.
  • Home Modifications: On the other hand, many people give care within their own home. This may necessitate the installation of handrails, adding ramps, widening doors, or converting a space to create an extra bedroom.
  • Healthcare: One of the most costly aspects of caregiving, out-of-pocket medical expenses may include prescribed medicines, copays and deductibles, and medical equipment such as a cane or walker.
  • Assisted Living: Designed for elderly people no longer able to live independently, assisted living facilities offer room, board and a variety of medical care. Costs can be expensive, especially if memory care is required.
  • Skilled Nursing: When a person’s health needs are beyond the skills of their primary caregiver, a registered nurse may be needed. Skilled nursing can be provided in a facility or at home.
  • General Living Expenses: Food, toiletries and entertainment are just a few of the general living expenses a caregiver may find themselves providing.

How to Ease the Financial Impact?

Caregiving can put a big strain on budgets. While the challenges of managing money as a caregiver are myriad and complex, there are a few ways in which caregivers might be able to ease the financial burden:

  • Tax Breaks: Caregivers are entitled to a number of tax breaks. You may be able to claim an aging parent as a dependent, or deduct medical expenses on your tax return. The IRS has more information on taxes for caregivers.
  • Medicare and Medicaid: The federal health insurance program Medicare pays for some aspects of long-term care. Medicaid, the joint federal and state insurance program, may also help to cover some medical needs for older adults.
  • Long-Term Care Insurance: Seniors planning ahead may opt for long-term care insurance, which helps to cover some living and healthcare expenses later in life. Premiums for this type of insurance are usually tax deductible.
  • Benefits to Veterans: If the person receiving care is a veteran, their caregiver may be eligible to receive Aid & Attendance benefits from the VA; paying up to $2,642 per month.
  • Workplace Laws: The Family and Medical Leave Act means that under federal law, many caregivers are eligible for up to 12 weeks of leave. While it is unpaid, it means job protection and the continuation of health insurance during this time.
  • Asset Transfers: If a person in need of care doesn’t qualify for Medicaid, but costs are still untenable, they can consider transferring assets to a family member or moving them into a trust. A knowledgeable lawyer can support families interested in this option.

Tags: Elder Care