The Financial Challenges of Caring for the Aging

The Financial Challenges of Caring for the Aging

07/25/2022 | Savings & Budgeting

The Financial Challenges of Caring for the Aging

Represented by an estimated 73 million people, baby boomers are the second-most populated generation living today. With the generation beginning at the end of World War II, baby boomers are now aging into their 60s, 70s, and 80s — and by 2030, according to Census.gov, all baby boomers will be 65 or older.1

As they get older, baby boomers are going to start dealing with more intensive healthcare needs. Those with limited access to financial resources and waning independence will likely be leaning on their children, younger relatives, and friends and neighbors for additional support as family caregivers.

If your parents are aging into retirement, or if you want to be as prepared as possible for your own aging and long-term healthcare, it’s important to know the full financial impact of caregiving — and the best strategies to mitigate that impact.

The Financial Impact of Caring for the Aging 

HealthView Services Financial estimated that the typical retired couple (assuming age 70) in 2024 will need $16,000 or more per year for healthcare expenses.² Obviously, this amount will vary based on a number of factors, including the age of each individual, the overall health of each individual, access to insurance and more. But that’s a lot of money. 

It’s also not the only cost you’ll have to consider. 

As a care manager preparing to provide care and assistance to an older loved one, you’ll need to think about the following: 

  • 1

    Direct healthcare costs. One of the biggest and most notable categories of expenses you’ll need to consider is direct healthcare costs. The person for whom you’re caring will be responsible for paying insurance premiums, medical expenses, pharmaceutical costs and more.  

  • 2

    Home modifications. As your parent or loved one ages and focuses on home health, they may require home modifications to improve mobility or reduce the chance of suffering an injury. This could include wheelchair ramps, modifications to stairs and other safety measures. 

  • 3

    In-home care assistance. If you’re acting as a caregiver, you may be able to check in on your loved one frequently and perform care tasks. But if they’re struggling to live an independent life, they may require more dedicated in-home care assistance and professional care services. 

  • 4

    Long-term care. Your loved one may benefit from some form of long-term care, such as assisted living, living in an independent living community, living in subsidized housing, living in a nursing home or some other option. All of these possibilities typically cost thousands of dollars per month, and sometimes more. They may or may not be partially or fully covered by insurance. 

  • 5

    Savings loss. You and your loved ones may be forced to deal with savings loss, and potential losses in your retirement accounts, to cover healthcare expenses. If you tap into your retirement savings to cover the cost of in-home care, for example, it could leave you in a compromised financial position. 

  • 6

    Personal healthcare costs. As a caregiver, you’ll need to think about your own health and wellness. Caregiving is hard work, and you may be forced to undergo significant physical labor and make sacrifices to do it. Accordingly, you may accumulate additional healthcare costs of your own. 

  • 7

    Job loss/loss of income. In some cases, caregivers are forced to quit their jobs or cut their hours to provide adequate support. That loss of income can make your financial situation challenging. 

Possible Solutions (and Challenges)

The good news is, there are many solutions available to help you better financially (and logistically) manage this caregiving situation.

The bad news is not all of these solutions are ideal.

Extra Income

One option is to secure additional income, either by picking up extra hours or taking on a new job. But when you’re already stretched thin, this can be a laborious — and sometimes impossible — task.

Conventional Health Insurance

Having health insurance can mitigate many healthcare and caregiving expenses. However, you may still be responsible for paying premiums or co-pays and covering costs up to your deductible.

Retirement Savings

If you or your parents have been dutifully saving and investing, you may be able to tap into retirement savings to cover at least some healthcare costs. But shrinking your nest egg can leave you without money for your other needs — or delay your retirement.

Medicare and Medicaid

Medicare and Medicaid are government programs designed to make healthcare more affordable for older people and low-income earners, respectively. However, enrolling in these programs (especially Medicaid) can prove difficult — and you may be forced to liquidate certain possessions to cover costs before you qualify.

A Health Savings Account (HSA)

A health savings account (HSA) may be one of your best financial options. Functioning somewhat like a conventional savings account, this special account allows you to contribute pre-tax dollars directly from your paycheck — and you’ll earn tax-free interest as well. You can use this money at any time for any healthcare-related expenses, and your money rolls over, so it’s never wasted.

A United Bank Financial Advisor

If you’re not sure what financial strategy (or combination of strategies) to use, consider talking to a United Bank financial advisor. We’re here to help you during this challenging time.

Steps You Can Take Now

If you’re concerned about your future as a caregiver to a family member or as a future retiree, there are a few important steps you can take now to improve outcomes:

Understand the Financial Road Ahead

Try to understand the true costs of caring for an aging adult and start exploring options for long-term care. The more you understand the variables (like how much time and money this is going to cost), the better you can plan.

Start Planning as Early as Possible

Don’t wait for a major health event to start planning. The earlier and more proactively you plan for your future, the easier it’s going to be.

Talk to a Professional

You don’t have to do everything alone. Working with a professional financial advisor and/or a health aide may be exactly the support you need to get a firm grasp on this financial dilemma.

Come Up with Backup Plans

Don’t put all your eggs into one basket. Come up with backup plans and redundancy measures to improve your position.

United Bank is here to help you plan for the future — whether you’re planning for yourself or a loved one. Together with your financial advisor, you can get access to better financial products. Contact a United Bank financial advisor today to get started. 

1 Bureau, U.S. Census. “2020 Census Will Help Policymakers Prepare for the Incoming Wave of Aging Boomers.” Census.gov, 25 Feb. 2022, https://www.census.gov/library/stories/2019/12/by-2030-all-baby-boomers-will-be-age-65-or-older.html 
2 Silvestrini, Elaine. “Health Care Costs in Retirement.” Annuity.org, 1 July 2022, https://www.annuity.org/retirement/health-care-costs/ 

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