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The Financial Impact of Caregiving

| January 25, 2016
Financial Planning

Did you know…52 million caregivers (one out of every five households) are involved in caregiving to persons aged 18 and over, and that number continues to grow? 1 You might be thinking: ”Wow, but that will never pertain to me.” But you might want to ask yourself this question: “Will one of my family members need my care in the future?” If the answer is no, you might want to think again. 80% of caregivers in this country are un-paid family members 2. Why is this? Because we love them.

If you are currently providing care to a loved one, you can almost certainly describe the physical and emotional strain this lifestyle can bring to you and your family. Something that is often over looked until it is too late is the six figure mark left behind that can devastate your future.

It is not uncommon for caregivers to sacrifice their hours at work, or stop working altogether: a sacrifice determined by the need to balance current income against the actual or emotional cost of outside caregiving. However, there is much more at stake than meeting current needs. Consider these questions:

  • Are you contributing to a retirement plan through your employer? Will this stop or be reduced?
  • Is your employer making matching contributions? Will this stop?
  • Will you be forced to put other saving and investing activities on hold without this extra income?
  • Will you have to take from your current savings or refinance your home to make the adjustment?
  • What possible opportunities will be lost such as job promotions, higher education for your children, etc?

So how, when we love them, can we care for them? As with any significant life change, revisit your Life and financial plan. And, if you aren’t giving care to a loved one today, but anticipate that you will in the future; discuss your plan today. Your Life Planner will help you identify and fill any gaps in your current plan, as well as the plan of the loved one that you are caring for. This simple act could minimize the impact of this life change on your financial future. Work with your Planner to find out what you can afford to do, both today and in the future. Using this as your foundation, discuss avenues for your job vs. time, alternative caregiving assistance, and benefits available to your loved one.

Caregivers in America spend an average of 4.5 years delivering care.3 The most extreme scenario would be a complete stop of income, raises, bonuses, retirement savings, employer contributions, and college education savings - and a total reliance on your current savings to meet your bills over however long it will take to provide the necessary care. The greatest asset you will ever own is time - once it’s gone, you can’t get it back. Then add to that - compounding interest, which also can never be bought back. Your best weapon is to use time and compound interest to the best of your ability now. Bottom line? Planning pays!