In a poignant statement that President Jimmy Carter’s family recently issued about First Lady Rosalynn Carter’s dementia diagnosis, the family shared that “As the founder of the Rosalynn Carter Institute for Caregivers, Mrs. Carter often noted that there are only four kinds of people in this world: those who have been caregivers, those who are currently caregivers, those who will be caregivers, and those who will need caregivers.”
No matter where your clients are on this journey, you can help them find ways to reduce the many stresses that often come with the job, including retirement-security risk. Asking clients if they’re providing or receiving caregiving is a good first step. Seniors receiving care may be concerned about or oblivious to the burden they’re placing on their loved ones.
“Being a caregiver, it is not just financial stress: It’s emotional, it’s mental and physical stress,” Marguerita (Rita) Cheng, CFP, CEO of Blue Ocean Global Wealth in Gaithersburg, Md., says from experience.
“My dad was diagnosed with Parkinson’s in 2004, before my third child was born. His condition started to decline precipitously in 2010,” she says. “Discussing caregiving and being sandwiched is important to me professionally and personally.”
Like other professionals who responded to Rethinking65’s queries about this topic, Cheng encourages family caregivers to put on their oxygens masks before helping others. We’ll get to their suggestions shortly, but first a look at some eye-opening statistics.
Behind the scenes
The army of caregivers assisting family and friends is larger than many realize. According to the AARP Public Policy Institute, 38 million family caregivers in the U.S. provide care to an adult with limitations in daily activities. Many of them care for more than one adult, such as mom and dad or an ill spouse and a parent.
More than half (54%) of adults age 50 to 80 polled by the University of Michigan helped an adult over 65 with health, personal or other care tasks in the past two years. Only 6% reported being paid for their assistance. Two in three (65%) noted at least one challenge from caregiving, including emotional or physical fatigue (34%), balancing work or other responsibilities (31%), lack of time for self-care (22%) and balancing time with family/friends (21%).
Many caregivers neglect their personal health needs while caregiving, putting themselves at increased risk of multiple chronic illnesses, according to the Centers for Disease Control. Its research shows that more than half (53.4%) of caregivers age 65 and older and 34.8% of those 45 to 64 have two or more chronic diseases.
Compounded financial effect
The financial fallout from caregiving is tremendous. Nearly 8 in 10 caregivers surveyed by AARP report they regularly incur out-of-pocket expenses related to their caregiving activities (an average $7,242 annually). Approximately 53 million Americans lose $522 billion in wages each year while caring for someone close to them, notes the National Alliance for Caregiving.
Leaving a job to provide care to a family member or close friend (19% of working caregivers have had to do that), or cutting back on work hours and responsibilities, can have lasting financial effects. Missed promotions, lower retirement-plan balances, difficulty reentering the workforce, and having to tap in to Social Security and pension benefits sooner are some of the potential ramifications.
For example, retiring early and claiming Social Security four years before full retirement age would permanently reduce monthly benefits by 25%, says Cheng. A Social Security benefit is reduced by 5/9 of 1% for each month before full retirement, up to 36 months, and then 5/12 of 1% of the PIA for each month beyond 36 months. In this case, (5/9 x 1% x 36 months) + (5/12 x 1% x 12 months) = 20% + 5% = 25%.
Still, “there are times when I’ve actually told people, ‘Hey, it’s okay to take Social Security early,’” she says. “You don’t want people to be worried” they’re making the wrong decision when they need the income and have so much stress and few options.
Caregivers who need to withdraw funds from an IRA or qualified retirement account prior to age 59 ½ can set up a substantially equal periodic payment (SEPP) plan to avoid the 10% penalty, says Cheng. The caveat: They can no longer work for the plan sponsor.
One of her clients established a SEPP when she left the workforce at 57; she moved in with her daughter and baby granddaughter to care for them, says Cheng.
Extra support for women
Cheng acknowledges “it can be tempting to quit your job because you’re feeling so stressed and overwhelmed,” she says. She felt that way herself at times. “But you don’t want to take yourself out of the workforce [without a plan] because it could be devastating.”
Clients need to know that “it’s not just the paycheck,” she says. “You don’t want to find yourself in a situation where you don’t have access to what you need as a caregiver,” such as health insurance.
She and advisor Catherine Valega, CFP, emphasize that spousal IRAs are an important retirement-savings tool for stay-at-home women or those who earn very little.
“Women tend to lose time in the workforce for caregiving on both ends — babies and parents. It is a big problem,” says Valega, head of Boston-based Green Bee Advisory LLC.
“Spousal IRAs are great and should be used very early in your financial journey,” Valega says, so the assets have time to grow and accumulate. Contribution limits for 2023, as for any IRA, are $6,500 ($7,500 for those are 50 and older).
No more excuses
Valega has clients dealing with aging parents and spouses with health issues. She reviews their entire balance sheet, estate-planning documents and insurance coverage — and tries to get them to be proactive as soon as possible in these areas.
“Caregivers tend to focus primarily on others and forgo their own planning,” she says. “We know that caregiving can be a major stressor, so it is important to have your own estate and life and long-term care insurance in place. Otherwise, this gets kicked down the road, and when you finally have time to review you may be ineligible for insurance or your premiums may be much more expensive than they would be otherwise.”
“I’m a big believer in LTC, but you have to get it soon enough to be affordable,” says Valega. “It puts your children in the place of ‘care supervising’ instead of ‘care-giving.’”
“Do you want to go watch mom’s favorite show and drink a glass of wine with her, or do you want to go bathe her? I know which one I would choose for my four daughters — which is why I bought LTC in my 40s,” she says.
Valega also encourages caregivers to have health insurance policies in place, for their general health needs and for potential job-related injuries. “Imagine you’re a small woman, helping a large man transfer, bathe, etc.,” she says.
Meanwhile, families who engage a non-family caregiver should prioritize workers’ compensation insurance, she says. “It may even be mandated by law, depending on what state you’re in.”
Valega also helps clients really understand their future financial needs and how much they’ll have to ramp up their earnings if they currently fall short. “It’s a tough conversation when they don’t have much bandwidth due to caregiving,” she says. Still, caregivers with appropriate skills may be able to boost their self-employment hours in a more flexible fashion.
Valega also suggests doing a Social Security analysis for clients to determine when they should claim it. “I would say that approximately 99% of recipients do not understand how it works or best timing,” she says.
The legal piece
Cathy Sikorski, a Pennsylvania-based eldercare attorney, speaker and author, says family caregivers should make sure that they have in place a durable financial power of attorney, for someone to handle their financial affairs should they become incapacitated, and a healthcare power of attorney, for someone to handle all their medical decisions, for the same reason.
“Twenty-five percent to 30% of caregivers die before the person they are caring for. Often the caregivers have these documents for their loved one but not for themselves. Big mistake.” — Cathy Sikorski
“Twenty-five percent to 30% of caregivers die before the person they are caring for,” she says. “Often the caregivers have these documents for their loved one but not for themselves. Big mistake.”
Family caregivers must depend on their personal health insurance coverage should they get hurt on the job, notes Sikorski. “It is unlikely that they would get any disability benefits unless they have a private policy,” she says.
“There are really no safety nets for a family caregiver,” says Sikorski, who has served as a caregiver to eight people. (Thankfully, not all at the same time, she once told us). That’s why it’s very important for them to get their financial houses in order.
Still, loved ones receiving care can take some steps to improve their caregiver’s financial position, says Sikorski, author of “12 Conversations: How to Talk to Almost Anyone about Long-Term Care Planning,”
For example, parents can establish a long-term-care plan that allows them to pay anyone for care, not only a facility or licensed caregiver, she says. Or a parent can sign a contract to pay their family member for caregiving services.
“All money is reported on a 1099 and the caregiver continues to add to their Social Security and even their IRA,” says Sikorski. She suggests meeting with an elder lawyer to draw up a contract for payment of caregiving and following up with an accountant to understand what this means for both parties.
She also encourages working caregivers who need more flexibility to learn about their benefits, their company policies and their rights under the Family and Medical Leave Act.
‘Caring for the caregiver’
Cheng, who led a “Caring for the Caregiver” presentation at her alma mater, the University of Maryland, offers a number of suggestions to her caregiver clients.
First, no one should feel forced to singlehandedly take on caregiving roles. “It does take a village. Don’t be afraid to ask for help,” she says. “There are things that different family members can do” to split the responsibilities. For example, some tasks, such as managing an aging parents’ finances, can be performed by a child living faraway.
Cheng, who lived close to her parents’ home and frequently accompanied her father to his doctor appointments, didn’t have to worry about also making dinner for her parents because she arranged for the caregiver to take on this role.
“You have to pay for it. But that’s how I was able to give him the care he needed, to take care of my business, my clients and everything,” she says.
To maintain or improve physical resilience, Sikorski suggests that caregivers engage in exercise. “Walking, yoga, weightlifting, whatever floats your boat,” she says. “One can never underestimate the value of moving and being outside!” she says.
Building emotional resilience can be a little trickier. “Caregivers are pretty bad at using support groups except if they are online,” says Sikorski. She serves on the board of directors of Nancy’s House,” a nonprofit that provides burnt-out caregivers with weekend retreats, online support groups, and other resources to break the isolation of caregiving.
She encourages family caregivers who’ve stayed in the paid workforce to use any mental health benefits their employers provide.
It’s also important to remember to find some humor in the situation. “Truthfully, there’s lots to laugh about. [Often] Those you’re caring for haven’t lost their sense of humor either; they see how ridiculous this can be!” says Sikorski.
“Share your stories. You’re not alone. Plus, laughter is healthy and makes it better, even briefly,” she says. “And on that note, when you’re caregiving, watch funny movies, comedy shows, YouTube videos. It makes a better day!”
Taking care of business
Sikorski and Cheng would like to see advisors who serve small-biz-owner or corporate-executive clients encourage them to assist their employees who are family caregivers.
“Please, for heaven’s sake, start the conversation,” says Sikorski, who teaches C-Suite members about their underutilized functions and additional supports they can bring in or create.
“Often employees think legal benefits [included in some employee benefits plans] are for DUIs or neighbor disputes,” says Sikorski, “but don’t think of it as a benefit caregivers could use for POAs, for example.”
She also encourages employers to look into job-sharing arrangements and paid-time-off (PTO) policies, and to permit workers to donate their PTO to employees. Employers can also try to help caregiving employees learn more about community resources, Medicare and how to evaluate nursing homes, among other topics, by bringing in speakers, referring caregiving consultants to employees, or turning to their employee assistance plan.
“Maybe start with a survey and ask your employees what they need most,” she says.
Don’t forget, “This is new territory for employers. They’re not used to needing to calculate into work the cost that caregiving is having on their business,” says Sikorski. “But the writing is on the wall. Caregiving is exploding with the aging population and people who work are family caregivers.”
Cheng would like business owners and executives to pay more attention to “presenteeism” — when employees are at work but feeling overwhelmed and unproductive — and to develop policies to help them.
“The pandemic has really heightened awareness of caregiving not just for children, but also for those who have special needs and our elders,” she says. “Allowing people to work virtually or be hybrid to care for a loved one, I think that’s huge … We have seen as a society that people can still be productive.”
A message for care recipients
Nadine Burns, CFP, president and CEO of A New Path Financial in Ann Arbor, Mich., can also personally relate to eldercare issues. Her husband’s parents, both 88, need care. Her retired sister-in-law lives near them and takes on much of those responsibilities since Burns and her husband live three hours away and both are still working. Burns’ mother, 85 and widowed, needs help as well and lives more than an hour away.
When caring for parents, “One huge issue is frustration and burnout — not just financial,” says Burns.
It’s especially difficult, she says, when older seniors want to continue to live in their homes, which require a lot of upkeep, and expect their time-strapped loved ones to maintain them the way they once did it themselves.
However. “I cannot do a week’s worth of gardening in a three-hour visit on Saturday. Or a week’s worth of laundry,” says Burns.
“We have to get messages out to seniors to take it easier on their family caregivers,” she says, “and not expect their past to be replicated by us.”
Jerilyn Klein is editorial director of Rethinking65.