5 Financial Planning Tips for Caregivers
As a caregiver, you might be so immersed in managing your aging parents’ financial and health needs that you ignore your own future needs. On the other hand, you know firsthand how much care can cost and probably don’t want to place that burden on your loved ones when you may need it.
If you haven’t done so already, now is the time to properly plan for your future financial and caregiving needs. With proper planning for retirement now, you can ensure you have the funds and care you need as you age.
Here are a few financial planning tips to help you achieve a secure financial future:
- Invest in your 401(k). If your employer offers a 401(k) program, be sure to take full advantage. Many employers make matching 401(k) contributions up to a certain amount, which is essentially like getting a bonus, so it’s wise to contribute as much as you can afford. All contributions and earnings to your 401(k) are tax-deferred, meaning you only pay taxes when the money is withdrawn. The IRS caps the amount you can contribute to your retirement account, so consult with a financial planner to ensure you are within those boundaries. AARP’s 401k Savings Calculator is a helpful tool to see how much you can save.
- Purchase long-term care insurance. Long-term care insurance (LTCI) is a policy that can cover some costs of long term care such as home care, hospice care, or assisted living. It is a common misconception that Medicare pays for long-term care, which it does not. An LTCI policy can help you maintain financial independence from loved ones and relieve them of caregiving tasks since paying for professional care becomes an affordable option.
- Obtain life insurance. A life insurance policy provides a lump-sum payment, or death benefit, to your named beneficiaries in the event of your death. Life insurance policies can also be used to fund long-term care costs, including home care, memory care, assisted living and hospice.
- Get your legal documents in order. As well as building a solid financial base, caregivers should have all of their legal documents in place, including a will or trust, financial power of attorney and health care power of attorney. These documents work together to ensure your wishes are carried out. But don’t take a “set it and forget it” mentality. Review your documents once a year, especially if any beneficiaries have passed away, became divorced, or had children, and update as needed. Make sure family members know where to find these important documents.
- Get help, but be savvy. It is best to work with a professional financial advisor on all of the above, but not all experts are created equal. Some financial planners may be tied to specific companies/products/services, so you may wish to find an independent professional that can provide unbiased advice.
This information is provided for informational purposes only and is not intended to be and does not constitute financial advice.
Many caregivers don’t stop to consider the personal, financial and emotional costs of caring for a loved one.