Whether you or your partner are considering becoming a stay-at-home parent or taking care of an aging parent full-time, serving as the primary caregiver for a loved one can be a rewarding and fulfilling experience. However, it may also have significant lifestyle impacts that come with many financial considerations.
As you consider becoming a primary caregiver, here are three financial questions to ask yourself and a few strategies to save on expenses. We can help you understand how this transition may affect your financial goals.
1. Do the numbers make sense?
As a starting point, determine what caregiving tasks you need help with - and how often you need assistance with them. For example, many caregivers find they need recurring support in areas like meal preparation, childcare, errands, appointments and medication management.
After defining those caregiving needs, then consider the financial impacts of paying for them given your current financial situation. For example, some couples may calculate the cost of paying for childcare versus the income lost if one parent stays home and determine that neither option has a particular financial advantage in the short term. Others may decide part-time work provides the flexibility they need, and many choose to balance both full-time work with primary caregiving roles.
Consider the income you will be living on as a primary caregiver, as well as any additional expenses that may arise because of these new responsibilities. Can you comfortably cover all your expenses and save for your financial goals in this new scenario? How can you sustain your present assets, while funding your future goals?
2. Am I comfortable with all the costs?
As you calculate the financial impacts, acknowledge that not every aspect of this decision-making process can be monetarily quantified. It’s impossible to put a price tag on the memories you make with your child when they’re young or the quality time you spent with your parent as they age. Those experiences may be as important to you as the financial impacts.
However, it’s also important to consider the lost income or forgone professional opportunities due to primary caregiving. If you’re taking a step back from your job or career, it may be more difficult to re-enter the workforce later, regain momentum or return to your same level. Part-time work may mean a loss of certain employee benefits.
From a lifestyle perspective, you may decide it’s worth forgoing or reducing certain lifestyle expenses — such as a larger home, frequent travel or eating out — to prioritize you or a partner being more present with loved ones. It’s a tradeoff that should be evaluated and accounted for.
3. How will this impact my financial goals?
Becoming a primary caregiver can affect how much you can save for your long-term financial goals. Consider the overall impact and whether you’ll need to adjust your savings strategies and time horizon accordingly.
When it comes to retirement, it’s especially important to keep in mind the implications that lost or reduced wages may have on your investment portfolio and your Social Security benefits. For example, you may find you need to delay your retirement to account for caregiving responsibilities.
We’re here to help you assess exactly how your new caregiving situation will impact your financial goals and provide recommendations to help keep you on track.
Strategies to offset the financial cost of caregiving
As a primary caregiver, consider taking advantage of these opportunities:
- Strategically rein in expenses. Your new caregiving situation may mean outsourcing less and/or reducing your own lifestyle expenses such as eating out and services like landscaping or housekeeping.
- Contribute to a dependent care flexible savings account through your employer. These are pre-taxed funds for preschool, daycare and caregiver expenses for eligible dependents living in your home so that you (and your spouse) can continue to work.
- Use available tax incentives. You may be eligible for the Child Tax Credit and the Education Credits. However, consider the impact of no longer being able to claim the Child and Dependent Care Credit (which is only available when both you and your spouse work).1
- Leverage veterans’ benefits and senior citizen discounts, if applicable. If you’re caring for an aging loved one, these perks can help reduce the cost of medical needs like care centers, hearing aids and eyeglasses. For veterans’ benefits, you can work with a VA service coordinator for guidance (by county). VA benefits are limited, and benefits vary based on the type of military service you provided.
- Tap into applicable insurance policies. This may include long-term care insurance, which reimburses policyholders for some daily caregiving services, or disability insurance based on the terms of the policy.
- Reach out to us. If you are feeling some expense pressures, as well as pressure managing multiple goals, we can help. Making a plan and creating strategies can help build confidence and reduce the burden.
We’re here to help
We are here to help you balance your financial goals with your other priorities, like providing support and care to your loved ones, and help preserve and grow your assets.