How Gen X Can Budget To Pay For Their Parents’ Long-Term Care
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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While the huge wave of retired and retiring baby boomers may have benefited from lower costs of living when they were still working, the costs for their long-term care are increasingly expensive, and many boomers are running into trouble affording this care.
This is putting their children, largely Gen Xers and some older millennials in the position of having to help pay for their parents’ care.
Melissa Murphy Pavone, CFP and founder of Mindful Financial Partners, sees firsthand the immense stress placed on members of the “sandwich generation” — those who are juggling the financial demands of raising their own children, saving for their futures and now, increasingly, paying for their parents’ long-term care (LTC).
“It’s a challenge that many Gen Xers and millennials never anticipated, but it’s becoming a reality as life expectancy increases and the cost of care continues to climb,” she said.
What can Gen Xers who did not set out to pay for their parents care do to budget for these additional costs? Financial experts offered some tips.
Start With a Realistic Budget
The first step is to take a clear, honest look at your finances, Pavone said. While the idea of adding another major expense such as long-term care for a parent, may feel impossible, “doing a deep dive into your cash flow can reveal opportunities to allocate funds effectively,” she said.
Explore Long-Term Care Insurance
If your parents are still healthy, Pavone recommended exploring long-term care insurance, hybrid life insurance policies with LTC riders or even annuities designed for care expenses.
“These options can significantly reduce out-of-pocket costs down the road,” she said.
However, these solutions are really only going to be sensible if they’re implemented earlier. “Waiting until care is imminent or health issues arise can make these solutions unaffordable or unavailable,” she warned.
Don’t Miss Payments
Jay Zigmont, CFP®, founder of Childfree Wealth®, said that if your parents have an existing long-term care policy, to make sure they never miss a payment as insurance companies may cancel the coverage after a missed payment.
“Caring for parents has become such a big challenge that we have integrated creating a plan to care for parents into each of our client’s financial plans. Their parent’s financial planning, or lack thereof, may impact our client’s success more than their own planning.”
Set Boundaries
While you may be willing to care for your parents, there may need to be limits or boundaries around that help, Zigmont suggested. He recommended outlining what you will and will not do to care for your parents.
“For example, my wife and I have decided that no one lives with us. We will support our parents in other ways.”
Be Realistic
Understand that it is not realistic for most people to plan on paying for their parent’s long-term care, Zigmont said.
On average, he shared, it costs $115,000 per year for a single room in a skilled nursing facility. Men will spend around 2.2 years in care, and women 3.7 years on average.
“These numbers jump considerably when you are talking about care for Alzheimer’s or similar cognitive decline.”
Don’t Count On Medicare
Also remember that Medicare does not pay for most long-term care, Zigmont said.
“If your parents do not have many assets, you may want to make a plan to rely on Medicaid. Unfortunately, Medicaid care is often not the best, but with good planning you may be able to protect some of their assets and get them care.”
Medicaid (state based) may pay for in-home care, however.
Consider In-Home Care
If you have to choose between a nursing home and in-home care, the latter is a more affordable option for aging parents, according to Yelena Sokolsky, the founder and CEO of Galaxy Homecare.
She said that nursing homes are usually more expensive due to lodging and general equipment costs that are included in service rates.
“If you can afford to invest your time to make the best decision for an aging parent, look into your options; home care can provide a broad range of personal care, companionship, homemaking, and live-in care services as well as skilled nursing care and specialty care for dementia/Alzheimer’s patients.”
Look To Other Coverage Sources
Additionally, other sources of coverage may include private/self-pay, auto accident insurance, worker’s compensation insurance and various religious or social service organizations, Sokolsky explained.
By building a realistic budget, seeking resources and working with a professional, you may be able to ensure that your parents are cared for while staying on track for your own financial goals.
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