How Millennials Can Budget To Pay For Their Parents’ Long-Term Care
Written by
Jennifer Taylor
Edited by
Jenna Klaverweiden
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Caring for aging parents isn’t cheap. However, many millennials are currently — or will soon be — trying to fit the cost of their elderly parents’ long-term care into their budget.
As of 2023, the most recent data available, the median cost of a home health aide is $6,292 per month, according to Genworth. If a parent needs an assisted living facility, this cost rises to $5,350 per month. A private room at a nursing home facility costs $9,733.
“Millennials and Gen Z professionals are often faced with supporting their elderly parents during retirement for a number of reasons,” said Heather Comella, CFP, lead planner at Folsom Wealth Advisors. “This may be because parents weren’t able to save enough, cultural norms may be such that adult children care for their parents or the rising cost of healthcare and long-term care expenses may cause issues — in even the most well-prepared retirement plans.”
If you’re in this situation, you might be struggling to provide for your parents without sacrificing your own financial goals. Keep reading for five tips that can help your family budget for your parents’ long-term care needs.
Combine Households
Maintaining one household can be cheaper than two, so Comella said this can be one way to save money.
“Moving a parent into your home — or building a mother-in-law suite or [accessory dwelling unit] — is becoming an increasingly popular option for families planning to care for multiple generations,” she said. “This arrangement can reduce the household’s monthly expenses by consolidating costs like internet, meal prep, pest control or landscaping and property taxes.”
Have a Complete Estate Plan
It’s also important to ensure your parents’ finances are in order and that they have a plan in place.
Comella recommended ensuring your parents have a complete estate plan — including a durable power of attorney — and having them add a trusted person to their bank and investment accounts.
“In my experience, parents can hide cognitive decline for a surprisingly long time, leaving them vulnerable to scams,” Comella said. “Even if your parents seem sharp, adult children would be well served to take preventative actions early.”
Communicate as a Family
Said Israilov, CFP, a fiduciary financial advisor and co-founder of Israilov Financial, explained that his brother and sister-in-law live with his parents and care for them. At times, he said this has presented many financial challenges for them. However, he explained that communication has been key.
“What proved effective for my brother in addressing these financial anxieties was establishing open lines of communication with both my parents and his siblings — myself, in my early 30s and my older sister, Gen X and the oldest of the siblings,” he said. “Three of us siblings have frank discussions and a clear understanding of how much money is required to meet my parents’ basic monthly needs.”
This communication has helped them establish a plan and budget.
“Budgeting for these expected as well as unexpected costs helps us — the three siblings — be financially and emotionally prepared and provide our fair share of financial assistance to care for our elderly parents,” he said. “Knowing that my brother has made major career sacrifices to care for my parents, my sister and I cover a larger portion of the budget required to care for my parents.”
Know Your (Financial) Limits
“Run the numbers on what the max amount of support you can provide to your parents without jeopardizing your own goals, like your own retirement or funding your children’s college education,” said David Flores Wilson, CFP, CFA, AEP, CEPA, managing partner at Sincerus Advisory.
He suggested working with a financial advisor to help you determine the impact of the support you can provide at various monetary levels.
“For example, providing parents with $1,000 [per] month of support could mean the second generation retiring at age 64, but contributing $2,000 [per] month could mean working until 66,” he said.
He advised having extensive conversations with your spouse — if married — about your long-term goals and values, and the trade-offs of supporting your parents at different financial levels.
Develop a Comprehensive Tax Plan
If you provide financial support to your parents, Wilson advised working with a CPA and a financial planner to find the most tax-effective strategy.
“For example, support structured as a formal loan could qualify as a deduction as a nonbusiness bad debt deduction,” he said. “Significant healthcare expenses could potentially qualify as an itemized deduction, if they are bunched up into a particular year to exceed the 7.5% of adjusted gross income hurdle.”
Tax deductions can add up fast, so you don’t want to miss out on these savings opportunities.
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