Budgeting for Care: Financial Considerations for Caregivers
Providing care for an aging parent, sick spouse or loved one with disabilities often comes at an immense personal cost especially financially. Between missed work, medical expenses, home modifications, hired assistance and more, caregiving can quickly put a massive strain on your budget.
Whether you're preparing for upcoming caregiving duties or are already knee-deep in providing support, it's crucial to understand the financial realities and have a plan in place. Proper budgeting, accessing available assistance programs, and diligent cost management can help ensure you don't sacrifice your own financial security in the process.
Here we'll cover some of the key money matters caregivers in the United States and Canada need to consider, along with resources to ease the expenses of caring for a loved one.
For Caregivers in the United States
Caregiving costs can add up alarmingly fast in the U.S. where healthcare charges are notoriously high and insurance coverage may be limited. A few staggering statistics:
- The average cost of a semi-private room in a U.S. nursing home is over $93,000 per year
- Assisted living averages over $4,300 per month for a one-bedroom unit
- In-home care runs $20+ per hour for a health aide, over $7,800 annually for just 6 hours per week
Even for those providing unpaid care for loved ones at home, out-of-pocket expenses can reach into the tens of thousands annually for supplies, home modifications, travel costs, medical co-pays and more.
Many caregivers also suffer income losses from reducing work hours, taking unpaid leave, turning down promotions, or having to quit jobs entirely to accommodate responsibilities. On average this equates to over $300,000 in lost wages and benefits over a caregiver's lifetime.
Creating a Caregiving Budget
The first step for U.S. caregivers is to sit down and organize all current and projected care-related expenses into a detailed budget. This may include:
- Household costs like rent/mortgage, utilities, groceries, etc.
- Outstanding consumer debts like credit cards, auto loans, etc.
- Insurance premiums, deductibles and co-pays
- Hired in-home care, adult day services, facility costs
- Home modifications like ramps, bathrooms, stair lifts, etc.
- Incontinence, nutritional and medical supplies
- Travel costs for appointments, treatments, visitation
- Legal fees for guardianship, power of attorney, etc.
Next, calculate your available income and assets that could cover costs. Include current salaries/wages, personal savings, investments, equity in homes/properties, insurance payouts, and any help from family members contributing financially.
With expenses and income mapped out, you can identify shortfalls and areas to cut back. Look for opportunities to earn supplemental income through freelancing, rentals or even getting family members to chip in for care costs proportionately.
It's wise to consult financial planners and eldercare service providers who can advise on budgeting strategies as well as options and eligibility for assistance programs.
U.S. Financial Assistance Resources
Thankfully, there are numerous federal, state and non-profit resources that can help offset the financial burdens of caregiving for those in need:
Medicare: While Medicare won't cover ongoing assisted living or nursing home expenses, it can help pay for home health aides, adult day services, medical equipment, therapy and prescription drugs providing some relief for certain care costs.
Medicaid: For low-income households, Medicaid offers more comprehensive coverage including nursing home care and even some assistance paying family caregivers. Eligibility and benefits vary by state so check details carefully.
Veterans Benefits: Low-income wartime veterans and surviving spouses may qualify for the VA's Aid & Attendance pension to help pay for in-home care, assisted living, skilled nursing and more.
Social Security Benefits: Social Security offers Disability, Survivor's and Retirement benefits that caregivers may be eligible for, either independently or on the recipient's record as a spouse, child or dependent.
Tax Breaks: The IRS offers several tax credits and deductions related to caregiving including the Child & Dependent Care Credit, Medical Expense Deductions, Household & Dependent Care Tax Credit and more.
State Assistance: Many states have their own programs aiding caregivers through Medicaid waivers, respite care, support services, loans/grants for home modifications and legal aid services.
Non-Profits & Charities: Organizations like the Alzheimer's Association, Cancer Society, MS Society and others provide caregiving education and assistance, including some financial relief programs and respite care subsidies.
Long-Term Care Insurance: While expensive, long-term care insurance can be invaluable for those who have policies to help cover costs of nursing homes, assisted living, in-home care and other services.
Reverse Mortgages: Seniors may opt for reverse mortgages to access equity in their homes as a source of income to pay for care costs without monthly mortgage payments.
For Caregivers in Canada
In Canada, the national healthcare system helps cover many medical costs that U.S. caregivers must pay out-of-pocket for. However, there are still substantial associated expenses to plan for:
- Facility care costs for nursing/retirement homes Over $30,000/yr on average
- Professional home care services from $25-$90/hour
- Out-of-pocket medication costs, supplies, home modifications
- Income loss from reducing work hours or leaving jobs to provide care
Strategies like budgeting carefully, earning supplemental income when possible, reducing expenses elsewhere, and leveraging any home equity can all help offset the financial strain.
Additionally, Canada offers several government-funded programs that caregivers can take advantage of:
Tax Credits: The non-refundable federal Disability Tax Credit, Caregiver Tax Credit and Medical Expense Tax Credit can provide some tax relief for qualifying caregivers.
Canada Caregiver Credit: This refundable tax credit is valued at over $1,200 per year for approved caregivers supporting spouses, parents, grandparents and related adult dependents.
Child Disability Benefit: Eligible caregivers for children under age 18 with severe and prolonged impairments can receive up to $2,950 annually in additional tax-free assistance.
CPP & EI Benefits: Low-income caregivers may qualify for a reduced Canada Pension Plan retirement benefit, while the EI Compassionate Care program provides temporary income assistance.
Veterans' Services: Veterans Affairs Canada offers compensation and coverage for in-home care, assistive devices and facility care access through multiple programs.
Provincial Benefits: Many provinces have income-tested tax credits, expense reimbursements, grants and subsidized programs specifically aiding caregivers. Alberta, Ontario, Quebec, BC, Nova Scotia and Manitoba are examples.
Non-Profit Support: Organizations like the Canadian Cancer Society, Alzheimer's Society, MS Society and others provide educational resources, support services and some financial assistance to caregivers and families.
Indigenous Services: First Nations, Métis and Inuit caregivers may be eligible for additional benefits and support services through various initiatives.
Home Care & Community Services: Provincial and municipal governments offer free and subsidized home care services, adult day programs, meal deliveries and transportation for seniors and disabled adults.
Equipment & Modification Funding: Various disability-focused grants provide financial assistance for vehicle modifications, home renovations, mobility devices and other disability-related expenses for caregivers.
Professional Financial Support
With so many potential areas of spending and confusing programs/benefits to navigate, seeking professional financial guidance can be extremely beneficial for caregivers in either the U.S. or Canada.
Working with an accountant, financial planner and eldercare specialists can help analyze your full financial picture, create a comprehensive caregiving budget, identify tax savings opportunities and determine eligibility for various federal/state/provincial assistance programs.
They'll be well-versed in the latest legislation, regulations and paperwork requirements saving you the time and headache. Their expert advice can optimize your money management while avoiding costly mistakes that deplete your nest egg faster.
When paying out-of-pocket is unavoidable, professionals can strategize ways to minimize the financial burden. This may involve tapping home equity through loans or reverse mortgages, purchasing long-term care insurance, setting up trusts and other protective measures to qualify for needs-based assistance.
The Takeaway
While providing care for a loved one is a noble and loving responsibility, it's easy to get overwhelmed by the sheer costs involved in both the United States and Canada. But with some proactive financial planning and taking advantage of available assistance programs, it's possible to safeguard your own financial health.
Start by meticulously budgeting all expenses and income sources. Seek support from financial advisors who can help you access caregiver benefits, employer relief, tax credits, community resources and more. And look for creative ways to cut costs through care sharing, pooling family resources, earning supplemental income, or tapping home equity when necessary.
It's also wise to have open conversations with family about everyone's ability to contribute whether financially, through sweat equity providing care themselves, pooling benefits like insurance policies, or handling care management duties. The more you can spread the costs and responsibilities, the less strain you'll face alone.
Protecting your own financial future is crucial as a caregiver. Don't hesitate to seek counseling to understand the full implications of your care plan and make adjustments if it's jeopardizing your retirement, children's savings goals, or overall financial stability. Avoiding burdensome debt, depleting all assets, or having to leave your job could have disastrous long-term impacts.
The good news is that in both the U.S. and Canada, there are a multitude of national, state/provincial and non-profit resources available to help ease the monetary burdens of caregiving if you qualify. Government benefits, community programs, tax breaks, legal and financial assistance can all provide some level of relief.
It just takes being proactive about understanding your full financial picture, making a comprehensive budget, and knowing where to look for help. With diligent money management and taking advantage of caregiver benefits, it is absolutely possible to provide loved ones with quality care without draining your own nest egg in the process.
