Raising children and caring for older relatives can be among life’s most rewarding activities. But becoming a primary caregiver can also create financial stress and personal retirement planning worries. With the right resources and strategies, however, caregiving may be an easier — and possibly more fulfilling — responsibility to bear.

Although eldercare and childcare both involve supporting others, there can be variance in the nature and the type of help that one provides.

Yes, they may both involve assistance with tasks in day-to-day living. But eldercare can often be a longer, more physically demanding commitment, especially if there are complex health issues that require extra responsibilities (e.g., administering medication and accompanying the individual to doctor’s appointments).

As for childcare, a typical young family’s needs are focused on learning, development and growth within a narrower time frame. That said, a stay-at-home parent in a larger family may commit years or decades to the work. Similarly, a parent who stays at home to focus on the care of a special needs child may spend more years either out of the workforce or in positions that pay less over time (e.g., part-time work).

Of course, caregiving doesn’t just account for elderly relatives and young children. Care may also be required if a spouse or an adult sibling falls ill, gets diagnosed with a disability, or becomes hurt in an accident.

Plus, it’s not unusual for one person to care for multiple generations at once, which can add complexity.

Connecting caregiving to finances

When it comes to providing care, you may encounter some (or all) of these financial concerns:

• Costs related to funding care
• Limited access to affordable health insurance
• Loss of income or reduced earning potential
• A reduction in the amount of funds you can set aside for retirement
• Additional household expenses
• Uncertainty about long-term financial security
  

Much as every caregiving situation is unique — each with its own set of demands, time frame, and level of commitment — so might be your financial strategies and solutions.

As a starting point, it may be useful to think about resources you can easily access, and determine where you might have gaps. Consider the following:

• The financial resources your loved one has available to them to help cover the cost of their care: This is especially true of eldercare, and may require reviewing personal savings, insurance coverage, long-term care insurance, retirement investments, Social Security Retirement benefits, VA pensions and other assets.
• The cost of the resources you’ll need to provide: Think carefully about expenses such as medical care, transportation, food, housekeeping, lawn care, entertainment and clothing. For minor children, factor in savings for education and extracurricular activities as well.
  
• How much time you’ll need to dedicate to caregiving: You may want to consider if you can meet the physical demands not only of time but also labor.
  
• The impact on your income and retirement savings: Are you going to pause your career to be a full-time caregiver, or will you mix caregiving with part-time, freelance or contractual work? When pausing or reducing your paid work, there can be both short- and long-term financial consequences.

Again, circumstances are unique, but this self-reflection will give you a clearer picture of what you have to work with and where you might need to find support.

» Tips:

1. Have your financial plans already been put on the backburner in the midst of caregiving? It’s not too late to put a forward-thinking strategy in place, and it doesn’t have to consume a lot of your time either. With the help of a financial advisor, you can easily begin developing an investment strategy that fits your budget, time frame and individual needs. They can also share with you an array of strategies and solutions that may help you advance your financial goals with more confidence.

2. When there are significant assets involved, other professionals to consider consulting with include an elder law attorney and tax advisor. Together with your financial advisor, you can develop plans and strategies to prepare for the future in ways that safeguard everyone. In the case of eldercare, a good attorney can help ensure that everyone is acting in the genuine interest of the elder in a manner that helps prevent claims of elder fraud or abuse, both real and rumored.

Investigate outside resources

During your caregiving journey, you might want to explore programs that may help fund care.

For example, if you’re caring for a parent or older loved one who served in the military, they may be eligible for financial benefits such as VA Aid and Attendance¹ that can help defray the cost of caregiving. You can check their eligibility for this and other programs using the federal government’s benefits checker,² which also includes information on housing, food and medical bill assistance for seniors with limited financial resources.

Caring for an aging relative may also allow you to receive payment through Medicaid programs, if your relative qualifies. And an Area Agency on Aging (AAA)³ might be able to assist you in finding other resources to help.

Speak with your tax advisor, too, about credits and deductions related to caregiving that you may qualify for, such as the Child Tax Credit,⁴ as well as possible deductions specifically designated for those caring for dependent adults.⁵

Planning to take time out from work for an extended period to raise kids or care for your parents or in-laws? Your spouse or partner may be able to make IRA contributions⁶ on your behalf while you’re not in the paid workforce. This is a thoughtful way to keep making contributions as a household to your future, while also acknowledging how much labor caregiving can demand.

Carefully consider your caregiving strategies

Once you’ve taken the steps above, you can use the information you’ve gathered to outline or refine your caregiving plans.

Even if you’re already knee-deep in providing care to someone else, you may still want to define:

What type of care you’ll provide: It’s easy to take on multiple roles as a caregiver at home, but this can be a recipe for burnout in the long run. Consider outsourcing some tasks within your budget — like housecleaning, lawn care or meal preparation — so you can take a break.

Whether you’ll rely upon other care providers, if available: In the event that your older relative or child needs around-the-clock assistance or supervision, you may want someone to cover the overnight shift once in a while.

» Tip: Sooner or later, every caregiver needs regular breaks, so factor in expenses for respite care like parents’ day out and adult daycare programs. (Again, a local AAA may help.) If you can arrange for other family members to provide this care, too, it can be a win for your family’s caregiving budget as well as your personal well-being.

Review and fine-tune your strategy

Parents know that just when you get used to one stage in a child’s development, a new one comes along. Similarly, caregivers for older family members are often accustomed to adapting to sudden changes in their loved one’s health status and care needs.

That’s why any time a change has a notable impact on your family’s financial situation, it’s wise to review and adjust your caregiver financial strategy.

For example, when a child starts school, a stay-at-home parent may be able to return to work part- or full-time. This can help you start to catch up on retirement and college savings. Of course, it’s possible that if an elderly parent or special needs child requires a more complex level of care, you may need to step away from work entirely and/or modify your budget to hire more help.

» Tip: After age 50, you can explore making “catch-up contributions” to your retirement savings strategy. This can be useful to anyone, but especially if you will have spent a lot of time outside the workforce helping others. There are annual caps to consider, but older adults typically can set aside more money in 401(k) plans and Individual Retirement Accounts (IRAs) as they move closer toward retirement.

Prepare for the potential need for YOUR care

Have you thought about what you would do if you personally might one day be diagnosed with a health condition or disability requiring daily care?

As you may have already discovered through caregiving, it can prove wise to consider solutions — such as retirement planning, life or long-term care insurance — that might make life easier for your loved ones, including future caregivers.

Again, a conversation with a financial advisor can be a good first step toward developing a strategy.

The takeaway

As a caregiver, being strategic about your finances can help reduce your stress and allow you to still advance your own long-term financial goals.

Fortunately, from simple retirement plans to sophisticated investment strategies, RBFCU Investments Group is ready to help you care for your family and make more informed choices by providing financial planning services tailored to each stage of your life — including your caregiving years.