Helping Women and Families Plan for Retirement While Caring for Aging Parents

“We’re big proponents of tax diversification,” says Lynch. “Fund or convert to a Roth in addition to a 401(k); that after-tax money will be more important than you’d assume.”

If a client’s parent experiences a medical emergency or sudden need for care, a large Roth or brokerage account distribution won’t bump them into a new tax bracket like a 401(k) withdrawal would.

Finally, “It’s worth finding out if the care recipient has any long-term care insurance policies in place,” says Foss. Some LTCI policies will pay for informal care, as well as in-home care, transportation and medical equipment – all of which will leave the client with more money and time. The same is true for certain life insurance policies, particularly those with long-term care riders.

Responding to the unexpected

Clients often see their parents’ health decline for years, giving them time to prepare for the financial (and emotional) realities of caregiving. When the need arises without warning, however, planning, budgeting and saving to the extent possible become even more important.

“This is a big challenge, and it’s where you’ve got to start asking your clients a lot of questions,” says Lynch. “It has to be a two-way street.” With less time to save, clients may need to streamline their budgets and lower their living standards, but with smart asset allocations and savings strategies, they can still avoid dipping into their nest eggs.

“I would also suggest talking to other caregivers and caregiver support groups, who can be huge assets,” says Foss. The National Alliance for Caregiving and the AARP provide myriad resources for women and families in caregiver roles, including information on insurance, legal affairs and affordable in-home help.

Legal affairs

A variety of legal concerns may also arise during the caregiving process, particularly when the caregiver needs to use the recipient’s assets. “Have honest conversations when the parents are healthy, and consolidate, clean up accounts and make everything as easy as possible,” says Lynch. A dependent parent’s savings could save a child from financial ruin, but if nobody of sound mind knows the account locations, passwords or even that the money exists, it’ll all be for naught.

“Another thing a potential caregiver should look for are any powers of attorney that might be in place,” says Foss. It might become necessary to sell the parent’s home or take out a reverse mortgage to pay for professional long-term care, for instance, but the proper documents must grant the caregiver that authority.

“It may also be important to establish a caregiving contract that clearly sets out the responsibilities of day-to-day care, financial contributions, payment of expenses and so forth,” Foss adds. These agreements can prevent conflicts between parents, siblings and other interested parties and remove suspicion that the primary caregiver is taking unfair advantage of family finances.

Prioritization and Proactivity

While women tend to prioritize the well-being of their parents and children, it’s imperative that they consistently save for their own retirements. To that end, Foss urges her caregiving clients to first keep their own financial houses in order, and to consider whether aging parents really need physical, emotional or financial support. If financial support is necessary, determining the amounts needed is crucial for long-term planning and the well-being of caregiver and parent alike.

On the advisor’s end, keeping an eye out for clients is key. “One of the biggest things we stress is to ask the question, ‘Who in your book of business is potentially going to be a caregiver down the road,’” says Lynch. “Make sure they have the right team members on their side ahead of time.”