Adult Children: Calculating the Cost of Caring for an Aging Parent 

You know the saying, “time flies?” It seems just about everyone says this, and perhaps for good reason – this saying bears the truth. As an adult, it’s nostalgic to take a moment to think back to our childhood years. Times were simpler and responsibilities were minimal. And as we reflect on these memories it’s only natural to think of our parents or loved ones who raised and cared for us. They’re at the forefront of just about every memory. But now, the years have gone by, and we’ve grown up. But we’re not the only ones who have gotten older – our parents have, too. As our parents settle into their retirement years and continue to age, we may find ourselves in a bit of role reversal, becoming their caregiver.  

If you now find yourself in a caregiving role for a parent, family member, or loved one, the good news is that you’re in good company. According to recent data from AARP, an estimated 48 million people provide unpaid care to an adult family member or friend. However, the harsh reality is, while adult children often take on the responsibility of arranging for caregiving services, most are vastly unprepared to cover the associated costs of caregiving. Nearly eight in ten caregivers report having routine out-of-pocket expenses relating to taking care of their loved ones – with a significant average annual spend amounting to $7,242. And, on average, these caregivers are spending 26% of their total income on caregiving activities.¹ But that’s not all. With the exorbitant national average cost of in-home care now amounting to over $4,000 per month,² the stakes are high for American families.  

When it comes to the cost of caring for an aging parent or loved one, there are two types of expenses to account for – literally. First, the hard costs of necessary supplies, services, and daily living expenses. Then, there are the hidden costs. These are less obvious as they aren’t a one-time credit card swipe, but rather the mounting consequences of the sacrifices caregivers often make for their loved ones.  

Read on to learn more about the costs you can expect to incur as a caregiver for an aging parent or loved one. 
 

Hard Costs 

Housing 
What’s the largest expense category your parents will face in retirement? You may have guessed it – housing. In fact, housing expenses such as mortgage, rent, property taxes, insurance, maintenance, and repair costs represent nearly 35% of total expenses for the average retiree household.³ According an AARP study, nearly half of caregivers reported having used their own money for household-related expenses, while 30% went as far as to cover rent or mortgage payments for their loved ones.¹ 

And while your parents or loved one’s home may be their largest expense in retirement, it may also be their largest asset. Today, homeowners ages 62 and older account for a record $11.81 trillion in home equity.⁴ Tapping into this housing wealth with a Home Equity Conversion Mortgage (HECM) can provide an additional source of cash flow to fund housing costs and more in retirement. We’ll cover more on this in a bit.  

Healthcare 
Healthcare expenses are notoriously difficult to plan for – while our parents will all require some type of healthcare services in the future, these costs vary significantly. And while there is no specific one-size-fits-all cost for covering your parents healthcare expenses, the latest figures from Fidelity reveal that the average retired 65-year-old couple can expect to spend around $315,000 on healthcare expenses in retirement.⁵ Yikes! 

While many seniors plan to rely on Medicare to cover healthcare costs, it’s important to realize that Medicare does not cover everything. For example, Medicare doesn’t cover long-term care – including in-home care services – that millions of aging Americans require. So, what does that mean for your aging parents and you? The Centers for Medicare and Medicaid services estimate that the US spent $121.6 billion on home healthcare in 2021– and this number is projected to skyrocket, hitting $226.4 billion by 2030.⁶ 

In addition to home care, healthcare costs also encompass out-of-pocket prescription and medical supply expenses. These costs are the highest among caregivers, totaling an average of $273 per month⁷ – or $3,276 per year!  

Accessibility 
If your aging parent or loved one wishes to stay in their home well into advanced retirement years, they’re in good company. In a recent poll, nearly 9 in 10 Americans (88%) between the ages of 50 and 80 expressed how important is to remain in their homes as they grow older⁸, indicative of the Aging in Place movement. However, while we can all agree that there truly is “no place like home,” the reality is that most homes are not designed to accommodate the needs of our aging loved ones. In fact, research from AARP found that only 1 in 3 middle-aged and older homeowners said their home had the necessary features that would allow them to age in place.⁸  

Fortunately, homes can be retrofitted – and there are plenty of modifications that can be made around the house to make it more accessible. This could be as simple as moving a bedroom to the first floor or replacing toilets and faucets to ensure they have safe and usable access to bathroom, kitchen, living, and sleeping areas. However, depending on the house, more substantial modifications may need to be made – such as building entrance ramps, installing chair lifts, or renovating bathrooms to make them handicap accessible. While the ultimate goal is to keep mom, dad, or a loved one safe and happy at home, it’s no secret that these modifications and projects can come with a hefty price tag. 

Daily Living 
As mentioned previously, more and more retirees are opting to stay in their homes for as long as possible. And for those still living at home, budgeting for daily expenses such as utilities, groceries, and transportation – especially to and from doctors’ appointments – is critical. As a caregiver, many adult children not only provide hands-on care around the house, but also find themselves reaching into their own pockets to pay for such expenses. In fact, an AgingCare.com survey found that 34% of caregivers spent $300 or more out-of-pocket each month on various daily caregiving expenses, while another 54% admitted to having sacrificed spending on themselves to prioritize their parents’ care needs. So where exactly do these daily caregiving dollars go? According to the survey, caregivers spent a monthly average of $159 on food, $151 on personal care items, $67 on clothing, and $54 on transportation.² 

Hidden Costs 

Reduced Hours at Work 
If you’re a working caregiver, you’re likely familiar with the challenges presented balancing work and home responsibilities, such as caregiving. And you’re not alone. According to a 2020 AARP study, 61% of caregivers were employed, with the majority having experienced at least one work-related impact.⁹ However, the demands of caregiving can impact productivity and increase absenteeism. For many working caregivers, this means taking more time off from work, and therefore reducing personal income in part or entirely. In fact, the AgingCare.com survey found that 43% of caregivers had needed to take time off work due to their caregiving responsibilities, while 48% reported earning less money as a result of their role as caregiver.²  

Compromised Retirement Savings 
As noted above, working less means less income over time. And as a result, many caregivers are left dipping into savings, which could impact their own retirement significantly. After all, leaving the workforce doesn’t just mean losing your current income – it also includes the loss of future raises, retirement contributions, and company matches. In fact, the AgingCare.com survey found that 62% of caregivers reported that the cost of caring for a parent has impacted their ability to plan for their own financial future.² As a caregiver, you’ll want to take this into consideration as you plan out how you’ll fund your loved one’s care – and your own future care. 

Addressing the Costs of Caregiving 

Now that we’ve covered both the hard costs and hidden costs of caregiving, you’re likely wondering how you’ll be able to fund these expenses as your parents or loved one continue(s) to age. One smart solution is a Home Equity Conversion Mortgage (HECM) loan – also known as a reverse mortgage. Exclusive to homeowners 62 and older, reverse mortgages allow your loved ones to convert a portion of their home’s equity into cash to use as they wish – with no monthly mortgage payments required.¹⁰ If they have an existing mortgage, the reverse mortgage will first be used to pay that off. And without that monthly payment, they’ll free up even more cash each month.  

For seniors wishing to age in place, a reverse mortgage is an especially appealing option as it allows them to maintain full title and ownership of their home for as long as they live there as their primary residence. And many aging homeowners opt to use the reverse mortgage proceeds to make necessary modifications throughout their home to help them age more comfortably. For more information on what adult children or caregivers need to know about reverse mortgages, check out our webpage, here. 

Don’t Forget to Find Time for Yourself 

Caregiving is truly a labor of love. And with research showing that adult caregivers spent nearly 19 hours a week – nearly three hours a day – in their helping role,¹¹ it can be easy to feel the weight of this responsibility on your shoulders. Fortunately, you don’t have to go it alone. There are plenty of ways to maximize your time and take advantage of services for your aging loved one. For example, when it comes to finances, you may consider hiring a professional advisor to assist your loved one in handling their affairs and managing assets. You can also take advantage of Eldercare, an online locator sponsored by the US Administration on Aging, to find local support, housing, health, and transportation services. While its natural to want to do all that you can for your loved one, the key takeaway is this: taking care of yourself will enable you to do an even better job taking care of your family members and loved ones. Now how’s that for a win-win? 

While caring for an aging loved one presents its challenges, it’s important to note that it isn’t all doom and gloom. The rewards of caregiving are real, especially having the opportunity to care for someone who has been an important figure in your life. They helped raise you, and now it’s your chance to give back and return the favor.  

At Longbridge Financial, we’re proud to support caregivers and are committed to responsibly helping your loved ones reshape their financial future by educating them on the reverse mortgage – and unlocking the power of their homes. We will help your loved ones determine what reverse mortgage solution is right for them. Not all lenders make this commitment.

Want to learn more? See why over 1.2 million Americans have already made a reverse mortgage part of their retirement plan.¹² For more information, contact the Longbridge team today.