Paying for Major Expenses for Elderly Parents
Thanks to advances in technology and medicine, people are living longer than ever, especially those in the 65-and-over bracket. However, more longevity can also mean more expenses and financial costs.
Without a plan, caring for elderly parents can create a financial burden over time. These expected (and sometimes unexpected) expenses can tally up fast, causing strain on your own finances, relationships, and more.
So, the question becomes: how do you take care of your own expenses while also managing for those of your aging parents? It can be a difficult task to take on, but we’ll arm you with the knowledge to make the right choices and to have confidence while doing so.
In this article, we’ll go over things such as:
- Typical senior care costs
- How insurance can help pay for aging parents
- Caregiving assistance tips
- Life insurance options while they are alive
Costs Usually Associated with Senior Care
Senior care has a number of costs associated with it. We’ll break down some of the most common ones you can expect, since knowing these expenses is the first step in developing a plan to manage them. Here’s a look at what they are.
Home health aides: Home health offers basic services like helping with medications, taking blood pressure and more. They’re not usually physicians, but do have training, and the care team can include physical and occupational therapists, a RN or LPN. If your elderly parent is in need of a little bit of medical care at home, a home health aide can be a great way to ensure ongoing coordinated care during a recovery period.
Respite and non-medical caregiver: These are also known as personal care aids and offer non-medical assistance and help with personal care, such as bathing, plus other needs like meal prep and household tasks. This kind of caregiver is great when your elderly parent has mobility issues or even just simply needs a little bit of help around with activities of daily living.
Assisted living facilities: These are typically for seniors who can’t live on their own but don’t need the total care that is associated with a nursing home. An assisted living facility offers a situation where your elderly parent can live in their own apartment, but with staff available on-call.
Nursing home: These are total-care facilities that operate 24 hours a day and offer the most care to seniors who need it most. They can range from short-term to long-term, with the associated costs usually being on the higher end compared to the other options.
How Insurance Can Help Pay for Aging Parents
There’s a lot of ways that insurance can help cover expenses for your parents, usually starting when they reach 65. Here’s a look at some of the most common options.
Medicare Part A is one way that your parents can cover some of their expenses. It’s also called hospital insurance since it helps to cover inpatient care, hospice care, and other related services. A deductible may or may not be required.
Medicare Part B, also known as medical insurance, covers most things related to preventative care: doctor visits, screenings and testing, flu shots, mental healthcare (outpatient), diabetes screening, and durable medical equipment like wheelchairs.
Medicare Part C, or a Medicare Advantage Plan, is an alternative option to original medicare plans and offers an “all-in-one” solution. It is usually offered by a private company that is approved by Medicare. It essentially bundles Part A (Hospital Insurance), Part B (Medical Insurance) and sometimes Part D (Medicare Drug Coverage). It can be a great alternative if your parents have additional needs.
Medicaid in general is great for helping those with a limited income. When the costs exceed what medicaid is able to cover, long-term insurance can also help out. However, it can be prohibitively expensive, especially when it’s purchased for an already elderly parent.
Caregiving Assistance Tips
Many parents want to live at home as long as possible, but could still benefit from having some assistance. Here’s some ideas and ways you can help them while still maintaining your own financial security and freedom.
Track spending. Just like any other aspect of your financial life, tracking spending and budgeting will help you stay on course.
Look for resources through your job. Particularly at larger employers, your human resources department may offer elder care resource benefits. They may also offer elder care counselors and referrals to services related to residential care, home care, legal support, adult day care and support groups.
Explore all options: If a parent is having trouble taking care of themselves at home, there may be ways to help make their environment easier to navigate and more safe.
- Perhaps you or other family members can work remotely some days in order to be around the house and help reduce caregiving hours and expenses
- Look at simple changes to make the home more accessible, making key areas like the bathroom and kitchen more safe.
- Talk to your parents about downsizing. Consider a smaller footprint, one level living and elimination of the need to manage a yard.
For the most part, this is a time to simplify life and focus on what is most important. Beyond budgeting and considering parental resources such as investment accounts, remember that downsizing may free resources in terms of selling the home or vehicles. Within your parents financial portfolio, assets like a life insurance policy may have a market value, providing funding for expenses.
Living Benefits from Life Insurance Policies
If your parents have life insurance, there may be some options available that can provide living benefits to help out with ongoing care expenses. Here are the different strategies to consider:
Borrowing from the policy: Over time, some life insurance policies, like whole life insurance, accumulate value and the policy owner may borrow against the policy. This is basically like taking a loan of the accumulated cash value of the policy – there will be repayments and interest. But the death benefit of the policy will be maintained as long as premium obligations, and any loan repayments, are maintained.
Withdrawal: A life insurance withdrawal is a possible option for permanent insurance policies with a positive account value. The withdrawal may be subject to taxation and the death benefit of the policy will be reduced.
Cash surrender: A cash surrender is a voluntary termination of the policy, with the insurance company refunding any excess account value less surrender charges. Term policies have no surrender value, but universal life and whole life may have value depending on the amount of premium paid in through the years.
Lapses: If the policy has a positive account value, it is possible the policy could continue for a time without additional premium payments. However, at some point the account value will become exhausted and the policy, and its coverage, will lapse.
Life settlement: Life settlements is the sale of an existing life insurance policy insurance policy to a third-party. In exchange for a lump sum cash payment, the third-party, typically an investment fund, will assume the premium obligation and ultimately the policy’s death benefit. If this is an option, the lump sum payment will always be higher than the cash surrender value. Life settlements do have some eligibility requirements; generally the insured must be over 65 years old with the policy having at least $100,000 in death benefit. There are some additional underwriting requirements, but it is a good practice to see if this is an option before lapsing or surrendering a policy.
The important thing to remember is that you’re not alone. Taking care of an elderly parent can at times feel overwhelming, but there are resources available for help. Every situation has its unique needs, and different strategies may help alleviate the financial burden or help leverage your time. One step at a time is the best way to help your parents through this new stage of life.