Insights & Advice

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The coming crisis in caregiving

If you thought the nation has problems with Social Security and Medicare, you ain’t seen nothing yet. Today, more than two-thirds of Americans assume they will be able to rely on a family member to meet their long-term care needs if needed. My advice: don’t count on it, and here’s why.

As it stands today, one-third of all U.S. families provide long-term care for a disabled or elderly family member. You may have guessed that two-thirds of those caregivers are women, although why it should be deemed a woman’s task alone is beyond me.

If you want to look at the upside to caregiving, you could say that caring for a loved one, who needs our help, is a chance to pay back all the love and support we received when growing up. On a good day of caregiving, there may be an immense satisfaction in helping to preserve an individual’s quality of life, whom you love, while lifting their increasingly difficult burden of completing daily tasks.

The downside of caregiving is well-documented. The economic, emotional and mental strain of caregiving is, at times, overwhelming. And it snowballs. Family relationships often suffer and tension among spouses is commonplace. Caregiving also takes a toll on your health and plays havoc with your work-life balance.

In 2013, according to the AARP, about 40 million families provided 37 billion hours of care, which was worth an estimated $470 billion. That nearly equaled the yearly revenues of the country’s four largest tech companies combined. In 2016, AARP estimated that, in addition to the physical caregiving, the average out-of-pocket expense per family was almost $7,000/year. That can amount to 20% of an average family’s income per year.

The economic impact can be devastating. To cover the additional expense, many families have to cut back on their own spending. They usually do this by short-changing their retirement savings and contributions. Since it is the woman (who also happens to be a wage earner) that most of the burden falls upon, there is a higher chance that she will be forced to give up full-time work in order to become a caregiver.

It is estimated that 17% of caregivers dealing with a parent with dementia will quit their jobs. The majority of caregivers who maintain employment, arrive late to work or leave early. About 15% of them are forced to take a leave of absence and 7% lose job-related benefits.

More than 10 million caregivers, over 50 years old, lose $3 trillion in wages, pensions, retirement funds and other benefits. Of that, women lose an estimated $324,044, while men lose much less ($124,693).

If that sounds pretty grim, just wait. Digging deeper, we find that the caregiver support ratio back in 2010, was more than 7 potential caregivers for every person in the high-risk years of age 80-plus, according to AARP. By 2030, that ratio will fall to 4 to 1, and by 2050, it will drop to 3 to 1.

As such, the decade between the 2010s and 2020s will be a transition period when Baby Boomers age out of their peak caregiving years and the oldest Boomers transition into the 80-plus high-risk years. Now, here’s the zinger:

“The departure of the boomers from the peak caregiving years will mean that the population aged 45-64 is projected to increase by only one percent between 2010-2030. During the same period, the 80-plus population is projected to increase by a whopping 79 percent,” according to Annalee Kruger, the founder and president of Care Right, a Florida-based firm that provides advice and aging planning for caregivers and their families.

Kruger, an expert in the landscape of health care, (the subject of her master’s thesis), fears that a real crisis is brewing in America. As the family unit in America continues to shrink while living further and further apart, seniors should not simply assume that a family member will take care of them when the time comes.

In my next column, I will provide more of Annalee Kruger’s insights in how to plan and prepare for this coming crisis.

Posted in A Few Dollars More, Financial Planning