Five tips for navigating finances as a caregiver

What is a family caregiver? The role conjures up familiar images of a daughter or son taking a parent to doctor appointments. Or helping with laundry and meals. Or providing companionship and emotional support near the end of life.

A new study, however, has found that the responsibilities of family caregivers are expanding far beyond the familiar. According to a reportOpens pdf from the TIAA Institute and the NewCourtland Center at the University of Pennsylvania School of Nursing, a majority of family caregivers are increasingly being called upon to manage investments, prepare tax returns or handle household budgeting—regardless of whether they have the financial expertise.¹

A whopping 92% of family caregivers report that they are either managing care recipients’ finances or providing them with out-of-pocket, financial assistance. Sixty-four percent report doing both. [See Figure 1] The TIAA Institute and NewCourtland study also found that more than 53 million Americans, or one in five adults, now provide uncompensated care to parents, spouses, partners or children with health problems or disabilities. The workload averages 24 hours a week, and the caregiver of an adult spends an average of 4.5 years in the role. Being a caregiver can be financially challenging too, as caregivers are more likely than non-caregivers to struggle with debt.

“Frankly, we were surprised the numbers were so high,” said Surya Kolluri, head of the TIAA Institute, of the high rate of financial caregiving. “But maybe we shouldn’t have been, given the dramatic improvements in life expectancy.”

Between 1950 and 2020, average U.S. life expectancy improved from 67 to 79.² Additionally, the likelihood of a 65-year-old living to age 90 is 30% for men and 40% for women.³ What this means, said Kolluri, is that all aspects of caregiving, especially financial ones, require much more long-term planning. “Too many people are taking on the role of financial caregiver without adequate information or support.”

Some caregivers may be operating without adequate legal authority as well. According to Melody Evans, a TIAA Wealth Management Advisor in Andover, Massachusetts, when a care recipient does not have a healthcare directive, healthcare proxy or durable power of attorney, the inaction can become a source of family friction at a time when the care recipient needs everyone coming together.

Evans has five tips for easing the burden on families:

1. Start planning early. Too many wealth clients put off discussing financial caregiving with their families until it’s too late. Evans hears a lot of, “My kids are too busy,” from older clients or, “I don’t want to think about my parents declining,” from the younger generation. Consequently, big decisions get put off until the last moment when emotions are running high. Another common mistake is discussing financial caregiving over vacations or holidays. “You want to think of this more like a business meeting than a family gathering,” Evans advised. “The goal is to make decisions before there’s a crisis and when you can create a game plan as a family.”
2. Include your children in the annual review meeting with your financial advisor. They can join via Zoom if they can’t be there in person. What’s important is that future financial caregivers have a full understanding of the care recipient’s finances, know what the family can and cannot afford, and grasp of the tax consequences of drawing from the various types of accounts.
3. Make sure adult children understand their roles and are prepared to work together. Evans has a client, an older couple, with a son who lives nearby and takes them to doctor appointments. The couple also has a daughter who does not live nearby but is a numbers-savvy business owner. Evans’s financial caregiving advice: Consider appointing the son as healthcare proxy and the daughter as financial power of attorney. “One way to avoid family conflict is not having one sibling calling all the shots,” she said. Another tip: If you have signed a healthcare directive, named power of attorney, or assigned a healthcare proxy, make sure your family knows where the original legal documents are stored. Not all state courts will honor copies, and original documents may be required to settle any disputes.
4. If you are a caregiver (or expect to become one), know the resources available to you. Most financial advisors have experience with longevity planning and family caregiving and can be leaned upon for advice. Also, many employers offer benefits for caregivers, such as paid family leave, geriatric care management services and emergency backup care.
5. Perform a financial fire drill. Decide ahead of time what you would do if the family suddenly needed $10,000 a month for assisted living or $20,000 a month to pay for 24/7 in-home care. “Maybe you’ll realize you need more cash on hand,” said Evans. “Or maybe the decision is you’ll take money from one account first because the tax impact will be much lower. The point is, it’s easier to make crisis-type decisions when you’re not actually in crisis mode.”

If you have questions about financial caregiving, contact your TIAA wealth advisor.