November is National Caregiving Month, and with that in mind, Merrill Lynch and Age Wave released a new study that examines caregiving with a focus on financial factors. The study shows that 92 percent of caregivers nationally, and 93 percent in our region, are financial caregivers – for example, paying bills and managing taxes or investments on behalf of someone else. Why is financial caregiving so prevalent, and what can you do to prepare for caregiving in the future? Ronald White, CFP®, CDFA™, AAMS®, vice president and senior financial advisor with Merrill Lynch in Atlanta, has answers for your questions here.

Q: What is a “financial caregiver” and why are their numbers increasing?

A financial caregiver is an individual who is contributing to and/or coordinating finances for their loved one(s). According to a new study released by Merrill Lynch, after two years of receiving care, 88 percent of care recipients are no longer managing their finances independently. The number of financial caregivers is increasing given the sheer size of baby boomers retiring—according to estimates, as many as 10,000 baby boomers retire every day.

Q: What do some of the responsibilities of a financial caregiver look like?

According to the study, two of the larger responsibilities include paying bills from the recipient’s account (65 percent) and monitoring their bank accounts (53 percent). Other common responsibilities include handling insurance claims (47 percent), filing taxes (41 percent) and managing invested assets (21 percent). Respondents to the study noted that the top challenge they encounter as financial caregivers is navigating health insurance expenses. Two other noteworthy challenges cited by respondents include not having legal authorization to perform their role, and inadequate or a complete lack of financial guidance.

Q: If I have an aging loved one, would it be a good idea to save money to help them?

Saving for a rainy day fund for a scenario like this is a good idea. According to the study, 53 percent of respondents made financial sacrifices to compensate for caregiving expenses. One example of how to financially prepare would be setting up a Health Savings Account (HSA) for your loved one. That way, contributions for current or future medical expenses can be made on a tax-deductible basis. Be sure to consult a tax or financial advisor, and check the terms of the HSA as rules vary.

Q: What else can I do to prepare?

One of the simplest ways to prepare for a financial caregiving responsibility is holding a family meeting. Having a focused and open dialogue can help spur decision-making among family members around important considerations, including the development or revision of a will, designating a financial and healthcare power of attorney, and other advance directives. A family meeting can also help minimize the tendency of financial caregiving to fall unevenly on family members.

Q: How do healthcare costs play into financial caregiving?

In a previous Merrill Lynch study, respondents cited unpredictable healthcare costs as their top financial concern in retirement. As healthcare costs continue to rise in the nation, steps should be taken to plan ahead. The best way to plan would be to draw up a retirement budget which includes anticipated healthcare costs not covered by Medicare (i.e. dental and vision care). Delaying retirement for the purpose of building up a reserve for healthcare costs, delaying social security, and allocating part of the higher benefit toward Medicare premiums are other options available for retirees, pre-retirees and their family members. Given that needs and circumstances vary, anyone considering retirement planning should consult with tax and financial experts.

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