Adult children who become caregivers often pay a steep price. According to a 2011 MetLife study, women older than 50 who leave the workforce early to fulfill this role forfeit about $324,000 in wages, Social Security payments and retirement benefits. However, with some smart strategies, you can avoid sabotaging your financial future.
Look into potential tax breaks. As noted in a recent article in Oprah Magazine, titled “Sanity-Saving Secrets For Caring For Your Aging Parents,” an elderly parent may be claimed as a dependent if their annual income is less than $3,900 and you provide more than 50% of their financial support. Their medical expenses may also be deductible.
If you’re a full-time caregiver, don't use your 401(k) or IRA for living expenses. There’s a 10 % penalty for an early withdrawal. The original article also advises to do whatever you can to keep your day job, even on a modified schedule. If your employer isn't helpful, you may be eligible for up to 12 weeks of unpaid time off through the Family and Medical Leave Act, allowing you time to make other arrangements.
If you have to quit work or go part-time, talk to your siblings and other family members about reimbursement for your services. Once you have analyzed what you stand to lose in lost wages, then negotiating a salary needs to be a top priority. At a minimum, you should have enough for basic expenses, including housing, food, insurance, and IRA contributions. If your parents are footing these bills, speak with a qualified and experienced elder care attorney to make sure you're not jeopardizing your parents’ Medicaid eligibility. Ask for a salary that offers you financial stability and peace of mind, both of which are critical for every caregiver. Naturally, you should not approach this important responsibility without consulting an experienced elder law attorney.
You can learn more about this topic as well as other strategies on our website under the tab entitled: elder law planning in Virginia. Be sure you also sign up for our complimentary e-newsletter so that you may be informed of all the latest issues that could affect you, your loved ones and your estate planning.
Reference: The Oprah Magazine (December 19, 2014) “Sanity-Saving Secrets For Caring For Your Aging Parents”