Why Adult Daughters Face Large Financial Impacts From Being Caregivers to Their Elderly Parents

On this episode of The Long View, Jean Chatzky, editor, podcast host, and CEO of HerMoney.com, breaks down how women can protect themselves financially, why women’s investing plans need to look different, and how to make sure they are prepared for later in life.

Here are a few excerpts from Chatzky’s conversation with Morningstar’s Christine Benz and Amy Arnott.

How Women Should Approach Long-Term-Care Planning

Amy Arnott: So we wanted to follow up a little bit about long-term care. And as you said, that is a big worry for a lot of women. Do you have any general advice for how people should approach long-term care or finding a long-term-care insurance, which is difficult to find a policy that’s affordable?

Jean Chatzky: I think there are two decisions that you have to make. The first is, are you going to try to buy some sort of long-term-care insurance? And I think long-term-care insurance makes sense for a pretty specific group of people. If you’ve got more than a handful of millions—a couple, three-ish million—you can invest your own money. You can pay for your own care. You’ll have the resources to be able to do that in most cases. If you have less than that, significantly less than that, like well under a million, you’re probably not going to be able to afford a long-term-care policy. And at the same time, if you were to need care over a significant period of time, you would exhaust your resources and likely qualify for Medicaid. It’s in the middle, as well as people with more resources who want to make sure that they leave those resources for the next generation, where a long-term-care policy makes sense.

We’ve seen a huge reduction in the number of carriers that are writing traditional long-term-care policies in recent years, as well as really big policy price hikes. People who’ve had legacy policies have started to get notices from their carriers that their premiums are going up by 10%, 20%, sometimes even more than that. And it happens year after year, which makes this market really, really difficult. Where I think we’re going with long-term care and where it seems to be making sense for most people who want it is with these newer hybrid policies that combine a long-term-care insurance policy with a life insurance policy or a long-term-care insurance policy with an annuity. What that does for people is it gets rid of the argument that, oh, I’m going to pay these premiums for years, and what happens if I never need to use it.

Because there’s something else there where there would be additional value. This is actually what I bought. I bought a long-term-care life insurance policy where if I do need to use the benefits, then I’ll be able to use the benefits. And if I don’t need to use the benefits, then they will be available as life insurance to my kids when I die. So I think that’s where if you’re looking for insurance, you kind of want to focus your search. And the other thing to realize is you don’t have to cover your full need. This is a policy where if you buy some coverage that can get you through a couple of years of at-home care or care in a facility, generally—if you play the averages, about three years will be enough.

Why Adult Daughters Face Large Financial Impacts From Being Caregivers to Their Elderly Parents

Christine Benz: Jean, I wanted to follow up with a related question about long-term care, which is that adult daughters are often the caregivers for their elderly parents. You referenced that earlier. That’s one of the things that drags on lifetime income. You’ve examined the impact, financial and otherwise, for these adult daughters. I’m sure you’ve had plenty of conversations with women about this issue. Can you summarize the key impacts?

Chatzky: MetLife did a study a number of years ago, and I think they put the caregiving cost at about $340,000 in lost income for those who were taking on caregiving. It’s a huge impact. It’s not just lost income. It’s lost seniority at work. It’s lost social security credits. It can be very difficult if you take a step out to get back in. I was not a long-term caregiver for either of my parents, but I’ve seen a number of people go through this. Often, the question they asked themselves on the other side was, is there an alternative, would there have been an alternative? Sometimes, even if the cost of care is equal to what you’re earning, it can make sense to try to stay in the workforce and find some other way to pay for care out of your salary, out of your resources, rather than take yourself completely off track. When we think about the sandwich generation, there are so many challenges that are going on at the exact same time. We’re trying to save for our own retirements. We’re trying to save for and then pay for college for our kids, and we’re trying to help our older parents. When it’s our own retirement, we can delay it. We can just push it back a bit. When it’s college for our kids, we don’t like to borrow, but we often do, and those resources are certainly available. When it’s our parents, sometimes we don’t think that there are choices, but I think that there are more than we sometimes take the time to explore.

Why Working Longer Can Benefit More Than Just Long-Term-Care Planning

Arnott: You made the point that women whose parents need care should try to stay in the workforce if they possibly can. A related idea, even apart from long-term care, is that working longer can often be beneficial, not just financially, but in terms of having more social interaction, having a goal and purpose in life, staying active, and so on. If people are able to continue working longer and also maybe not save as much for retirement, but spend a bit more while they’re working so that they can travel and spend on things they enjoy, is that something that you encourage people to do?

Chatzky: Absolutely. The world of retirement—we need a new word. Many, many people are working. Many people are embarking on this idea of a phased retirement. Some people are dipping in and out, taking sabbaticals, taking adult gap years, whatever you want to call them. I think what we’re realizing in a number of ways is that life is just really long, much longer than it was when retirement was originally defined. That gives us so many choices about what we want to do in our third and fourth acts, whether we want to earn money, whether we want to start businesses, whether we want to volunteer, whether we want to travel. The one really common thread, I think, that we’re realizing is how important relationships are in all of this and that staying engaged with other people is what really keeps us happier and healthier and sharp mentally and on track to continue to live this longer, more vital life.