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Summer 2019  Volume 12, Number 2        

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How to be a Caregiver Without Taking a Major Financial Hit

Caregivers can be life savers by taking care of people who cannot care for themselves. However, caregivers must also take care of themselves — particularly their finances.

Caregiving is someone providing care and support to people who are elderly, ill or disabled. Caregivers usually are family members who care for their parents or close relatives. The National Alliance for Caregiving and AARP found that family caregivers spend on average 24 hours per week giving care, while nearly one in four caregivers spends 41 hours or more per week. Caregivers' lost wages, pensions and Social Security benefits total nearly $3 trillion, according to the MetLife Mature Market Institute’s Study of Caregiving Costs to Working Caregivers.

Caregivers also often have the additional burden of paying for caregiving expenses themselves. A 2016 AARP study estimates that caregivers spend an average $6,954 on out-of-pocket costs.

Fortunately, there are steps a caregiver can take to insure a better financial future.

Employer Retirement Accounts

If you're a currently employed caregiver and have a pension or 401(k) plan, there are some things you should consider before leaving a job or reducing hours.

For instance, stay in your job until you are vested. Vesting usually occurs after you've had a job for at least five years. It means you will get all of the matching funds your employer has put into your account. Leave before you are vested and you could lose this "free" money.

If you decide to leave your job and you have a defined contribution plan, such as a 401(k), you may be able to leave your retirement savings in the account or roll it over into an Individual Retirement Account (IRA). You are allowed to contribute up to $6,000 a year to a traditional or Roth IRA, and the limit may be adjusted for inflation in future years. You also can contribute an extra $1,000 if you are age 50 or older.

Whatever you do, don't cash out the account and take the money. You not only will lose retirement money and future investment growth, but will pay high IRS penalties if you take out the money before age 59 and a half.

If you decide to reduce your work hours, determine the minimum working hours you need to continue contributing to a retirement plan with matching funds.

Other Retirement Account Options

If family members pay you as an independent contractor, they also can contribute to a Simplified Employee Pension (SEP) for you. One advantage of a SEP is it has higher contribution limits than IRAs.

Health Insurance

The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue health care benefit coverage under your previous employer's policy for 18 to 36 months. But, you will pay the full premium. If you decide on this option, you have 60 days after you leave your job to decide to continue the coverage.

You also can go to a Health Insurance Marketplace to find coverage that fits your budget. Established by the Affordable Care Act in 2010, the law also provides subsidies in some cases. Visit www.healthcare.gov or call 1-800-318-2596 to apply and find out more about plan options. You also can determine if you qualify for free or low-cost coverage through Medicaid or the Children's Health Insurance Program.

Additional Insurance

You're providing a valuable service and if you were to die, your family members would have to pay another caregiver to continue the service. Consider buying a life insurance policy to help them with those costs.

Also consider purchasing disability insurance. The Council for Disability Awareness says almost half of American adults say they can't pay an unexpected $400 bill without having to borrow or sell something. And the possibility of becoming disabled is greater than you may realize. The Council says almost six percent of working Americans will experience a short-term disability due to illness, injury or pregnancy every year.

Not sure how to start planning your financial future? A good broker or financial planner can help you sift through options and help you decide what will reduce financial strain so you can focus on your important role as a caregiver. Please give us a call if we can help.


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In this issue:

This Just In...

The Likelihood of Medicare for All

How to be a Caregiver Without Taking a Major Financial Hit

The Importance of Life Insurance at Any Age

When Euthanasia and Life Insurance Intersect


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