Considerations for Caregiving - Savings (Pt. 1)
Many households are experiencing the ‘sandwich generation’ phenomenon recognized about 30 years ago. They are raising (or planning to raise) children and providing care for aging family members – both groups mostly or solely reliant upon them. Extended caregiving can cause interruption to careers and opportunities to earn income. These interruptions lead to fewer working years and reduced opportunities to contribute to retirement plans like 401(k)s. Additionally, caregivers may work part-time for schedule flexibility or seek moderate-paying jobs for some income. Some of these options have limited or no access to employer-sponsored retirement plans.
That doesn’t have to be the end of the story. There is no shame in providing care for our loved ones. They are important and should know that we are available for their needs. Recognizing that not all family care giving events announce themselves beforehand, what strategies are available for those looking to expand their families or address potential care for aging or ill family members? Should you consider a savings plan? What investments can be maxed out for the best future outcome, and what long-term care insurance policies are available to offset some financial liability?
Let’s start with savings. Growing your family is a marvelous event. Spending time bonding with your newborn, heal physically and recover emotionally come during the time after your joyous bundle is born. According to the Family and Medical Leave Act of 1993 (FMLA), ‘eligible employees are allowed to take unpaid, job-protected leave for specific family and medical reasons.’ The birth and care of a new baby and care for a spouse or parent with a serious health condition are covered under the Act. The key to the basic provision is unpaid. Many resources are directed to preparing for the birth while one or both parents are working. What is the plan for that time after the birth when one or potentially no parents are working? Are you participating in a high-deductible health plan that comes with a health savings account? If so, perhaps you should consider saving the maximum allowed for any health care costs post-delivery? Or if you are taking care of aging loved ones, who will take care of you? Having some money stashed away for your own health care can alleviate some of the pressures. Your HSA travels with you after you part from your employer and you can still contribute to the account. You cannot effectively take care of them if you are unwell.
Continuing the savings topic, consider how long you would like to be away from the office. Do you want to take the full 12 weeks allowed under FMLA, less than 12 weeks, or potentially not return to the workplace in a traditional manner. That initial desire is a reasonable starting point for planning your finances. What would be required to take the full 12 weeks (approximately 3 months), then work down from there. If you know that it takes $8,000 to cover your household obligations, then that means $24,000 would be a starting point for a savings goal. Now don’t panic if you currently have $4.67 in a savings account. That’s what I’m here for, to discuss financial goals and creative strategies to accomplish them.
Caregiving doesn’t have to come at the expense of your financial stability and wellbeing. How can we work together to make both outcomes positive? We will touch on investment options for caregivers and insurance needs in future blog posts. For now, until we meet, keep working on the change.