Unpaid caregiving is a reality for millions of Americans, including many Millennials, and it can dramatically impact financial plans.
Financial professionals need to know if their younger clients are, or will become, caregivers, and they should make clients aware of the possible challenges ahead.
Many Millennials find their parents resist discussing a future in which they lose some control in their lives, but family finances are connected, and children should know their parents’ plans.
Unpaid caregiving will be a reality for millions of Americans this year.
In 2020, 21.3% of Americans were caregivers at some point, which translated to roughly 53 million adults providing care, according to a 2020 AARP and National Alliance for Caregiving Report.1 Despite being seen as young, some Millennials are already providing care to adult family members. The average age of a Millennial caregiver is 30.2 years old.2 While we are the most diverse generation of caregivers in terms of race, ethnicity, gender, and sexual orientation, we reportedly are more likely to be unmarried, have lower household incomes, and are least likely to have our own health insurance when compared to caregivers of older generations.2 All of this collides into the potential for financial strain.
The reality is many financial planners will have a client who either needs care from or will be providing care to a family member. The 2020 Caregiving report found that 61% of caregivers were still working.1 Despite the majority continuing to work, many caregivers will sacrifice their own financial health. The report found three in 10 have stopped saving and 23% of caregivers have taken on more debt.1 One way you can help provide relief is to ensure your clients, especially Millennials, are preparing for this potential squeeze early as opposed to being reactive and scrambling once a loved one needs care.
Financial professionals can help their Millennial clients prepare
Millennials (or Generation X) might not know they’re going to become a caregiver. But the stats around caregiving indicate otherwise. More than 51% of caregivers did not financially prepare for the costs of care,3 and 40.7% of caregivers who worked with a financial advisor never talked to the advisor about their caregiving.4 This should be alarming to financial professionals who either work with Millennial and Gen X clients or have clients with children in those generations.
It’s important financial professionals are aware of whether or not clients will be caregivers, because it may impact a person’s financial plan. Part of your work with younger clients should be to bring up the potential of providing care to parents, in-laws, or another family member. It’s particularly important to engage Millennial women in this conversation early as women are disproportionately impacted — 61% of caregivers are women with an average age of 49.4 years old, according to the 2020 Caregiving Report.1 The oldest Millennials in 2022 are in their early 40s.
Part of initiating this critical conversation is encouraging Millennial clients to ask their parents about the following:
Question for parents: Where do you want to live after you retire?
How to ask: “What’s your dream retirement situation?"
Question for parents: Have you met with a financial advisor to discuss your retirement nest egg and if it’s sufficient for providing a high quality of life in your retirement?
How to ask: “I’ve found it so helpful to work with a professional to gut check all the hard work I’ve been doing with my financial planning. Are you working with a financial professional to double check your retirement plan?”
Question for parents: What is your plan for health insurance?
How to ask: “Do you know what Medicare will and won’t cover? Are you prepared for any uninsured costs?”
Question for parents: Do you have long term care insurance?
How to ask: “Have you ever heard of long term care insurance?” Follow up with, “Have you checked to see if you’re still eligible for a policy and how much it would cost?”
Question for parents: Are you aware how much it would cost if you needed in-home aid or to move to an assisted living facility?
How to ask: “Have you thought about any help you might need around the house? Like someone to mow the lawn or even helping with cooking and cleaning?” or “Do you think you’ll want to stay in this house long-term or would you rather move to a community with more activities and not have to handle home maintenance?”
The answers to these questions should form the advice you, as a financial planner, would give your client about how to prepare for potential caregiving costs.
What’s a Millennial to do?
A common problem Millennials face in these necessary discussions is their parents’ resistance to engage. After all, the child is shifting a long-standing paradigm. Suddenly, the child is asking questions that require the parents to consider a time in which they will need to relinquish some element of control.
For adult children, it’s okay to express concern about the state of your parents’ finances, but keep any condescending tones at the door. Begin with a thank you to your parents and an acknowledgement of all they’ve done for you.
“I want to acknowledge and thank you for all the work and sacrifice you put into raising me (and my siblings).”
Then connect their situation to your current reality.
“As you know, I’ve started to really lay the foundation of my financial future. I’m even working with a financial planner. Part of building my plan is thinking about your future as well. I know you’ll tell me not to, but we’re connected.”
Then make the big ask.
“It’s important to me that we have an honest and frank conversation about what you want for yourself in retirement and as you age. I also would like to know if you’ve handled necessary paperwork and if your nest egg will be enough to provide the life you deserve.”
It could take time and multiple attempts to get your parents to open up. Or you could try another tactic. Family medical history can, and perhaps should, be used to engage in these critical conversations with parents.
“We have a history of Alzheimer’s in our family. I know it’s incredibly painful to think about, but I need us to be able to sit down and have a conversation about what you would want if you were to ever get diagnosed. We should take care of all the legal paperwork now, so that I can be certain about your wishes and ensure you immediately have the best possible care.”
Millennial or Gen X children can also bring up what happened with grandparents as a way to engage in this conversation with parents.
“I know you really struggled with having to handle grandma’s care after grandpa died. I want to make sure that history doesn’t repeat itself and we have a plan in place early.”
For those whose loved ones refuse to engage in this critical conversation, there is one final tactic you can take. You, and any siblings, can design your own plan including an emergency savings (or investment) fund earmarked for your parents’ care. Each sibling can contribute what is reasonable based on their situation and this buffer may help provide both a financial safety net and peace of mind. Siblings who may not be in a financial position to contribute can also be put in charge of researching state or federal programs that may help subsidize your parents’ care and needs as they age.
Ultimately, you can’t bulldoze your parents (or in-laws) and force them to engage in a frank financial conversation about their retirement and caregiving wants and needs. They are adults and are entitled to make their own decisions, so long as they are legally of sound mind. The best you can do is continue to initiate and engage with them while also working with a financial planner to put yourself into a position to care for your future, your children, and your parents.
Things to Consider:
Many Millennials may not know they’ll become caregivers one day, but statistics indicate otherwise.
It’s particularly important to engage Millennial women in caregiving conversations because they are disproportionately impacted.
Millennials cannot force their parents into financial and caregiving conversations, but they can stay engaged with their parents and work with a financial planner to put the best plan in place for themselves and their entire family.
1 “Caregiving in the U.S.,” AARP, May 2020 2 “The ‘Typical’ Millennial Caregiver, National Alliance for Caregiving, AARP, May 2020 3 “MIT AgeLab CareHive Executive Summary,” MIT AgeLab, 2021 4 “MIT AgeLab Caregiver Panel Financial Data,” MIT AgeLab, March 2021
Transamerica Resources, Inc., is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker-dealers. Transamerica Resources, Inc., does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical, or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.
