An estimated 48 million Americans are caring for someone over the age of 18. Many of them are family members caring for an elderly parent or older relative — and the value of that unpaid care is estimated at about $600 billion dollars a year, according to a recent report by AARP.

Daphne Taylor, Debbie Taylor and Shelia Miller know the cost of caregiving firsthand. These sisters started caring for their 87-year-old mother after she had a stroke four years ago. Coincidently, the three had all retired around that same time. Miller and Debbie Taylor live in Alexandria, Virginia, while Daphne Taylor resides in Washington, D.C.

“We started out saying, ‘Okay, this is our life now,’ and we’ll do trial and error,” said Debbie Taylor, now 63, recalling how the sisters stepped in to provide around-the-clock care to keep their mother at home. 

“It was all a learning process,” said Daphne Taylor, 65, a retired project manager. She took the lead in creating spreadsheets to coordinate care, track medications and note her mom’s progress. She says the ups and downs of her mother’s health and coordinating necessary services has been frustrating. “I was always able to get done what needed to be done in the working world,” Daphne said.

Managing health-related and long-term care expenses is also a challenge. Trying to arrange care quickly and efficiently, the sisters have paid out-of-pocket for medical equipment, transportation and supplies that were not covered by Medicare or insurance, including a $5,000 hospital bed. 

“We’re trying to take care of our mom 24/7,” Debbie said. “There’s just no way in the world that you have time to try and figure this all out.” 

The alternatives to being the primary caregivers for their mom are also expensive. The median cost for a private room in a nursing home is more than $100,000 a year — and more than $60,000 a year for a home health aide, according to a Genworth survey.   

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Meanwhile, family caregivers spend more than a quarter of their annual income on caregiving costs, according to a 2021 AARP report. Many of them have stopped saving money or taken on more debt to pay for those expenses.

Planning ahead for long-term care can reduce some of the financial strain, says certified financial planner and CNBC FA Council member Barry Glassman, but few families actually do it. “It’s tough because a person in their 80s doesn’t really know when they may need help, or what help they may need, if at all,” said Glassman, who is president of Glassman Wealth Services, with offices in Vienna, Virginia, and North Bethesda, Maryland. 

Still experts say taking these five steps can help prevent burnout and financial stress for many family caregivers.

Medicare and most health insurance plans generally don’t pay for long-term care. However, if an elderly individual is eligible for Medicaid or a U.S. veteran, there’s a good chance a family member can get paid for caring for them. 

Family caregivers may be able to be paid by Medicaid, depending on their state of residence. The amount of funds can vary contingent on the elderly person’s needs and the average wage paid to home health aides in that state. Go to the American Council on Aging’s website at medicaidplanningassistance.org to find out if your loved one is eligible for a Medicaid long-term care program that pays family members.

In many states, former service members can manage their own long-term care, including choosing a caregiver, who may be a family member — and their military pension can also cover caregiving costs. The U.S. Department of Veteran Affairs’ Caregiver Support Program website can provide more information on how a caregiver of a military veteran can qualify for financial assistance. 

Consider getting respite care for your loved one, too. Although options for family members to get paid for caregiving are limited, you may be able to get help by paying someone else to give you a bit of a break. Check out state and federal funding, as well as private sources that may be available to help you pay for respite care on the ARCH Respite Network and Resource Center website. 

Research other government health and disability programs in your state, as well as disease-specific and non-profit organizations that may offer financial resources for caregivers, on the Family Caregiving Alliance website.  

If your elderly parent or relative lives with you and qualifies as a dependent, you may be eligible to claim them as a dependent on your federal tax return. 

You can deduct medical and health-related expenses for yourself, your spouse and your dependents that exceed 7.5% of your adjusted gross income on your federal income tax return. Qualifying expenses may also include including home modifications, equipment, and transportation.

You may also qualify for a dependent care tax credit for a percentage of up to $3,000 in qualified care expenses for one person or $6,000 for two people. 

You may be able to save even more money by taking advantage of health savings accounts and flexible spending accounts offered by your employer — and using that money to pay for qualified medical, dental and vision expenses for a dependent. 

You generally have to be enrolled in a high-deductible health insurance plan to contribute to a HSA — which allows for up to $7,750 in contributions for a family in 2023. If you’re 55 and older, you can contribute an extra $1,000. Contributions are tax-free, earnings are tax-free and you can withdraw the money tax-free for qualified medical expenses, too. You can make contributions to an HSA for 2023 until the tax deadline next April. 

You may be able to contribute your pre-tax income to a health flexible spending account, as well as a dependent care flexible spending account. A health FSA covers qualified health-care expenses. The contribution limit is $3,050 in 2023. A dependent care FSA allows you to put away pre-tax money to cover in-home or daycare expenses for a dependent of any age while you are at work, up to $5,000 per household in 2023.

Consult a tax professional to find out if those accounts, as well as other tax breaks ,will provide some financial relief to your caregiving situation.  

Find out if your employer offers other caregiving benefits, such as paid time off for caregiving, mental health and counseling services, remote work and flexible schedules.

Emotional stress and burnout can add to the financial strain of caregiving. Connecting with other caregivers in a support group may alleviate or help you better manage the multi-faceted aspects of caregiving. Search online for caregiver support groups that meet in your area or virtually. 

A care manager may be another avenue of support you can engage even before a crisis. “We can be their ‘black umbrella,’ being there in the corner for them when it starts to rain,” said Anne Sansevero of the Aging Life Care Association. “But they have it in their closet, and they’ve got everything organized.” 

Care managers are often social workers or nurses who can help with creating, evaluating and monitoring a plan to help you care for your loved one. They can make referrals and provide you with a list of resources in your area for in-home care, adult day programs and other services. The fee can range from $125 to $350 an hour, Sansevero said. 

Finally, a key strategy to saving money and reducing the emotional stress of care is planning early. 

If your older parent or relative is reasonably healthy and under the age of 70, consider helping them buy long-term care insurance if they can’t afford the premiums on their own, recommends CFP Ivory Johnson, founder of Washington, D.C.-based Delancey Wealth Management and a CNBC FA Council member. 

Cash flow, family dynamics and personal preference are all factors to consider when looking at a long term insurance. And be sure to understand the fine print. “You can absorb all the risk, you can transfer all the risk, or you can do a little of both,” said Susan Hirshman, director of wealth management at Schwab Wealth Advisory and the Schwab Center for Financial Research. “There’s not one general rule.” 

And discuss with older parents their wishes for who will make health and financial decisions if they are unable to do so. Know where they keep the legal documents that spell out these wishes — health-care proxy or power of attorney, living will or advanced medical directive, and durable power of attorney for their finances. 

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