The Sandwich Generation Squeeze: Care Costs Can Eat Up 80% of Family Income
One in five Americans is part of the sandwich generation, caring for their own children and an adult, usually a parent. A recent CareScout analysis examines childcare and non-medical caregiver costs across states to understand how paid care affects sandwich-generation families’ finances.
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CareScout found that if a typical American family with two young children and a full-time (44 hours per week) non-medical caregiver for an aging relative were to cover day care for the children and in-home care for their aging relative, the combined cost would be 79.6% of their household income. If the caregiver worked part-time (20 hours a week), the combined care costs would be equivalent to 46.7% of their income.
This analysis doesn’t suggest that most people are paying that much out of pocket. But it goes to show how expensive care costs have become.
Families living in some states face a greater financial burden. Wyoming took the top spot as the most burdened state. If a Wyoming family absorbed the full cost of child care and 20 hours per week of in-home care, combined costs would total 61% of their income. With full-time in-home care support, the total cost would be $128,080, which would exceed their income of $115,899.
One might assume that combined costs would be higher in high-cost-of-living states like New York or California, but that’s not the case. In rural states, like Wyoming and Montana, a shortage of caregivers may be one reason for rising in-home care costs. On the other hand, Mississippi families face the lowest burden. If a family absorbed the full cost of child care and 20 hours per week of in-home care, combined costs would total 35.3% of their income, or $38,520. If they needed full-time in-home care support, the total cost would be $68,472, which is 62.7% of their $109,152 income.
Unfortunately, care costs are rising faster than wages in many parts of the country, and many sandwich-generation families caring for both children and aging adults aren’t prepared financially. But there are steps families can take to ease the financial burden, and advanced planning can help.
“We all know it’s cheaper and easier to replace our tires when they are worn down than to fix our car after we slide into the one ahead of us during a rainstorm. The same goes for care planning. Families should start exploring their options long before they need them.”
Lisa Hostetler Brown, a Certified Expert in Elder Law and founder of LawyerLisa, LLC
What Sandwich Generation Families Can Do To Ease the Financial Burden
Lisa Hostetler Brown, a Certified Expert in Elder Law and founder of LawyerLisa, LLC, says the key to managing care costs is pre-planning.
“We all know it’s cheaper and easier to replace our tires when they are worn down than to fix our car after we slide into the one ahead of us during a rainstorm. The same goes for care planning,” she explains. “Families should start exploring their options long before they need them.”
Brown recommends first looking at what resources an aging parent already has. Does the parent have long-term care insurance? If so, what will it cover? Policies vary widely, and families should request a current statement of benefits. Veterans and their spouses may also qualify for Aid and Attendance benefits to help cover care costs, even without a service-connected disability.
For adult children providing hands-on care, Brown says it may make sense for the parent to pay them under a formal caregiver agreement. This compensates a child who may have cut back on work to help, and the agreement can be structured so the parent remains eligible for Medicaid once their resources are depleted.
Brown also cautions families who are considering moving in with their aging parent. While it may seem like a practical way to reduce costs, if the parent eventually needs government benefits to pay for their skilled care, the home could be subject to Medicaid estate recovery, potentially leaving the adult child without a place to live.
“Meeting with an attorney early on to set it up to protect the entire family is a worthwhile investment in saving resources down the road,” she explains.
The options for covering care costs shrink as a parent’s health declines. Whether you’re the one who may need care someday or the adult child helping to figure it out, Brown stresses the importance of starting the conversation early, before a crisis. Early planning gives families the best chance of managing costs without draining their savings or retirement funds.
