Budgeting for senior care can feel daunting. Caregivers may worry about supporting a senior loved one while also tending to the financial needs of their own families — never mind the endless challenges of saving for retirement and planning for the future. Seniors are often on limited budgets, trying to stretch modest savings and small Social Security checks as far as possible. No wonder so many families avoid discussing the realities of budgeting for senior care.
Avoiding these topics won’t make them go away. Financial challenges are a fact of life, but you can remove their power by tackling them head-on. Here’s what you need to know about devising a budget for senior care.
What to Consider When Budgeting
A budget is a living document. There’s no single “right” number you must reach to fund senior care because a person's needs may change with time. Instead, your budget should set a few target figures: the cost of senior living in the best-case scenario of a relatively healthy person, as well as costs associated with the worst-case scenario of serious illness.
Some factors to take into account when budgeting include:
- Timeline. How long do you have until you or your loved one will need senior care? If you have some time to plan, your first priority should be saving as much money as possible.
- Health. What is the senior’s overall health? Do they have a chronic or progressive illness? Do chronic or progressive illnesses run in your family?
- Retirement goals. How does the senior want to spend their retirement? Is there an ideal geographic location that would offer convenient access to family? What is the cost of living in this geographic location?
- The ideal senior living arrangement. What does senior care look like to you? Does your loved one want to remain at home as long as possible, move in with loved ones, get in-home care, or move to a senior living community? Each option carries a different price tag.
- Expenses. Budgeting for senior care is not enough. You’ll need to factor in other expenses, too: medical care, transportation, home costs, utilities, entertainment, and more.
- Benefit and other plans. Long-term care insurance, employer assistance programs, veterans benefits, and other programs may help fund senior care. Be sure to take into account the value of these plans. If you have the chance to invest in a plan through your employer, take it.
If you’re budgeting for future senior care, you must also take into account the role of inflation. The money you have today will likely be worth less in the future. The right financial advisor or retirement planner may be able to help you estimate the effects of inflation on your senior care budget.
How to Organize Your Budget
Once you have an idea of how much you need and which care options will work best for your family, it’s time to organize your budget. A budget isn’t just a number you calculate once and forget; it’s something you must continually revisit as your needs and financial realities change. Try the following:
- Set realistic goals based on your budget. How much should you save per month or per year? By how much do you need to reduce your expenses?
- Revisit your budget on a monthly basis.
- Plan an annual consultation with a financial planner who can help you determine if your investments are growing fast enough to fund senior care.
- Incorporate your senior care savings into your family’s budget. When deciding what to do with your money, make sure you set aside the money for senior care first.
- Schedule regular family meetings to talk about senior care budgeting. This is especially important if multiple family members are involved in decision-making. If family members disagree, working together on the budget may help establish a shared reality that makes consensus easier.
- Understand your long-term health care needs. Ask your doctor about any conditions you’ve been diagnosed with and gain a clear understanding of their prognosis. This information is critical to a realistic budget.
Some people find that packaging the budget in an attractive way makes working on it feel less daunting. A pretty journal, an inspiring image, or a well-maintained spreadsheet can work well, depending on your aesthetic sensibilities.
Strategies for Ensuring You Have Sufficient Money
The nightmare scenario for everyone budgeting for senior care is running out of money. There are no guarantees, but a handful of simple strategies can greatly increase the likelihood that you will have enough money:
- Live below your means. Consider downsizing to a smaller house, cutting unnecessary expenses, or traveling a little less. Saving a little is better than saving nothing at all; if you save $25 a month, that’s $25 more you can invest. With the magic of compound interest, that money adds up.
- Get out of debt. Debt eats into your budget and erodes your financial security. Pay down debt now. Credit cards with no balance can be lifesavers if you have an emergency, so make this a goal.
- Choose the right balance of investments. A financial planner can help you decide on the right mix of conservative, safe investments and risky, high-reward investments.
- Consider whether you need your home, which is likely your most valuable investment. Selling your home offers plenty of money to fund senior care. If you invest that money, it can grow quickly.
- Take advantage of government programs such as Social Security, Medicare, and veterans benefits. These programs can fill gaps in your finances and offer more breathing room.
- Look into state-level senior benefits. Some states, for example, offer Medicaid-backed compensation for family caregivers.
If your family needs help planning for a senior's long-term care needs, the right team of experts can help. Consider recruiting assistance from:
- An estate planning lawyer
- An elder care attorney
- A geriatric social worker
- A senior care coordinator
These experts can be uniquely helpful when family members disagree about the appropriate care plan.
Tools That Can Help
You don’t have to figure it all out by yourself. A few simple tools can help you calculate how much money you need and how to begin working toward that figure:
- AARP Long-Term Care Calculator. This tool helps you assess how the specific senior care option you choose will affect costs. Try plugging in different scenarios to gain a keener understanding of how your choices affect your budget. This can be especially helpful when there is a family disagreement about the right care plan.
- AARP Retirement Calculator. If you are still saving for retirement, this calculator can help you decide if you’ve saved enough. It can also increase your understanding of the impact of inflation on your retirement savings.
- Arbor Senior Living Cost Calculator. Arbor’s senior living calculator can help you compare the costs of aging in place to the costs of an all-in-one approach to senior care. Particularly for seniors who may need long-term care, this tool can help put the costs of senior living in perspective.
- Compound Interest Calculator. Invested money grows with time. This calculator helps you predict the future value of your investments.
- Debt Repayment Calculator. If you have debt, chances are good that it grows faster than your investments. Paying down debt more quickly can ensure you have more money to fund senior care, and this tool helps you calculate how to do so as quickly as possible.
Tips for Families Helping to Support a Senior Loved One
Caregivers contribute $470 billion dollars’ worth of unpaid labor annually. This is time they could spend instead on paid work, hobbies, or other meaningful ventures. Many caregivers also offer direct financial support to senior loved ones. They may help fund the cost of senior living, pay for transportation, or welcome a senior into their homes.
If you are contemplating helping to pay for senior living, you’ll need to budget for your own long-term financial future, not just your loved one’s immediate needs. The following tips can help.
- Factor in your own retirement and senior care needs when deciding how much you can contribute. If you can’t afford to help without giving up saving for your own retirement, you can’t afford to help.
- Consider investing in long-term care insurance for your own future.
- Use your loved one’s senior living challenges as an incentive to plan for your own future. The more money you can sock away now, the less likely you will be left depending on someone else to support you in the future.
- Meet with a retirement planner who can discuss your own retirement savings needs.
- Consider the expenses awaiting you in your future. Do you need to save for your child’s college education or put away money for a special needs child? Are you and your partner planning to pursue fertility treatments? Ensure you have enough money for these needs first.
Budgeting for senior care can feel stressful. The relief that comes from knowing you’re on the right track, however, is worth the effort. Arbor has proudly served seniors with care that’s surprisingly affordable for three decades. We’d love to talk to you about your senior living options. Give us a call or chat with us today to learn more!