How Gen X Can Prepare for the Financial Costs of Supporting Aging Parents

After years spent balancing your career, managing a household, and supporting your children’s goals, many in Gen X face a new and emotionally complex responsibility: caring for aging parents. Whether you’re an older millennial or in Gen X, being in the “sandwich generation” can bring significant changes to everything from relationships and daily routines to financial strategies. And while the caregiving role is filled with love, it can also bring a great deal of both financial and emotional stress.

The cost of supporting aging parents can cover caregiving tasks, medical expenses, long-term care, and other unexpected financial obligations. It’s normal to feel unprepared or overwhelmed, but the good news is that with the right strategies in place, you can navigate this role with confidence, knowing your finances—and your future—are protected.

Assessing the Financial Impact of Supporting Aging Parents

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When stepping into the role of caregiver for aging parents, one of the first hurdles is grasping the true financial cost of the journey ahead. The reality is that, depending on your parents' health and future needs, the expenses can quickly escalate. For instance, if your parents require assistance with daily activities, you may find yourself exploring options like nursing homes, assisted living facilities, or in-home care. While essential for providing the level of care needed, these services are often not cheap. According to research by GenWorth, the average monthly median cost for assisted living in Ohio in 2023 was just over $5,000 while the same for a private room in a nursing home was just over $9,500. Costs vary by state and region, and while their weight can be staggering, it’s wise to research them ahead of time so that you can plan accordingly.

Beyond long-term care services, other hidden financial responsibilities can catch caregivers off guard. Medical expenses, for example, often extend beyond what insurance will cover. Prescription medications, frequent doctor visits, and specialized treatments can add up quickly. If your parents prefer to age in place, which many prefer, you might have to fund necessary home modifications. Simple updates like handrails or ramps can provide safety and mobility, but larger investments, such as stairlifts or bathroom renovations, may also be needed as their mobility declines.

Then there are the less predictable costs, like transportation. Regular trips to medical appointments, therapy sessions, or hospitals can become a part of your new routine. Whether you’re driving them yourself or hiring transportation, these costs often go overlooked but are very real. In the case of emergencies, the expenses can rise even higher.

By better understanding the scope of potential caregiving costs, you give yourself the chance to prepare. Having a realistic picture of what may lie ahead allows you to create a plan that balances both your parents’ needs and your own financial well-being. You’ll know where to focus your resources and how to avoid unexpected financial stress down the road.

Open Communication with Your Parents About Their Finances

One of the most important, yet often difficult, steps is having an open conversation with your parents about their financial situation. It can feel uncomfortable, but knowing where they stand financially and what plans they already have in place will help you avoid surprises later.

Here are some topics you might cover during this conversation:

- Savings and income sources: Learn about their current income, savings, and any investments they may have. This includes Social Security benefits, pensions, and retirement accounts.

- Insurance policies: Find out if they have long-term care insurance, life insurance, or any supplemental health coverage that might ease the financial burden of caregiving.

- Care preferences: Discuss their wishes for care. Do they prefer in-home care, assisted living, or another arrangement? Understanding their preferences can help you plan both the logistical and financial aspects of caregiving.

- Legal and estate planning: While the focus here is on finances, it's also important to discuss any legal documents, such as wills, power of attorney, and healthcare directives, to ensure that their wishes are honored in the future.

Three Financial Planning Strategies for Caregiving

1. Explore Long-Term Care Insurance

One of the most significant ways to prepare for future caregiving costs is to explore long-term care insurance. These policies can cover a large portion of the expenses associated with nursing homes, assisted living facilities, and even in-home care.

It’s important to note that long-term care insurance becomes more expensive or even unavailable as people age or develop health conditions. If your parents don’t have a policy, now may be the time to explore options while they’re still eligible. Review any existing policies with them to ensure they provide adequate coverage for future care needs.

2. Create a Caregiving Budget

Creating a caregiving budget can help you manage the financial responsibility of supporting aging parents. Start by estimating both immediate and future expenses. Consider the following costs:

- Monthly in-home care or nursing facility expenses.

- Out-of-pocket medical costs, including prescriptions and doctor visits.

- Home modifications to accommodate aging in place.

- Transportation for medical appointments.

Once you have an estimate, build a budget that balances caregiving costs with your personal and family expenses. If possible, you might set up a separate fund to track caregiving expenses, which will make it easier to stay organized and prevent caregiving costs from overwhelming your household budget.

3. Tax Benefits for Caregivers

Caregiving can be financially draining, but there are tax benefits available that can help offset some of the costs. You may be eligible for tax deductions or credits if you provide significant financial support for your parents. Here are a few options to explore:

- Dependent Care Credit: If your parents meet certain qualifications and live with you, they may be considered dependents for tax purposes, allowing you to claim the dependent care credit.

- Medical expense deductions: If you're paying for your parents' medical expenses, you may be able to deduct these costs if they exceed a certain percentage of your adjusted gross income.

Be sure to keep detailed records of caregiving expenses throughout the year. Consulting with one of our tax advisors can help you ensure you're maximizing any deductions or credits you're eligible for.

Balancing Your Financial Goals with Caregiving Responsibilities

While it's natural to want to support your parents, it’s important to remember that your own financial future is at stake, too. One of the biggest risks caregivers face is depleting their own retirement savings or emergency funds to cover caregiving costs. Before dipping into your savings, look for alternative solutions, such as setting up a family fund for caregiving or using any available benefits or government assistance programs.

Keep your long-term financial goals in mind. Whether it's saving for retirement or funding your children's education, these goals shouldn't take a back seat to caregiving. Creating a plan that prioritizes both your parents' needs and your own will help you maintain financial balance in the long run.

Consider Shared Responsibility Among Family Members

Caregiving doesn’t have to be a solo journey. Having conversations with siblings or other family members about sharing both caregiving tasks and financial contributions can reduce the emotional and financial burden.

Some families find it helpful to create a family fund, where each sibling contributes a set amount monthly to help cover caregiving expenses. Others divide responsibilities—one sibling may take on physical caregiving duties, while another handles financial support. By working together, you can create a plan that distributes responsibilities more equitably.

Planning Today for Peace of Mind Tomorrow

Supporting aging parents can be both emotionally and financially demanding, but with the right strategies in place, it’s possible to navigate this role with confidence. By planning ahead, communicating openly, and exploring financial solutions, you can manage the costs effectively.

At Wealthquest, we understand how overwhelming it can feel to juggle your finances while also caring for aging parents. Our “all under one roof” model is designed to provide peace of mind, coordinating your investments, tax planning, estate planning, and financial goals under one team. If you’re ready to navigate these uncharted waters with confidence, our team is here to help you plan for the future—both yours and your parents’.