1. Research Medicaid options
For those who qualify, Medicaid can cover many long-term care costs. But the rules surrounding eligibility for the program can be complex. Consult an elder care law attorney to determine whether your loved one qualifies and what the program covers.
2. Look into long-term care insurance
Most people who need long-term care aren't suffering from acute medical issues that would be covered by insurance or Medicare. That's where long-term care insurance can help. This insurance is designed to cover the cost of in-home care as well as stays in an assisted living or nursing home facility.
3. But buy it early to avoid higher premiums
The average annual cost of long-term care coverage for a 55-year-old couple is $2,466, according to the American Association for Long-Term Care Insurance. At age 60, the premium increases to $3,381. Pre-existing conditions like cognitive dysfunction may disqualify some applicants from being accepted. Even if this isn't a viable option for your parent, consider long-term care insurance for yourself and your spouse.
4. Take advantage of caregiver tax benefits
If you provide for more than 50 percent of support costs for an elderly family member and their gross income is less than $3,950,footnote2 you can claim them as a dependent for tax purposes. That grants you a $3,950 tax exemption as well as the ability to deduct some related expenses, including food, clothing and even modifications made to your home to accommodate your loved one's physical needs. Consult with your tax professional with regard to your particular situation.
5. Explore the dependent care tax credit
If you and your spouse are both employed or looking for work, you could also qualify for a tax credit worth up to a maximum of $1,050footnote3 for money spent on dependent care. Those are expenses that you incurred paying for the in-home or day care of a family member that you were unable to provide yourself because of your work schedule. Consult with your tax professional with regard to your particular situation.
6. Take advantage of a dependent care flexible spending account
You may be able to direct a portion of your pre-tax income into a flexible savings account designated exclusively for dependent care. You'll stretch your dollars further and lower your taxable income. Withdrawals from that account must be used for expenses related to the cost of caregiving for your elderly family member.
Leveraging these tools and approaches can help give your elderly family members the support they need without jeopardizing your own retirement savings. Learn more from Merrill Edge about helping to care for aging parents.