Family caregivers are America’s other social security, providing the bulk of long-term care today. The aging of the baby boomers will result in unprecedented numbers of people in America needing care. As a caregiving crunch is upon us, ‘The Journey of Caregiving: Honor, Responsibility and Financial Complexity’ offers an in-depth look at Americans’ financial and emotional journeys during this life stage. This study marks the beginning of a new, multiyear research series from Merrill Lynch and Age Wave that will examine five distinct life stages: early adulthood, parenting, caregiving, widowhood, and end of life.

As the first of the series, this study examines the responsibilities, sacrifices and rewards of caregiving – a life stage that nearly all Americans will participate in, as a caregiver, care recipient or both. This study comprehensively explores the topic of financial caregivers – a role largely unexamined, yet held by 92 percent of caregivers. Financial caregiving involves contributing to the costs of care and/or coordinating or managing finances for a care recipient.

The study is based on a nationwide sample of more than 2,200 respondents, including 2,010 caregivers. Key findings about their caregiving journey include:

• Much more than hands-on care. Providing emotional support (98 percent), financial caregiving (92 percent), household support (92 percent) and care coordination (79 percent) far outweigh physical care (64 percent).
• Financial costs – with little discussion of their ramifications. Seventy-five percent of financial contributors and their care recipients have not discussed the financial impacts of these contributions.
• Caregiving for a spouse vs. for a parent. A spouse is 3.5 times more likely to be the sole caregiver looking after a care recipient, and is more likely to spend more out of pocket on care-related costs. Their caregiving journey is also different in terms of the obligations and financial interdependencies they hold with their loved one.
• Caregiving gender gap. Both for cultural and biological reasons, women are more commonly caregivers for spouses and parents, averaging six years of caregiving in their lifetime versus four years for men.² As a result, women are disproportionately impacted by the challenges of caregiving, including struggling to balance responsibilities and making career sacrifices. And then, more find themselves alone and without someone to care for them when needed.
• Responsibilities extend beyond the care recipient’s life. Sixty-one percent of the time, caregivers expect their role will end with the death of their loved one. However, the complexities of financial, legal, and other aspects of caregiving often continue for months, or even years.

“As tens of millions of people take on caregiving responsibilities each year, supporting those caring for our aging population has become one of the most pressing financial issues of our lifetime,” said Lorna Sabbia, head of Retirement and Personal Wealth Solutions for Bank of America Merrill Lynch. “Greater longevity is going to have a profound impact on the caregiving landscape and calls for earlier, more comprehensive planning and innovative solutions to address the health and long-term care needs of our loved ones.”

Financial caregiving: Navigating complexity and responsibility
The study finds that 92 percent of caregivers are also financial caregivers, and are contributing to and/or coordinating finances for their loved one. In fact, after two years of receiving care, 88 percent of care recipients are no longer managing their finances independently.

Financial caregiving is often far more complex than simply contributing to the recipient’s care. Financial caregivers are responsible for a wide variety of tasks, including:

1. Paying bills from their recipient’s account (65 percent)
2. Monitoring bank accounts (53 percent)
3. Handling insurance claims (47 percent)
4. Filing taxes (41 percent)
5. Managing invested assets (21 percent)

• Health care rises as top challenge. Respondents find that navigating health insurance expenses is the top challenge of financial caregiving (57 percent).
• Uncharted territory. An estimated 49 percent of financial caregivers don’t have the legal authorization to perform their role.
• Guidance and resources lacking. Sixty-six percent of caregivers feel they could benefit from financial advice.

Costs and compensations of caregiving
While some aspects of caregiving may feel like a burden, those surveyed also tell us it is a blessing. Contrary to all we hear about the stress and sacrifices of caregiving, for many caregivers, the role is also often associated with a range of positive experiences and rewards. Caregivers describe a complex, demanding yet often nourishing journey – defined by honor, gratitude, fulfillment, purpose, and strong family bonds.

Costs:

• Nearly three quarters of respondents say they’ve made numerous sacrifices as a caregiver – whether familial or professional.
• Fifty-three percent have made financial sacrifices to compensate for caregiving expenses. Thirty percent of caregivers say that they have had to cut back on expenses, and 21 percent have had to dip into personal savings.
• Two in five caregivers under the age of 64 have made sacrifices at work due to caregiving responsibilities, including reducing their hours (17 percent) and leaving the workforce (16 percent).

Compensations:

• Caregivers feel rewarded knowing they are doing something good for someone they love – 61 percent say the greatest benefit of providing care is the sense that they have “done the right thing.”
• Seventy-seven percent say they would gladly take on being a caregiver for a loved one again.
• Forty percent report a strengthened bond between themselves and the care recipient, and 24 percent say caregiving brought their family closer together.
• Eighty-six percent say watching their loved one’s health struggle was a motivator that caused them to place more value on taking care of their own health.

“Caregiving is one of today’s most complex life stages, throughout which hard work, high stress and heavy obligations intertwine with honor, meaning and resilience,” said Ken Dychtwald, Ph.D., CEO and founder of Age Wave. “This experience becomes even more emotionally complex and financially challenging when caring for loved ones suffering from dementia or Alzheimer’s. Even with that added burden, this study reveals that 65 percent say that being a caregiver brought purpose and meaning to their life.”

The crucial role of employers
Employers can play an integral role in supporting caregiving employees during this demanding life stage. While 84 percent of employers say caregiving will become an increasingly important issue in the next five years, only 18 percent strongly agree that their workplace is currently “caregiving-friendly”⁴ – underscoring the need for new approaches and solutions across the workforce.

“Meaningful, well-designed employer benefits can make a crucial difference in helping caregivers navigate the high stress of caring for a loved one, and help them balance these responsibilities with the rest of their working and financial lives. Just as child care has been an issue in the past that led to revolutionizing HR benefits, the aging of the population means we need to consider how caregiving is becoming an increasingly important issue for employers and employees,” said Kevin Crain, head of Workplace Solutions for Bank of America Merrill Lynch. “These should include resources and programs focused on addressing caregiving complexities and employee networks that facilitate support from experts and peers.”

According to Crain, “Bank of America Corporation is committed to meeting the needs of caregivers in today’s transforming world. Companywide initiatives dedicated to addressing the needs of our country’s aging population and those of their caregivers include combatting elder financial fraud, increased awareness of cognitive decline and Alzheimer’s disease, and implementing caregiving best practices through training and resources for its financial advisors and corporate clients. The company supports our employees who are caregivers through a variety of resources including access to emergency back-up care for adults and children, professional elder care assessments, elder care law services, and an internal Parents and Caregivers employee network.”

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2nd July 2013

Retirement is a critical point of everyone’s career, and oftentimes the most anxiety ridden for most individuals. Although retirement is inevitable, most individuals fail to adequately plan for this crucial junctures of their life. Improper planning adds to the financial stress that individuals face, as they are no longer able to work and most of the retirees rely on pensions, social security, current savings and assets to sustain their standard of living. Most retirees need regular cash flows to manage their day to day expenditure in order to lead a satisfied and comfortable retired life. One of the cheapest and most effective ways of establishing cash flows is to use existing real estate property for that purpose, it may be possible to leverage currently held real estate into current cash flow by renting it out to local businesses or by turning any other real estate holding into rental property. When managed properly, rental property allows for a secure flow of income that gives retirees a certain amount of stability in terms of cash flow. However, there are disadvantages of holding investments in real estate property as, it can have hidden costs such as additional taxes and other fees, which may rise depending upon the property.

Due to the recent financial crisis, real estate and rental properties have been incredibly low, and it is possible to acquire assets that will significantly rise in value in the near to medium term. Careful investment can garner reliable income returns, but the variances within the market and the current state of the economy makes this investment option one for individuals who can afford to have a certain degree of risk within their portfolio.

Another option for retirees is to retire with a significantly lower tax load depending on the source and level of income that they are able to bring in after retirement. There is an option for the retirees to relocate to those states in the U.S. where income is not taxed from certain sources. Reverse Mortgage is another option available for the retirees to access a portion of equity within their homes by exchanging a part of the equity of their homes for a lump sum or a monthly payment. Reverse mortgages serve as revolving credit lines that home owners can access and allows them to use the built up equity within their property without losing property rights and privileges over their homes. This can be advantageous to those retirees with no other sources of income; this method also prevents the sale of property.

Real estate income is a highly viable source of income and brings cash flows to the retirees and it is possible to acquire a significant income stream with careful investment and management of real estate options.

Nearly two thirds of Americans have increased their focus on retirement over the past five years and a recent Merrill Lynch study has found many still lack the confidence to save adequate money for their retirement. According to a report by Bank of America which analyzed on work place benefits, 85 percent of the 1,000 employees surveyed said they are not saving more enough and 78 percent of those interviewed said they would be working into their 60’s and 70’s. A majority of the employees opined that they needed help for retirement advice or guidance and more than half of them were seeking advice across all aspects of their financial life.

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