Investing in long-term care insurance—which can pay for home aides or assisted living—can pay off in a big way later on.

Investing in long-term care insurance—which can pay for home aides or assisted living—can pay off in a big way later on.(ISTOCKPHOTO)

Without planning, taking care of a loved one can easily become a major drain on financial resources. And the more demanding it becomes, the more your own financial health is endangered. America's caregivers provide an average of 21 hours a week of volunteer care over an average of 4.3 years; in a 2004 survey, 38% of those caregivers reported some financial hardship as a result. Whether you are still eyeing the corner office or youre thinking about reducing your hours to spend more time helping a family member, here are some of the issues youll want to consider.

What to watch out for:

Stalled career development. Your ability to nurture your own career can be imperiled by your caregiving duties. Difficulty focusing, the constant intrusion of family emergencies, emotional exhaustion, and, if you have cut back on office hours, less work capacity and face time with colleagues can all translate into fewer career advancement opportunities—and, ultimately, less financial security. "Your confidence and ability to develop your career is much different than someone who isn't a caregiver," says Katana Abbott, founder of, a website dealing with caregiving issues for women.

Obviously you want to help your loved one, but there are limits. "If you're putting your own career at risk, remember that the person you're caring for probably doesn't want you to do that," says financial planner Bonnie A. Hughes of the Enrichment Group, a wealth management firm in Miami, Fla.

]Jeopardized retirement savings. If you're contemplating going part-time or even stopping work altogether in order to care for someone, think about your own retirement security first. Consider the situation of a 61-year-old retiree from San Francisco: When his mother, now 94, had a stroke three years ago, he quit his truck-driving job and took an early retirement package. He estimates that his pension is about 30% less than it would have been had he worked till age 65. "If I'd stuck it out the next three or four years, the higher pension plus getting a salary all that time, I'd be in much better shape financially," he says. "I sometimes wonder if I made the right decision."

At a minimum, try to work long enough at your job to become fully vested in your company pension or retirement plan. That way, you can take all your employer's contributions with you. Even after you leave work, continue contributing to an individual retirement account (IRA) on your own to make up for the lack of a workplace plan and diminished social security credits.

If you cant stick around until youre fully vested, think about cutting back on hours until you are, instead of giving up your job entirely. Part-time work may also allow you to keep some benefits, like health insurance. "Caregiving is so stressful, you want to make sure that you have your own health care covered in case something happens to you," says Hughes.

Where to get help:

The government. All too often, caregivers think they have to stretch their own resources to the breaking point. But there are some other options. For instance, your disabled child may qualify for Medicaid, the government medical insurance program for low-income individuals and families, and Supplemental Security Income, which pays a monthly stipend once he or she reaches 18. "The child of Bill and Melinda Gates can still qualify for Medicaid because eligibility is based on the child's income once the child reaches 18," says Ron Pearson, principal of Beach Financial Advisory Service, a financial planning firm in Virginia Beach, Va., that specializes in families with special needs. Go to BenefitsCheckUp, a website hosted by the National Council on Aging, to find out about government programs that your loved one might be eligible for.

Long-term care insurance. Preferably way before your parents or other elderly relatives need care, talk to them about long-term care insurance, which can pay for home health aides, assisted-living facilities, or nursing homes. The earlier you purchase it, the less it costs and the more likely you are to qualify. If there's money for care, you can greatly reduce the amount of time you'll need to spend on it yourself. Abbott, for example, convinced her mother to purchase a plan 15 years ago when she was 58. Now her mother is in an assisted-living facility. The policy, which pays $3,000 a month, partially covers the cost. "She'll never have to spend down her assets," she says. "It gave us choices we never thought we had."

Your family. If your parents are older than 62 and own their home, they may be able to take out a reverse mortgage to tap the equity in their home. Or they might be eligible for something as simple as a Meals on Wheels program or participation in an adult day-care center. Contact your Area Agency on the Aging to learn about programs available for older adults where you live.

Have open, frank discussions about how you'll care for family members should the need arise, but do so while those family members are still healthy; it allows them to be part of the conversation. Ask lots of questions. If one sibling is willing to provide direct care to an ailing parent, can another pitch in financially? It might be a difficult conversation, but it will prepare everyone for what might lie ahead. "This lets a person see what they need to do and helps them get organized," explains Abbott. "This will prepare you for when you get that call in the middle of the night."