Caring for an older parent or ill spouse can be a labor of love, but it can also take a toll on you emotionally, physically and financially. While many caregivers are not full prepared for their role, it is important to understand the impact that caregiving may have on your own pocket book and retirement savings and how to plan ahead so you can avoid bankrupting your financial future.

Retirement and Women – the Longevity Factor

A report released in December, 2010 conducted by the Society of Actuaries (SOA) and co sponsored by the Women’s Institute for a Secure Retirement (WISER) found that while half of women age 65 will likely live beyond age 85, 92 percent of female retirees do not have retirement plans to cover that 20-year period.  That means that family caregivers will most likely be picking up the tab for loved ones who don’t have a solid long-term-care plan in place.

“This SOA report underscores the need for women to understand the full-blown drama of retirement,” said Cindy Hounsel, president of WISER. “For most women, there is little room for error and being unprepared for nearly a third of their lives will have consequences.”

Since the average caregiver is a 48-year-old woman caring for her 74-year-old mother, the female factor becomes even more important when planning for caregiving and your retirement.

The Caregiving Cost Drain

Since the economic downturn, 63 percent of America’s 65 million caregivers who were also working were saving less for their own retirement, four out of 10 had their pay or work hours cut, and one in six lost their job according to a survey from the  National Alliance for Caregiving (NAC).  Losing not only income but benefits such as 401K plans, pensions and health care coverage can be devastating but even more so if a loved one’s ongoing care depends on the caregiver’s financial well-being.

In fact, another NAC study found that more than half of caregivers spend on average 10 percent of their annual income on care-related expenses such as prescription drugs, home safety modifications, in-home services or Adult Day Care, food and meals, household goods, transportation and legal fees.

Retirement Planners Should Speak “Venus” and Not Just “Mars”

While all these statistics can cause anxiety, Larry Slabotsky, president and CEO of the Society for Lifetime Planning and creator of the “Women Alone” financial planning seminars for women age 60+, encourages women to find a financial advisor who understands what women face in retirement, especially caregiving, a life event many women will encounter.

“One of the biggest mistakes financial planners make, especially with female clients, is to not ask questions about their client’s lives and income strategy for retirement,” said Slabotsky.  “Too often, planners are focused on selling products and not focused on understanding things such as the caregiving equation that many women will face in retirement.  That can make a huge difference in the types of products and services best suited for that client.”

Tips on Creating a Retirement Plan That Considers Caregiving

1.  Be empowered – find a financial planner who wants to listen to your lifestyle and life stage plans.

2.  Create a plan – Have a dialogue with your planner about your income strategy and what you face in retirement — particularly consider the possibility of caring for an older parent or ill spouse.

3.  Consider working longer – Since women live 3-4 years longer than men, they should also consider remaining in the workforce longer.  Not only will you reap continued benefits from your 401K and health care coverage, but by retiring at age 65 instead of age 62, you will increase your monthly Social Security benefit by 20 percent.   In addition, some employers offer caregiving and elder care assistance through work-life benefits or employee-assistance programs (EAPs) that can support you while you juggle career and caregiving.

4.  Don’t rely solely on Social Security – statistics show that four out of 10 women over age 65 rely soley on Social Security benefits in their retirement.  These benefits alone will not guarantee your current lifestyle and will be woefully low if you are also helping to care for an older parent.

5. Understand your loved one’s long-term care coverage – it is better not to wait until the crisis hits to know what your parents have planned for their long-term care and what costs you may be facing in order to continue to care for them.

Many of us wait until an event occurs which thrusts us into our caregiving journey.  In order to ensure you are not tied to the railroad tracks waiting to get run over, understand the costs of care, the coverage your loved one has and what impact that may have on you financially.  That is the first step in balancing “self-care” with “caregiving” that will make your journey a smoother and more pleasant ride.