According to Voya, one out of every five people in the U.S., or 56.7 million people, has a disability, and one out of every six workers, or 105 million people, assist with caregiving, be it for a family member with a disability or an aging parent.
As a result, “caregivers deprioritize their retirement savings,” says Tom Conlon, head of client relations at Betterment for Business in New York. “This is why it is important for retirement plans to start with the best known practices: automatic enrollment, on-demand digital advice, managed accounts and financial wellness programs,” Conlon says.
Employers are in a unique position to help caregivers, agrees Heather Lavallee, president of the tax-exempt market for Voya and head of Voya Cares, a program the company launched specifically to help caregivers. Caregivers spend an average of 24 hours a week caring for their loved ones, but only 56% of caregivers report their responsibility to their employers, she notes.
“To help a caregiver save for retirement, advisers and employers should recommend health savings accounts (HSAs) that the caregiver can use to cover out-of-pocket expenses not covered by their medical plan,” Lavallee says.
In addition to optimizing use of benefits such as life insurance, health insurance and retirement plans, employers may encourage caregivers to examine whether their dependents qualify for government benefits, which can be either means-tested, i.e. available to those whose income falls below a certain level, or structure as entitlements, Lavallee says.
People with disabilities or special needs who have less than $2,000 in personal assets qualify for Supplemental Security Income (SSI). “When a child turns 18, they are means tested on their ability to earn an income, and this benefit could be as much as $500 to $800 a month,” Lavallee says. “Receiving this benefit could free up the caregiver to divert more of their own money towards retirement savings.”
Medicaid is another means-tested benefit that provides health coverage for people with disabilities, as well as others. A third means-tested program is the Supplemental Nutrition Assistance Program, otherwise known as food stamps. All of these may be factors in an employee’s decisions about diverting assets to the retirement plan.
Two entitlement programs are Social Security Disability Insurance, available to those with disabilities or special needs, and Medicare, which provides medical care to certain persons, including those with a disability.
“There is also the ability for people to take advantage of 529 Able Plans, state-run savings programs for individuals with disabilities,” Lavallee adds. “They allow you to save $15,000 a year up to a total of $100,000, and the money can be withdrawn tax-free when the funds are used to pay for qualified disability expenses.
Employers can also give caregivers access to licensed clinicians and seek out health insurance that includes caregiving support, she says.
Specialist providers can play support role
Wellthy is a program specifically designed to help people care for aging parents. It launched in 2014, originally focused on the consumer market, but the firm shifted its solution in 2016 to become an employer-linked benefit. Today, it works with 385 employer clients.
“Wellthy pairs a caregiver with a dedicated care coordinator who helps them find the right home aid, schedules appointments, negotiates insurance bills and helps them find the right health insurance option,” says Lindsay Jurist-Rosner, chief executive officer of Wellthy, based in New York. Jurist-Rosner says this service is greatly needed, as one in five workers are taking care of an aging or chronically ill parent.
Jurist-Rosner says it is critically important for these workers not to quit their jobs, because reentering the workforce is very challenging. Instead, they should hire a home aid, and if they cannot afford that on their own, Medicaid might cover it.
“There are also community day care programs in many areas, sometimes run by religious groups, and many are free,” she says. “There are a number of various non-profits and community organizations that provide resources, and there is no shortage of support programs for individuals who have aging parents or children with special needs.”
She also cautions people against taking out loans from their 401(k)s to cover medical bills for disabled dependents. In one instance, a worker was saddled with $500,000 in medical bills after his wife passed away.
“We worked with the hospital and within six months, we negotiated that down to $300,” Jurist-Rosner says. “We very often successfully help people negotiate insurance bills. We often find they are paying too much or were billed erroneously.”While Wellthy is most commonly available through employers, an individual can work with the company directly, for $300 a month, or $200 a month if they commit to six months. “While that may seem cost prohibitive, we do save them a great deal of money,” Jurist-Rosner says.