Americans caring for an aging parent may be cutting back on their own expenses, having trouble paying the bills and dipping into their savings, according to a new study.

“Our clients who are retirement age who still have parents who are alive and aging are coming into the position where they might want to be helping their parents out financially,” said Suzanne Shier, chief tax strategist with Northern Trust. “It’s not something they factored in when they were planning their own retirement years. It’s a conversation we are having more and more.”

The October 2017 Age Wave/Merrill Lynch study found that 71percent of caregivers have made a lot of sacrifices in their role as caregivers; of the 68 percent who contribute financially to the cost of care, half experienced a significant impact on their finances.

“It comes down to being proactive,” said Mary L. Ballin, a financial advisor in Walnut Creek, Calif. “If adult children are in communication with their parents and visiting periodically, their hopefully won’t be surprises concerning the parent’s financial matters.”

Increased life expectancy  is one reason that elderly parents are impacting their adult child’s retirement and pre-retirement. There were nearly half a million people 100 years or older in 2015, according to United Nations data, and projections suggest there will be 3.7 million centenarians across the globe by 2050.

Below are five signs that advisors indicate a client’s best laid retirement plans may be at risk because of an elderly parent:
 

Missing Out On Leisure Activities Or Travel In Retirement

“Clients retirement is at risk when they are redirecting their fun money or fun activities on a month-over-month basis to cover a parents' care,” said Matt Chancey, a CFP in Orlando, Fla.

Some 30 percent of caregivers cut back on their own expenses, 24 percent have trouble paying bills, 21 percent dipped in to their savings, 18 percent couldn’t contribute to other expenses or savings and 15 percent took on debt to cover costs of care.

But the issue is beyond financial for Virginia-based CFP Mark E. Johannessen, who has witnessed retired clients have their own retirement interrupted by increasingly needing to care for World War II-era parents.

“Though there have been some financial implications in those instances, the bigger issue has been time and undue burden put on those family members who are retired,” Johannessen told Financial Advisor.

Clients Taking Unplanned, Early Or Additional Withdrawals From Retirement Accounts

Clients who pull money out of their retirement accounts to help pay for elder care can be a slipper slope, advisors say.

“It doesn't always come up in conversation, even when you ask, because the client may have thought another sibling would handle mom's or dad’s care or  they thought it wasn't going to be as big a deal,” Chancey said. “The first time you find out caring for an aging parent is an issue is when you get a request [from a client] for some type of unplanned withdrawal.”

Instead of paying out cash, Johannessen advises gifting appreciated stock, especially when the elderly, needy parent is in a lower tax bracket. “This provides an adult child with the opportunity to both rebalance their own investment account portfolio at lesser cost than if selling and preserves cash for the pre-retiree that they will need to support their own lifestyle in retirement,” Johannessen said.

Co-Mingling Funds

Clients sometimes combine their and their parents' assets as a matter of convenience—to make it easier to pay the parents' bills, for example, or to monitor how they're spending.

But such a move could have serious consequences, advisors say.

Chief among these concerns is that it could make the elderly parents ineligible for Medicaid and other forms of public aid because the caregivers assets could be looked upon as a gift, advisors say.

“When that happens, an adult child can be viewed as responsible for the parent’s credit cards, loans or mortgages and could make the parent ineligible for Medicaid,” Ballin said.

A means-based government program, Medicaid covers doctor visits, hospital expenses and long-term care costs—both in a nursing home and at home—which can cost upwards of $45,000 per year for assisted living residency and $49,200 a year to employ a home health-care aide, according to Genworth. “If a parent cannot qualify for Medicaid, your pre-retiree or retired client may be the one paying for the long-term care of the parent, which can prevent them for saving or cause them to dip into their retirement savings,” Chancey said.

Any gifts or transfers of assets made within five years of the date of application for Medicaid are subject to penalties.

“Putting yourself on your parent’s title for homes, investment or savings accounts can be viewed as a completed gift causing not only estate tax implications for the parents, but also for the child if they are assigned to distribute the parent’s assets among other siblings at the parent’s death, which can activate sibling rivalry or animosity” said Ballin.

Retiring From Work Earlier Than Planned

Care management for an elderly parent can be a full-time job—literally. If it ends up replacing a client's normal job, that's a serious loss of income.

Caregivers to adults over age 70 with normal cognitive functioning provide 66 hours of care per month, on average, while caregivers for someone with Alzheimer’s or dementia spends an average of 171 hours caregiving each month, according to the Age Wave/Merrill Lynch study.

“If my client retires from work even five years ahead of schedule, then that's lost income and lost retirement savings,” said Chancey. “They may also suddenly have no health care for themselves because they're not on a corporate health-care plan anymore, which is an additional cost.”

Squabbling Over An Elderly Parent’s Quality Of Care

When siblings fight over how parents should be cared for, that is usually a sign of problems to come, including possible litigation, advisors say.

Such court battles only end up wasting money that could be used for caregiving.

“It requires attorneys who often charge an hourly rate,” Chancey said. “Involving the courts and lawyers in a family dispute is never good and it's more expensive than it appears in the beginning of a legal action. Every dollar spent on attorneys fees is less money that can be invested in retirement savings.”

Instead of calling an attorney or going to court, Johannessen suggests arranging a meeting with siblings and a local geriatric care manager, while including the at-risk aging parent.

“Employing a care manager locally can help adult children identify resources that may be otherwise unknown while also putting in place local support for when out-of-town relatives aren't immediately available,” Johannessen said.