Sandwiched Between Generations

According to Retirement Advisor, in 2014, nearly half of adults in their 40s and 50s have a parent age 65+ and are either raising a young child or financially supporting a grown child. The data has shown this trend is continuing to grow. Having started families later than past generations, their children may just now be entering college or still living at home. At the same time, aging parents may need financial assistance. It is a dilemma that is likely to become more common.

Caring for Parents

As life expectancies continue to rise, it becomes increasingly likely that you may need to help an aging parent. On our Knowledge Center, we have many resources. Print our Peace of Mind Checklist to help organize essential life documents and their locations. Some financial precautions you should consider now include:

• Investigate long-term-care insurance for your parents. If they can’t afford the insurance, you may want to purchase it for them.
• Have your parents prepare a listing of their assets, liabilities, and income sources, including the location of important documents. This can save time if you need to take over their finances.
• Make sure your parents have legal documents in place so someone can take over their financial affairs if they become incapacitated. Delegating healthcare decisions for when they are unable to speak on their own behalf is a vital part of long-term wellness.
• Understand the changing tax laws if you provide financial support to your parents. You may be able to claim them as dependents if you provide more than half of their support. You may be able to deduct medical expenses paid on their behalf.
• Find out if your employer offers a flexible spending account for elder care. This may allow you to set aside pretax dollars to pay elder-care expenses for a dependent parent.

Assisting Your Children

For many families, college costs are significant. While you may want to pay all college expenses for your children, it may not be feasible with competing needs to save for retirement and/or assist parents. Knowing your own financial situation will help your family discuss what is financially viable and what kinds of support are realistic for you to provide. Consider these strategies:

• Shift some of the burden of their education onto them by requiring them to work or take out student loans.
• Understand the financial aid system, investigating all financial aid sources. Search for scholarships that are not based on need. Apply to several different colleges, looking for the best financial aid package. Negotiate with your child’s preferred college to see if you can increase that package.
• Look for ways to reduce the costs of college. Your child can start at a community college, which is often cheaper than a four-year university, especially if the child commutes from home. Also consider a public university in your state, which will generally be more affordable than a private university.
• Once your child graduates from college, don’t assume your financial responsibilities are over. Adult children may return home for a variety of reasons — they can’t find a well-paying job, they have too much debt to live alone, or they divorce and need financial support. If your child returns home, realize there are increased costs — additional food, Squeezed Continued from page 1 phone bills, utilities, etc. Consider charging rent and imposing a deadline on how long he/she can stay. For more information on this, read our blog, “Loan Carefully” on our Knowledge Center.

Don’t Forget Yourself

When faced with the competing needs of children and aging parents, it’s easy to neglect your own need to save for retirement. But don’t feel guilty about your retirement needs. One of the best gifts you can give your children is the knowledge that you will be financially independent during retirement. Consider the following:

• A Certified Financial Planner™ professional is uniquely qualified to help you calculate how much you will likely need to save for retirement to afford the quality of lifestyle you desire. Once you have a realistic financial plan in place based on all of the expenses you have by supporting the generation before and after you, start out saving what you can for your own future. You may need to amend your retirement plans.
• Take advantage of all retirement plans. Enroll in your company’s 401(k), 403(b), or other defined-contribution plan as soon as you’re eligible. Also consider investing in individual retirement accounts.
• Reconsider what retirement may look like. It may not be a time of total leisure. Listen to our discussion about this on our podcast, “E5: Part-time Retirement,” where we discuss the many reasons why retirees return to the workforce.