The other day someone came to me and said that her adult children were still living with her and it was affecting her ability to make decisions about the rest of her life. She wasn’t asking me for advice so much as wondering whether her experience is the norm. According to the Pew Research Center, she’s definitely not alone. The sandwich generation is a term coined in the last decade of the last century by Carol Abaya in reference to middle-aged adults providing financial and/or emotional support to both their children and their parents. Just over one of every eight Americans, aged 40 to 60, is both raising a child and caring for a parent. The problem, say financial advisors, is that if you are one of those midlife care providers, you’re going to have to make some tough decisions because you don’t want what’s happening now to be a situation your own children inherit when you reach your parents’ ages.
It’s no secret that the economic downturn affected people in the millennial generation in ways that may continue to haunt them for decades. High unemployment and even higher student debt has forced many of that generation to consider their old room at home to be a somewhat permanent landing pad. At the other end of this story is that rising medical and living expenses along with shrinking retirement accounts has forced many otherwise prepared older adults to look around for assistance from family members.
Those elements mean that money that would have found its way to retirement accounts is being diverted to the needs of the other two (and sometimes three or four) generations. Here are some steps to keep your retirement on track while continuing to provide care for your aging parents and adult children.
- As important as it is to provide for your parents and your children, make sure your own retirement needs are met first. Pay at least as much into your retirement account as your employer will match.
- Re-evaluate your options. Make tough choices such as moving to a smaller house, reducing your reliance on your automobile so that you can trim down to one car, and trim expenses such as cable and entertainment costs.
- Take a step back and look at what resources you actually have. Ask your children for help with expenses, scale back on promises to pay for college education. If a child was hoping to attend a big state school, it may be time to attend a local university and live at home rather than paying expensive college boarding fees or an additional rent. Children should cut their own social life budget to the bone before you shortcut your own retirement.
- Get a grasp on opportunity costs (what you’ll give up in the future for what financial decisions you make today). Don’t dip into retirement savings.
- Combine households. If you are paying for your child’s rent or your parents’ rent, consider living all in one household in order to cut expenses.
- Check out tax breaks that may be available by claiming your children or your parents as dependents.
- Use what you are learning about your parents’ aging to help plan for your own. One thing you may want to consider is purchasing a Long-Term Care Insurance Policy to create a bulwark against the possibility of your own future care needs.
The first place to start is to assemble a team made up of a financial expert and an Elder Law Attorney to go over your planning. Most people aren’t experts in these fields and going it alone is likely to end up costing more money than you have saved. They’ll be aware of resources and options that you may not be aware of and can help position you so that you can take advantage of resources such as government benefits when they become necessary. Contact our office to get started.