Personal Finance Essentials

Your Family Will Grow Older, Too

Your Parents May Live to 100

Have You Planned for That?

Longevity Planning

Long before you reach age 100, your parents and in-laws will. If they haven’t planned for this, that means you may well have to financially support them – for decades longer than you or they ever expected.

Children may also need help. When you’re in your 80s, your kids (now in their 50s and 60s) may themselves be experiencing job loss, divorce, drug or alcohol dependency, medical problems or financial strife – again requiring your help.

Longevity will bring issues to you that are unprecedented, and you must make sure you’re ready.

The Sandwich Generation

Twenty million Americans are members of what researchers call the Sandwich Generation – people who are caring for or supporting aging parents and their own children at the same time, all while managing a career and trying to fund retirement.

Raising Children and Caring for ParentsOne in eight Americans between the ages of 40 and 60 is simultaneously raising a child and caring for a parent at home, according to the Pew Research Center. As many as 10 million more are caring for aging parents from a long distance. And the picture is getting more complex: empty nesters are finding themselves with a full house again as newly unemployed children move back in alongside grandparents who can no longer live independently.

Nearly 30 percent of adult children contribute financially to their parents’ care, chipping in for everything from uncovered medical costs to groceries. Families are responsible for 80 percent of elder care in the U.S., according to AARP, and much of that help is financial. The strain is real. Studies have shown high rates of separation and divorce among couples caught in these situations. Caregivers suffer significant reductions in income, damage to their careers and impairments to their own health.

The most important principle here: Do not empty your retirement savings to pay for your children’s college education or your parents’ long-term care. Their crisis is their crisis. If your child or parent is broke, becoming broke yourself by trying to help them just leaves all of you broke instead of just them. Help them to the extent you can do so without placing yourself in financial jeopardy. This isn’t selfishness – it’s the only rational way to protect everyone involved.

Six Steps to Help Your Aging Parents

The earlier you have this conversation, the better. Waiting until a parent is in crisis means making decisions under pressure, often without complete information. Here is a framework for getting ahead of the problem:

1

Start the conversation now

Ask your parents how they want to live as they age, what kind of health care they do or don’t want, and who they want to make legal and medical decisions for them if they become unable to handle their own affairs. Make sure they obtain the legal documents needed to carry out their wishes.
2

Take stock of their finances

Do your parents have enough savings and income to support themselves for another 20 or 30 years? If not, start planning now. The earlier you understand their financial picture, the more options you’ll have.
3

Obtain long-term care insurance for your parents, if possible

One of the most difficult truths of aging is that by the time you need long-term care insurance, no one will be willing to insure you. Have a conversation about it with your parents now, before it’s too late. And if you have to, pay for it yourself. Paying a few thousand dollars a year for a policy is far less expensive than paying several thousand dollars a month for the care itself.
4

Check their insurance coverage

Make sure your parents have both Medicare and Medigap coverage, as well as prescription drug coverage. Medicare A and B alone is not sufficient. Your parents need a supplemental policy to cover what Medicare leaves out.
5

Don’t try to go it alone

There are support groups, guides, blogs and websites to help you cope with the financial and emotional issues associated with a parent’s declining health and wealth. Professional help is available for everything from asset management and estate planning to treatment plans and Medicare navigation. You are not the first person to go through this, and you don’t have to go through it alone.
6

Resolve family conflict proactively

Often, one family member emerges as the primary caregiver. If the rest of the family abdicates involvement, that individual can become overwhelmed and resentful. The best approach is to give everyone a specific role. By working together, chores can be distributed, helping everyone feel involved. If a caregiver is contributing time, the siblings and parents should contribute money.

Elder Financial Abuse

Elder financial abuse is a growing crime estimated to cost victims $2.6 billion annually. It takes many forms: a handyman who charges excessive fees for unnecessary repairs, a caretaker who steals checks and forges signatures, a financial advisor who steers an elderly client into unsuitable investments, a family member who gains control of assets through undue influence.

Abusers are often people the victim trusts. In fact, 90 percent of perpetrators are family members or other trusted individuals. The Older Americans Act defines elder financial abuse as the fraudulent or otherwise illegal use of an elder’s funds, property or assets. The best protections are advance planning, transparent family communication about finances and the involvement of a trusted financial advisor who serves as a fiduciary.