Editor’s Note: Join me in welcoming Hank Coleman, new PT Money contributor and future certified financial planner. This week Hank is tackling the subject of caring for elderly parents. With Mother’s Day just around the corner, we thought it was a good time to address what to do if/when Mom and/or Dad need(s) financial help.
More Americans are raising their own children and at the same time caring for their elderly parents.
It is called the “Sandwich Generation”. Without proper financial planning, being a part of the Sandwich Generation can lead to financial ruin.
In the past 20 years, Americans have seen a dramatic increase in Baby Boomers that are not only caring for their own children but are also caring for their elderly parents. This of course is putting themselves into a struggle between the love of family and the enormous cost of caring for, essentially, two families. They are finding themselves sandwiched between a rock and a hard place with their finances often taking the brunt of the punishment.
Baby Boomers are finding themselves having their own children later in life, and their parents are living longer. In fact, according to the Pew Research Center, “about one-in-seven middle-aged adults (15%) is providing financial support to both an elderly parent and a child.”
The Sandwich Generation Experiences Financial Hardships
There are many upfront costs of caring for an elderly parent while you have children of your own. There are also some not-so-apparent costs. Baby Boomers often find themselves with one spouse having to work less hours at their normal day job in order to care for a parent or loved one who can no longer completely care for themselves on their own. This often comes at an inopportune time as younger children of baby boomers are often approaching their teenage years and college age where expenses are often increasing on that front as well.
Many of the Sandwich Generation find themselves having to drawdown their own retirement accounts in order to keep up with the rising costs of caring for ailing parents. So, who will be there for you when the baby boomer reaches the age of retirement or beyond? This sets up a vicious cycle of younger siblings or children caring for elderly parents for generations. Other families find themselves siphoning money from their emergency funds and reducing their savings and investments which could have devastating long-term consequences.
So, what is a Sandwich Generation family to do with ailing older parents? Here are a few things you can do:
Build a Team to Help
In order to be as successful as possible, you should consider assembling a team of experts that can help you navigate all of the financial aspects of being in the Sandwich Generation. You may want to include having an accountant, financial planner, lawyer, and estate planner on your team to help you navigate the tricky waters of caring for elderly parents. You shouldn’t have to do it alone, and the more help you get and help as early as possible will set you up for success in caring for your children and elderly parents.
Look for Long-Term Care Insurance
Another factor to help you with the financial burden of caring for older parents that you may encounter is purchasing long-term care insurance for your parents. Of course, you will need to purchase the long-term care insurance before you and your parents will need it for it to be affordable. Having long-term care insurance can help you and your parents with either in-home care or nursing home care should the need arise without having to tap too much of your parents or your family’s emergency fund.
Have the Difficult Conversations
Now is the time to have the difficult and frank conversations with your parents before it is too late. You need to discuss topics such as having a general power of attorney, medical power of attorney, updating records, locating important financial documents, and even the type of funeral and arrangements your parents want. While it is not a pleasant conversation to have, these are important topics to discuss while your parents and loved ones can have significant input into the conversation. If you wait too late, you may not be carrying out their wishes correctly or can even face time-consuming challenges.
Of course, your parents may not be very open to these discussions either. Many older parents do not feel comfortable talking about money and finances, among other things, with their adult children. Dave Ramsey calls it the “Powdered Butt Syndrome.” Your parents have powdered your butt and cared for you for decades. They will often resist the inclination to let you help them for a change with tasks that they once probably handled with ease. So, these topics must be approached with kid gloves more often than not. And, it helps to start easing into these talks as early and as often as possible.
Consider Adult Day Care Programs
You may be able to find an adult day care program for your ailing parents instead of quitting your job to care for them. While expensive–with many adult day care programs costing over $60 per day–this can be more affordable to many families than in-home care. According to Kiplinger’s, the average in-home healthcare aide can cost over $20 per hour or over $160 for an eight hour shift. The average for a private room in a nursing home can run over $200 a day. So, an adult day care may be another more affordable option.
Use Tax Benefits You Qualify For
You may be able to qualify for additional tax breaks if your parents live with you for over half of the year. You can also claim, in many cases, the cost of using an adult day care. You are typically able to contribute up to $5,000 per year to an employer’s healthcare spending account even for dependent care (this number is dropping due to Obamacare). Or, you can claim the dependent care tax credit on your income tax return. While this will only cover a portion of the cost of healthcare for your elderly parent, every little bit will help stem the cost for the Sandwich Generation.
Look to Cut Your Costs
If you find yourself faced with caring for your elderly parents and your own children, you should definitely reexamine your costs. Start by reexamining your family’s monthly budget. If you have not been writing down all of your family’s monthly expenses, now is the time to start. With a monthly budget, you can not only see where your money is leaking out of your family’s finances, but also areas where you can save in order to help pay for your parents care.
Increase Your Income to Help with Caring for Elderly Parents
While no one wants to hear that you may want to get a second job, a part-time job in addition to your regular job for at least one spouse in your family may be the extra push you need. An extra source of income can help to put your finances over the top and pay for your children and ailing parents. Having a second job may be the answer to help you keep from dipping into your retirement accounts or emergency fund to pay for your elderly parents’ care.
Cut Loose Your Boomerang Kids
There comes a time in our lives when we have to cut loose our children from the nest. Many American families are finding themselves with “Boomerang Kids” who come back after graduating from college. Either they have trouble finding a job or simply want to save money while living at home as an adult. Parents, of course, want to support their children, but it often comes at a cost and at a detriment to their own finances. If you are in the Sandwich Generation and find yourself caring for elderly parents, it may not be feasible to have your adult children come back home to live with you. Cutting loose the Boomerang Kids can help give you the financial boost you need to care for your parents instead.
Life is not easy for those in the Sandwich Generation who have to care for not only their own children but their elderly parents. There are many challenges associated with caring for two families that can put a strain on your family’s finances at often the most inopportune time. But, with a little prior planning and careful budgeting, you can help your family tackle the difficult situation of caring for elderly parents as they live longer.
Have you had to make difficult decisions to care for your elderly parents? What other tips should people facing this difficulty consider?
Photo by Elvert Barnes