Living and coping with today’s troubled economy is certainly no easy task. However, taking care of one’s family at the same time can be overwhelming. If you're helping your parents and trying to meet your own children's needs while looking ahead to your own retirement, you're part of what's called "the sandwich generation."
It’s an unenviable position to be in but don’t feel like you are out on some island. There are ways to deal with this difficult set of circumstances. Here's a recipe to help you cope with being jammed in the middle.
Chart the terrain First, conduct an assessment of your current financial situation and financial goals. Make improvements where you can, and develop a realistic, manageable budget. Be sure to monitor your finances so you can adjust to changing circumstances. Then conduct a similar assessment of your parents' finances as well, so that you fully understand their current situation.
Keep your retirement savings plan on track First and foremost, resist dipping into your current retirement savings, and try to keep your retirement savings plan on track. Make investing in your financial future a priority by maxing out your 401(k) and/or other retirement savings plan. At the very least, contribute as much as your employer will match.
Put your child's college education on the front burner Start saving, and with college tuition soaring, the sooner, the better. There are several college saving options for you to consider. These include tax-advantaged strategies such as college savings plans, Coverdell education savings accounts, and U.S. savings bonds.
If necessary, look into the wide variety of financial aid programs available during college, such as scholarships, grants, work-study employment, and student and parent loans. Financial aid is based on two things: the cost of a college education and your ability to pay. You'll find that an increasing number of families with significant incomes now qualify for aid.
Helping your parents If you need to help your parents manage their affairs, you'll need legal authority to do so. Make sure your parents have a durable power of attorney authorizing you to sign checks, pay bills, and make financial decisions.
Also, make sure your parents have health care directives allowing you to make medical care decisions according to their wishes. Make sure your parents have a will that's been updated recently.
If your parents have limited income, talk to them about their options. For example, can your parents sell their home or access the equity they have in it to increase their income? Will they need to move in with you or another family member? If they're not willing to discuss this with you, you may want to suggest they talk with a trusted professional.
Long-term care insurance Since government programs such as Medicare and Medicaid, traditional health insurance, and disability insurance may not adequately cover the cost of long-term care, look into long-term care insurance. The cost of a long-term care policy will depend primarily on the ages of your parents (in general, the younger they are when the policy is purchased, the lower the premium will be), but it also depends on the benefits you choose.
Get support and advice If you're feeling the squeeze, remember: you're not alone! Don’t be afraid to reach out for assistance. There's plenty of help out there, from local programs to national organizations, from books to websites. And consider discussing the specifics of your situation with your financial professional.
-- Reardon is a financial planner and president of Shakespeare Wealth Management, Inc. in Brookfield. He is also a member of the National Association of Personal Financial Advisors (NAPFA). He can be reached at 262-814-1600 or Kevin@ShakespeareWealthManagement.com.