As people approach their 40s, 50s and 60s, they begin to think more about the next chapter in their lives. That might be retirement, a passion project, or simply spending more time on themselves. But according to the Pew Research Center, 15% of middle-aged adults will end up financially supporting a parent and a child—simultaneously. That’s reality. This tug-of-war is taxing both emotionally and financially. If you’re among the 15%, what can you do to ease these burdens?
Providing Financial Support
Baby boomers have an average of $147,000 in retirement savings. While that amount isn’t insignificant, it can quickly be depleted by medical expenses or long-term care needs. Before you reach into your own pocket to help your parents, have a candid conversation with them about their financial situation. Make sure you understand where their funds are located and any taxes and penalties associated with using those funds. Don’t forget to consider the equity in their home in this discussion.
Tip: If you find you are paying more than half of your parents’ expenses, investigate the possibility of claiming them as dependents on your tax return.For Adult Children
At the other end of the spectrum are your young adult children. Higher education is undeniably an investment in their future, but can you afford it? Consider the total costs of the programs your children are considering and talk with them about the average salary and loan payments they can expect. Many college graduates are struggling to make ends meet and depend on receiving some type of support from their parents. Before you open your checkbook for them, however, review their financial situations. Maybe you could keep them on your health insurance plans for a few years—they are eligible until age 26—or perhaps you could co-sign a loan to get them lower interest rates. If they are working in public service, encourage them to explore loan forgiveness programs.
Living in a Multigenerational Household
It’s not uncommon for parents to move in with their children and for adult children to move back home. That creates a multigenerational household. In fact, in 2016, 20% of the U.S. population lived in multigenerational homes. Moving mom or dad into your house may sound like the best financial solution, but step back and think about the true costs. Your home may need extensive remodeling to accommodate their needs. Are your doorways wide enough for walkers or wheel chairs? Are the bedrooms and bathrooms located on the first floor?
When adult children move back home it typically doesn't require home updates, but this change has a whole new set of considerations. Will you be charging rent or require that they sign a lease? What if they aren’t utilizing the opportunity to become financially responsible?
Regardless of who your new tenant is, it’s important to set expectations with the entire family and establish a new “normal.”
Dealing With the Emotional Drain
Don’t underestimate the emotional toll you’ll likely feel when your loved one needs help. Juggling a career and managing caregiving responsibilities for an aging parent is not for the faint of heart. Have a family meeting to divide up responsibilities and discuss how major decisions will be handled in the future. If you don’t have family support, investigate local community options that can provide care when you need it. Don’t be ashamed to ask for help. It takes a village to successfully navigate these situations.
Though it may be difficult, don’t put the needs of your children or your parents ahead of your own. Your highest earning years could easily overlap with the need to support a family member. Make sure you maximize your retirement contributions and are on track to meet your goals. Depleting your savings may appear to solve a problem in the short term, but it doesn’t help anyone in the long term. Your parents may have to spend down their assets to pay for their care and your kids may have to get loans to finance their college costs. Let them, rather than sacrificing your retirement fund. After all, no one is going to give you a loan to help you retire!
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