Life expectancy has increased due to advances in pharmaceuticals, medical technology, and quality of life, thus many of today’s baby boomers’ parents are still living. AARP says 44% of Americans aged 45-55 have living parents as well as children under age 21 and that 22% financially support their parents by contributing to housing, home care, medical, pharmaceutical, travel, and clothing costs. In addition, 25 million unmarried adults aged 19 to 39 live with their parents. The changing demographics within families have created a period in which baby boomers are "sandwiched" between the needs of their parents and their children.
Baby boomers should be planning for their own retirement but when providing financial
assistance to aging parents and dependent children, this becomes a daunting task. According to a MetLife study, individuals age 55 to 59 are least confident about having money in retirement, with approximately 44 percent worried that they will not be able to live comfortably if they live past 85. In regard to this type of concern, Winston Churchill once said, “Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, and until self-preservation strikes its jarring gong . . . will most act”. These are words “sandwiched” baby boomers should heed to realize that it's necessary for them to prepare for their own financial needs in order to help their loved ones.
To avoid the “jarring gong”, Seniorliving offers the following recommendations to baby boomers:
· Children attending college should take out student loans if necessary and elderly parents should use their own assets to finance their care for as long as possible.
· Project what kind of income will be needed for retirement. There are plenty of financial planners available to assist in this task.
· Look into the viability of long-term care insurance for their aging parents and for themselves. Long-term care insurance could help offset “asset-draining” costs if nursing care is necessary.
· Talk with their parents as early as possible about their assets, how they want to live as they age, what kind of health care and lifesaving measures they do or don't want, and who should make legal and medical decisions for them if they are no longer able to handle their own affairs. This may be a difficult and uncomfortable conversation but Laura T. Coffrey of msnbc recommends the following:
1. Broach the subject of money by sharing a money related story of their own or one of their friend’s parents.
2. Ask the parent for permission and assistance to examine the parent’s checkbook, bank statements, credit card statements, etc. to look for “red flags” such as duplicate payments, lots of payments to home-shopping networks, large charitable donations, unnecessary payments to a “handy man”, etc.
3. If there is a problem, investigate into government programs for older Americans on low or fixed incomes at BenefitsCheckup.org.
4. If the parent lives in a large home, recommend they “downsize” and realize cash from the sale of the home. Or, if the parent is 62 or older, they could get a reverse mortgage. Such loans allow homeowners to convert home equity into cash without having to move or assume extra debt. To learn more, visit http://www.aarp.org/revmort.
5. Arrange for a durable power of attorney, which would allow a parent to appoint a trustworthy person to help them manage their finances; a durable power of attorney for health care (also known as a health-care proxy); a living will, and a will. The financial planner previously recommended can direct the parent to an attorney who specializes in such matters.
By addressing these issues while there is still time to plan ahead, baby boomers can avoid a lot of the “sandwiched generation” problems.
Baby boomers should be planning for their own retirement but when providing financial
assistance to aging parents and dependent children, this becomes a daunting task. According to a MetLife study, individuals age 55 to 59 are least confident about having money in retirement, with approximately 44 percent worried that they will not be able to live comfortably if they live past 85. In regard to this type of concern, Winston Churchill once said, “Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, and until self-preservation strikes its jarring gong . . . will most act”. These are words “sandwiched” baby boomers should heed to realize that it's necessary for them to prepare for their own financial needs in order to help their loved ones.To avoid the “jarring gong”, Seniorliving offers the following recommendations to baby boomers:
· Children attending college should take out student loans if necessary and elderly parents should use their own assets to finance their care for as long as possible.
· Project what kind of income will be needed for retirement. There are plenty of financial planners available to assist in this task.
· Look into the viability of long-term care insurance for their aging parents and for themselves. Long-term care insurance could help offset “asset-draining” costs if nursing care is necessary.
· Talk with their parents as early as possible about their assets, how they want to live as they age, what kind of health care and lifesaving measures they do or don't want, and who should make legal and medical decisions for them if they are no longer able to handle their own affairs. This may be a difficult and uncomfortable conversation but Laura T. Coffrey of msnbc recommends the following:
1. Broach the subject of money by sharing a money related story of their own or one of their friend’s parents.
2. Ask the parent for permission and assistance to examine the parent’s checkbook, bank statements, credit card statements, etc. to look for “red flags” such as duplicate payments, lots of payments to home-shopping networks, large charitable donations, unnecessary payments to a “handy man”, etc.
3. If there is a problem, investigate into government programs for older Americans on low or fixed incomes at BenefitsCheckup.org.
4. If the parent lives in a large home, recommend they “downsize” and realize cash from the sale of the home. Or, if the parent is 62 or older, they could get a reverse mortgage. Such loans allow homeowners to convert home equity into cash without having to move or assume extra debt. To learn more, visit http://www.aarp.org/revmort.
5. Arrange for a durable power of attorney, which would allow a parent to appoint a trustworthy person to help them manage their finances; a durable power of attorney for health care (also known as a health-care proxy); a living will, and a will. The financial planner previously recommended can direct the parent to an attorney who specializes in such matters.
By addressing these issues while there is still time to plan ahead, baby boomers can avoid a lot of the “sandwiched generation” problems.
Gretchen,
ReplyDeleteGreat information. I'm especially interested since I'm a baby boomer. My mother purchased a wonderful long-term care policy a number of years ago through USAA (only for retired military), so my siblings and I don't have to worry about it. Friends in my age group don't seem to think they have to worry about retirement. It's their children (in their 20s and early 30s) who haven't even begun to think about it. This is what I worry about.
Thanks for the good information.
You did a great job on this. I recently read that you should put money towards your own retirement instead of your kids education. At first this made me think "how selfish" but then they went on to explain that there are loans for school while there are no loans for getting old and your children will pay for it later.
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