As you build your retirement savings, you may be forgetting an important and potentially prohibitive expense: Caring for your elderly parents.
A lot of things can hijack your retirement plans, but perhaps nothing is as alarming as the potential bill of $43,500 a year to house your mother or father in an assisted living facility—the average cost, according to insurer Genworth Financial’s 2016 annual Cost of Care study. Or, even more daunting, consider a $92,300 annual bill for a private room in a nursing home.
For many Americans in the so-called “sandwich generation,” the costs can be compounded by also having to provide financial assistance to adult children. About one-fifth of adult Americans now support both an elderly parent and an adult child, according to the TD Ameritrade 2015 Financial Support Study, and those financial supporters pay an average of $12,000 a year to help their parents and adult children with living and medical expenses.
“It could be a burden,” said Dara Luber, senior manager, retirement, at TD Ameritrade. “You need to be able to ensure you have enough saved for a secure retirement and make sure your mortgage is paid, but if you have to support an elderly parent, you may have to adjust your own plans for the future.”
Here are some things you might want to consider if you find yourself wanting to help your aging parents but also saving for your own retirement.
Help Yourself First
It might sound selfish to say, but the first thing to do is look at your own circumstances and make sure you have your retirement plan in place. You can take out a loan for some things, like a child’s education, but you won’t be able to get a loan for retirement.
“Make sure you’re saving for yourself first,” Luber said. “You should put together your own budget, make sure you have an emergency fund, that you can pay your mortgage and bills. If you are supporting aging parents and still taking care of children, you need to be realistic about your own retirement plan. In order to ensure that you have enough, it may mean adjusting your retirement age, and being realistic about what you can do in retirement. Maybe you can’t take a round-the-world trip, but a simpler vacation could be still in the plan.”
The TD Ameritrade retirement calculator can help you get a sense of how prepared you are for retirement, and whether you might need to make adjustments based on caring for your parents.
Approach Your Parents for a Money Talk
If you think you might need to help your elderly parents at some point, have a talk with them as soon as possible, before they encounter health issues.
Some adults get nervous approaching their parents and asking about money. Only 44% of the 1,000 adult financial supporters in the TD Ameritrade survey had had such a conversation with their parents. But there is a way to do it, even if you believe it could be a difficult conversation.
“You have to read your parents and be open and up front with them,” Luber said. “It’s saying, ‘Look, you’re getting older. You don’t need to tell me exactly what you have, but I want to understand so if something happens to you and you need help we can be there to support you, so we need to have this candid conversation.’ These aren’t easy conversations to have. Some parents are tight-lipped about finances, and it’s something you may not be able to do in one day, but can be done over time.”
The talk might flow more naturally if it’s in a relaxed setting with just you, any siblings, and your parents.
Items to Discuss
Once you get your parents into a conversation, here are some of the important matters you should consider bringing up:
- Do your parents have long-term care insurance? Find out, as it could make a huge difference to everyone’s expenses.
- Where are your parents’ assets? If your parents are like a lot of people, their assets might be scattered among different banks, annuities, and investment firms. It’s crucial for you to have this information in case you ever need it.
- Are assets in separate or joint accounts? Find out if their money is in both their names or if some assets are accessible to one parent but not the other.
- Any other insurance? Do your parents have health insurance? Life insurance?
- Do your parents have debt? Sometimes even elderly people have mortgages and other debt. You should find out if there’s a plan in place to pay this off, or if the burden might end up being yours.
- Where are important documents? You should find out where your parents keep papers like their wills, living wills, and trust documents. Are they in a bank safety deposit box? With a lawyer or advisor? In a home safe?
It’s not just your parents you should be talking to. You’ll also want to get together with any siblings and come to an understanding, if possible, on who can provide what kind of support should it be needed. These, too, can be difficult conversations.
Talk to an Expert
The most difficult burden falls on people who have to support both elderly parents and adult children. Of these, 35% had to reduce their work hours, 27% had to lower their career goals, and 26% had to or will have to delay retirement, the TD Ameritrade survey found.
But even if your own kids are grown and providing for themselves, you could still face big challenges just helping your parents. Consider having a conversation with your financial consultant to understand how providing this support might affect your own retirement, and what sort of sacrifices you might have to make. You can also explore how to potentially generate income in retirement to help pay some of your expenses.
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