I was recently asked by an email reader named Susan about how to handle the needs of her own retirement in light of her kid’s needs AND her parent’s needs for financial support.
I honestly never expected my parents to live as long as they have … and they didn’t either. Today I and my husband part of the “Sandwich Generation” — squeezed between our own savings for retirement, my elderly parent’s need for financial support (his parents passed away 14 years ago), and my two boys needs while they’re in college (one is 19 and the other is 21). Which of these three demands should take priority?
Note: This is an increasingly common problem, one exacerbated by a lack of good financial planning on the part of her parents and by the ever escalating demands and expectations that parents should foot every bill a child incurs until the age of 26, or 30, or even older.
Here is my advice: Your parents need food, water, shelter, and probably health care. If they can’t meet those needs on their own, then Susan, you and your husband, along with any of your siblings, are going to have to help them. It won’t be easy. One sibling may not agree or my contribute less than another, despite earning more. One sibling may feel he or she “cares more” and spends more time taking care of your parents. One may want to send them to an assisted living facility and another may not. Regardless, there will be disagreements, so FIRST sit down and outline on paper what you all can … and will … do from this point forward, as well as plans for all contingencies you can think of like:
- A sibling or their spouse losing a job
- One parent passing away
- One sibling or their spouse passing away (consider life insurance)
- Who will handle your parent’s finances and how will they be audited (for lack of a better term)?
- Reluctance on your parent’s part in accepting financial help despite needing it
- How to handle the sale of any parental assets including their home
If your parents DO own any non-performing assets such as a large home or two vehicles, those should possibly be sold or downsized. Also, any cash sitting idle in a bank account or any other financial assets may have to be liquidated to pay for your parent’s needs. And don’t forget that if you can afford it, you can give them up to $13,000 in cash or property each year without having to worry about the tax implications.
Once you have your mother and father taken care of, your next priority should be your own retirement funding.
The needs of your children must come in third in this personal finance triage. Why? Kids can always get scholarships, grants or borrow for their college education. There are no scholarships for retirement and the last time I checked, there wasn’t a retirement loan program either.
Don’t think of this as being selfish. Think instead: Do YOU want YOUR kids to have to take care of YOU like you’re having to take care of YOUR parents today? I’m guessing no. Putting your own retirement needs ahead of your kid’s demands for more cash from the Bank of Mom and Dad will actually benefit them in the long run. When they’re your age, they won’t be faced with the same dilemma you’re facing. Chances are they won’t understand, but that’s part of being a parent — seeing a bigger picture and having the wherewithal to put it into place amidst a flurry of protests and emotional threats and guilt trips.
Also, don’t forget that if you ARE taking care of your parents financially and are providing more than 50% of their support, you may be able to claim them as dependents on your tax return — even if they don’t live with you! (check with your tax advisor)