Over half of Americans in their forties are packed in between their dependent children and an aging parent requiring care, according to a recent Pew Research survey. A Mass Mutual study showed nearly half of people in this situation help with financial tasks for the adults they care for.
These strains can put your own finances and savings in jeopardy—not to mention your own mental health.
In this article, I’d like to share some thoughts about financial planning for people in this phase of life—inspired by conversations with a client who is right in the thick of it—caring for a special-needs child at home while helping two ailing parents.
Understand the situation
Talking with parents about money can be very uncomfortable. But as you take over more caregiving responsibilities, you need to have an understanding of their financial situation. Having an open and honest conversation can help you map out your parents’ needs and non-negotiables while also allowing you to discuss your boundaries and what you are willing and not willing to do when it comes to your parents’ care. As you discuss, you’ll get a better picture of what they can afford and if there are any gaps you may need to fill.
My own personal experience here was enlightening. When my grandfather unexpectedly passed away several years ago, my grandmother suddenly had big decisions to make and faced a lot of work to sell their farm. At that time our family did not set aside time to have a conversation about finances, and so my dad and aunt found themselves in a stressful situation. When there is a medical emergency, or a family member dies, emotions generally are running high and making financial decisions can become even more challenging.
With all that in mind, after gaining an understanding of your parents’ financial reality and setting expectations for how you are able to help, look at your own plan and budget to see if there are areas where you can improve or reallocate for their needs.
Prioritize your financial wellbeing
Your own financial wellbeing should be non-negotiable, and that includes saving for retirement. It’s important to maintain boundaries, a balance between care and your own health, and be flexible as your families’ situation changes. Discuss your financial goals with a financial advisor who can help you proactively work on your financial plan. Cover short, medium- and long-term goals to establish how to direct your cash flow.
Of course, your goals may be affected by your current situation. For those with parents experiencing dementia, you may need to consider the costs of memory care, whereas those whose parents are experiencing physical decline may need to look into rehab and nursing expenses. Though challenging, it is important to have a plan for when a loved one experiences cognitive decline.
Many parents aspire to fund their children’s education or help with their down payment on a first home. Discuss your goals with your financial planner and resist any temptation to put up your hands in defeat. Create a process and allocate your cash flow the best that you can, based on when savings may be needed. Some, like your child’s education or expected elder care for your parents, may come sooner than your retirement.
Although tempting, try not to dip into your retirement savings to support your children or parents. Withdrawing funds from qualified plans could result in penalties, and if you neglect your retirement savings too much, you may not have enough funds for your own retirement. Ultimately the result might be reliance on your own children later in life.
Review parents’ estate plan—and your own
Now may be a good time for both you and your parents to review estate plans. Be sure your parents have set up powers of attorney to designate a trusted individual who can make financial and healthcare decisions on their behalf. During the estate planning process, you can learn more about your parents’ wishes and set up an advanced directive, or living will, that would allow your parents to plan and make known their own end-of-life wishes if they become unable to communicate. While these conversations can also be difficult, I can share from experience that when elderly clients share these details with their children, they are often relieved to share that burden.
As you review and update your parents’ estate plan and will, you might take this opportunity to update your own:
- For parents of minor children creating a will and naming a guardian allows you to choose who raises your children if something were to happen to you.
- For parents of children with special needs, you can also set up special needs trusts to help provide for your child’s financial needs over the long term.
Seek professional and community care
During this time, you may feel that the pressures to care for your family are insurmountable, but you don’t need to go it alone. When it comes to your parents’ physical, mental and memory care, seek out eldercare professionals who can connect your parents with the care they need. Your extended family, friends and community may all be able to help in expected and unexpected ways. Don’t forget about your own well-being too – consider speaking with a mental health professional, friends, or a support group of folks who have the same challenges.
As you shoulder burdens across multiple generations, find constellations of people to help care for your loved ones and yourself. It may require both communication and planning, but there are people out there who can help you through a difficult phase of life.