By Cyril Tuohy
Whether we like it or not, millions of Americans in their 40s and 50s will at some point have to deal with three generations living in their household: their own, their children and their parents.
It’s not a responsibility the “sandwich generation” will be able to sweep under the rug, put off into the future or have the chance to “do over.”
The answer is to deal with it, according to financial planner Eleanor Blayney, the Certified Financial Planners Board of Standards’ consumer advocate.
The sooner parents — generally adults in their 40s and 50s — can answer questions about in-kind compensation and set parameters of living in the households they run, the better, she writes.
The question for many middle-aged Americans is, “How can I say ‘yes’ to my own financial needs and goals, when it is impossible to say ‘no’ to needy family members?” Blayney writes in one of her latest blog posts, “Squished! What to Do When Financially Supporting Two Generations.”
Blayney, who reminds readers that there are “no financial strategies that allow us to have our cake, and let others eat it, too,” says the only sure certainly is that there are trade-offs to be made, “and everyone in the family needs to come together to find workable solutions.”
Among her solutions is to define expectations and set boundaries. The “Bank of Mom and Dad” or the “Mom and Dad Hotel” aren’t free. Banks charge fees and hotels charge by the year, the month, the night, even the hour.
Heads of household should set rules about the length of stay, behavior, even interest rates and terms for loans to family members, Blayney said.
Such rules may suffice for young 20-somethings. For elderly parents, Blayney suggests putting the type and amount of care in writing.
New expenses incurred when family members move in or become dependent are “never-ending,” said Tom Moore, former president of the International Union of Operating Engineers, Local 95. Moore said he maintained two households when his mother-in-law moved to the same street where he lives in Ross Township, Pa.
Moore has company, lots of it. Recent data released by Northwestern Mutual found that one in eight Americans age 40 to 60 is part of the sandwich generation, simultaneously supporting aging parents and their own children.
Blayney writes that keeping accurate records regarding expenditures, mileage and hours logged matter, particularly at tax time or when the time comes for reimbursement from an asset pool or an estate. In addition, questions surrounding advanced and end-of-life care, living wills, and powers-of-attorney over medical and financial matters require documentation.
Ignoring the paperwork can be “extremely costly,” she writes.
Working adults with children still at home and who serve as caretakers or caregivers to their parents, Blayney says, should at all costs avoid quitting their jobs to care for parents as the cost of quitting may involve reduced retirement and Social Security retirement benefits.
For women, the total individual amount of lost wages due to leaving the labor force early because of care giving equals $142,693, and the estimated impact of care giving on lost Social Security benefits is $131,351, for a collective loss of $274,044, according to a 2011 study by MetLife.
For men, the collective loss comes to $233,716, the study also found.
“If leaving work to care for an ailing relative becomes absolutely necessary, be sure to look into your eligibility for unpaid leave under the Family Medical Leave Act,” Blayney writes. “You may be able to return to your job after 12 workweeks.”
Leaving a job to care for a member of the military may entitle caregivers for up to 26 weeks.
Blayney and experts on aging say assistance is available from government and community resources, even if applying for help isn’t always as easy as it should be.
Some states reimburse caregivers under a cash and counseling program, and caregivers may also be eligible for unemployment benefit.
“If your relative has assets and does not qualify for Medicaid, consider drawing up a contract whereby you are paid for your services, and can thereby contribute to a self-employed retirement plan,” Blayney writes.
Some long-term care policies pay out benefits for care provided by family members, she said.
Taxes and financial reporting, however, are best left to a professional advisor. “It’s one thing to be sandwiched between the needs of generations one up and one down,” Blayney writes. “It’s quite another to completely lose yourself and your own financial goals.”
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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