This group, often referred to as the “sandwich generation,” may be the first to care equally as long for parents as for children, according to the Coalition on Family Caregiving.
One in eight Americans between ages 40 and 60 is raising a child and caring for a parent simultaneously, according to the Pew Research Center.
Senior citizens, however, are probably more willing to accept a little advice than seniors in high school. Helping aging parents be as prepared as possible for the next stages of their lives can go a long way toward creating harmony for the whole family.
Start the Conversation
Talking with aging parents about topics like long-term care and living wills is never easy, but it can eliminate a lot of headaches if done before a crisis hits.
Ray LeVitre, certified financial planner and author of “20 Retirement Decisions You Need to Make Right Now,” says making a plan for physical and mental deterioration and discussing parents’ wishes with them while they are still “mentally there” will save a lot of stress and ill feelings down the line.
Once you’ve determined the kind of care parents have in mind, the next step is figuring out how to pay for it.
Dive Into Your Parents’ Finances
“Understand your parents’ cash flow situation — their income, their expenses,” said Chris McDermott, a certified financial planner and senior vice president of retirement and financial planning at Fidelity Investments. “One of the things we typically talk about is real estate.”
McDermott says many retirees look at downsizing their home as an opportunity to minimize expenses and unlock potential equity, noting that the proceeds can often supplement retirement income.
Sometimes scaling back can also help seniors simplify by not having as much to maintain. David Chmiel recently helped his dad, an octogenarian, relocate.
“Our Mom passed away two years ago and we were concerned about Dad, but it was never about finances,” said Chmiel of Maplewood, N.J. “He wanted to stay in the family homestead, which is a big old three-story house. He just turned 80 and we were worried it would be too big and worried about him on the stairs. But he's active and fit and it wasn't an issue.”
Still, Chmiel says, when his father decided it was time to sell, “it was a great relief.”
Can Mom and Dad’s Portfolio Pass a Stress Test?
LeVitre recommends reviewing all possible sources of income, including Social Security, pensions, rent, portfolio withdrawals as well as pension and survivor benefits when both parents are alive.
The financial planner says he likes to put his clients’ portfolio through a financial stress test to determine if current assets can provide for parents during the remainder of their lives, and if their nest egg could support one parent in a nursing home and one parent living outside a nursing home. If the funds aren’t there, it’s time to make some adjustments.
Don’t Underestimate Medical Costs
According to Fidelity's latest retiree health care costs estimate, a 65-year-old couple retiring this year is estimated to need $240,000 to cover medical expenses throughout retirement, up 4 percent from 2011.
“The cost of long-term care on average annually is $90,000,” McDermott said. “That’s not built into that $240,000 so that stresses the importance of getting ahead of this.”
McDermott recommends getting familiar with parents’ Medicare coverage and finding out whether or not they have any supplemental coverage or prescription drug coverage. He says it’s important to understand where the gap is, if one exists, as well as what risk parents could face should they require an extended hospital stay.
“It’s projected that 70 percent of people over the age of 65 require some type of long-term care at some point in their lives, and the reality is that Medicare is not going to cover that,” McDermott said. “Individuals should think about whether or not they need long term care coverage and what type of insurance they need and how much coverage they need. The earlier they do that the better.”