Life is all about stages. Closing the door to one stage opens up an entirely new set of opportunities. Entering the stage of parenthood comes with the knowledge that eventually your children will leave the nest, opening up a whole host of opportunities for you to undertake in your spare time, you remember all that free time pre-parenthood? Time to travel, discover new hobbies and relax. As your children continue making their way toward adulthood and that next stage is finally within grasp, members of the sandwich generation quickly see a new stage sidelining the one they thought they were headed for, one with very little free time.
Enter your parents, who are now living longer than ever before, and are in need of financial, emotional and physical help, much like the children you have spent the last 18 years raising. This new stage you are entering is hardly carefree and comes equipped with emotional baggage and added stressors. Members of the Sandwich Generation are responsible for providing care at both ends of the spectrum of their family. Adult children care for their aging parents and relatives, while at the same time meeting the needs of their children and in some cases, grandchildren.
Many elderly are finding that their financial plans for retirement which accounted for 10-15 years were much too short as they live well into their 90s and exhaust their funds. The burden then lies on their adult children who also have to take into account their own retirement finances and their children’s financial needs. Aging increases the likelihood of developing certain types of dementia, Alzheimer’s disease, Parkinson’s, Cancer, Diabetes or Cardiac/heart disease problems that many elderly did not allot treatment funds for. These scenarios are morphing from unique to usual.
If you are finding that your parents need assistance, the first thing sandwich generation members should do is sit down and have a frank discussion with their parents about their finances, as uncomfortable as this may be. You need to discover their sources of income and expenses as well as their assets and liabilities. Once you know where they stand, you will be better able to help them and yourself.
- Let your parents know that unnecessary expenses (like extravagant gifts for the grandchildren) are unwarranted. Your parents may need to cut back on the money they spend and evaluate their spending habits to determine where they can save a little money.
- Look over their insurance coverage and deductibles for property, long-term care and prescription drugs to make sure they have the correct coverage and are not paying too much for it.
- Your parents may benefit from re-evaluating their unnecessary whole life insurance policies with built-up cash value. Look into a 1035 tax-free exchange to an immediate fixed annuity for extra cash flow.
- It may also be time to tap the value of their home. Downsizing or selling their house can exclude up to $500,000 in capital gains from taxes for married couples filing jointly and $250,000 for singles. By selling their home and moving in with others, or selling the home to family members so they can remain in the home, they will free up a lot of extra cash.
If you are part of the sandwich generation, you have a lot on your plate. Finding the funds to support your aging parents is no easy task, and you should not be saddled with all the extra costs. While the new stage of life you have entered may not be exactly what you were anticipating, it is important to keep your funds intact so that you can survive the next stage of life, which may finally include relaxation.