By Kimberlee Davis, J.D., CDFA®
Kimberlee Davis is a Partner and Managing Director in The Bahnsen Group, a wealth management practice with offices in Newport Beach, California and New York City.
It was a usual Monday morning…until it wasn’t…
It was a sunny Monday morning and I was in my office at The Bahnsen Group in Newport Beach, California, working at my desk, looking forward to a short week because on Wednesday, I was going on vacation to Turk’s and Caicos – a destination I have wanted to visit for many years. Needless to say, I was in a good mood and full of anticipation of some rest and relaxation in an idyllic setting!
Mid-morning, I received a phone call from my father, who is 89, lives in Pittsburgh, Pennsylvania, with my mother, who is 87, that my mother was being taken to the hospital with a serious heart atrial fibrillation, and the situation was very volatile. I am an only child and extremely close with my parents. I immediately left the office, went straight to the airport and boarded a plane to Pittsburgh.
My mother was in the hospital for 8 days, and had electrical cardioversion performed and now takes a cocktail of heart medication. My mother also has short-term memory problems and suffers from the early stages of dementia, which seriously complicates the situation. Although my father is able to help with the care of my mother, his memory isn’t as sharp as it had been, and he is often overwhelmed.
I am also the mother of three daughters who still need my emotional and financial support to some extent, and, have a full-time demanding job.
I have been sandwiched!!!
I am now a baby-boomer who is officially a member of the “sandwich generation” and I now always have something weighing on my mind…
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What is the “Sandwich Generation”?
The sandwich generation is the segment of the population who are “sandwiched” between the emotional and financial needs of aging parents and, are either raising young children, or financially supporting to some extent a grown child. According to the Pew Research Center, approximately half of middle-aged adults have provided some financial support to at least one grown child (support, college expenses, etc.) and to aging parents. People are living longer, having children later, and health care/elder care costs are rising exponentially.
This situation is occurring because an increasing number of adults are in a position where they must provide at least some level of care or support to elderly parents, while simultaneously helping grown children who are struggling to achieve financial independence. As Parker states, “Think of all those millennials who have boomeranged back into their parents’ homes”. And she further states, for most, this is not a short-term problem.
Almost 75% of sandwich care-givers are women, and needless to say, they feel more stress than any other age group as they balance the demanding and delicate act of caring for young or grown children and aging parents, according to the American Psychological Association.
What is the solution?
From the financial perspective, there are few things that can be done to plan for this inevitable dilemma and can help us get in front of this stressful scenario.
Know the facts
Even though it can be very difficult to speak to your parents and children about money and financial realities, try to do so early on before a financial or medical crisis forces you to act without having the appropriate planning in place or the time and flexibility you may desire in dealing with the situation.
It is important to get a clear picture of your parents’ financial situation, including health insurance coverage, long-term care coverage, liquid savings, investments, insurance, and fixed living expenses. Evaluate with them what their essential living costs are versus their discretionary costs, and, compare these costs with their sources of income such as Social Security, pensions, annuity income, IRAs or investment income from taxable investments. Explore how you could possibly assist them with better strategies.
Check into their health care plans to determine what is covered by such plans and what is not.
Medicare does not cover all health care expenses in retirement, and according to Fidelity Benefits Consulting, a 65-year old couple retiring this year will need an average of $275,000 after taxes in today’s dollars to cover medical expenses through retirement.
Consider whether they might need to arrange for long-term care before it is too late to do so. Long-term care is expensive and is not covered by Medicare. The average annual costs for a nursing home or assisted living are $85,776 and $45,000, respectively. The answer to this depends on age, cost of coverage, length of time and the benefits you will want. You need to have this discussion as early as possible so you and your parents can weigh the options.
To avoid dire complications, make sure that they have a health care proxy in place with medical directives/powers of attorney and a living will so that in the event they can no longer make rational decisions for themselves, you can do so.
Discuss with them what their long-term care preferences are in the event they may not be able to discuss this issue with you when the time arises. Will they be amenable to living in an assisted living facility or will they want care in their home? This will give you guidance on the varying costs associated with these alternatives and what planning for these expenses must be done in the present.
It is also prudent to consider disability and life insurance for yourself, to make sure that your parents and children are cared for appropriately if you can no longer work.
In my situation, I do help my parents financially with the needed care expenses, and luckily as I am employed, I am able to do so.
However, even though I am responsible for paying some of the bills and helping them manage their current circumstance, I am very aware of protecting their dignity and respecting the financial resources that they have built up over a lifetime. It is difficult to see my parents’ energy and acumen diminished, but they are the people who nurtured me and helped me through many a trying time with advice, unconditional love, and support, and I am committed to handling this with grace and respect for them, come what may…
Talk candidly to your children
Having very candid conversations with your children about money, finances, education, and personal responsibility is as important as the discussion you have with your parents.
It is important that we cultivate independence in our children from a young age, and, make them aware of money and its effect on our lives. I know this is much easier said than done, and I readily admit that I should have initiated these discussions with my daughters much, much earlier than I did. Quite frankly, it wasn’t until my divorce and the repercussions thereof, that I finally addressed this issue with them which was to all of our detriment in many ways. But we have all learned from what happened to me and lived through the measures that had to be taken to get us all back on course, and I believe my daughters are better for it.
Discuss with your children what your universal expectations are with respect to university education and the type of institutions that would be affordable, and their participation in the payment thereof. Give your children (within reason) a clear understanding of your financial situation and retirement needs, and, explore how these their education goals and your retirement goals dovetail.
If grown children need to return to the nest, they should pay for a portion of their parents’ household expenses and be on notice that this is a short-term solution.
Plan, plan, and then do some more planning
- Caring for family members of all ages is an unpredictable and uncertain experience. Many people are facing this challenge, and it is often difficult to prioritize these competing needs emotionally and financially. Don’t let the uncertainty and conflicting emotions paralyze you into \\\\\inaction!
- Get started by evaluating your own situation. Fund your emergency cash reserves, pay down high-interest debt, set up a college funding plan and please make your retirement saving a top priority!
- If you are in the sandwich generation, save as much as possible. Boring I know, but it is possible you may have to take time off work to care for elderly parents (which you most certainly did not anticipate).
- Pay yourself first by maxing out on your employer’s retirement plan, don’t take loans out against it to fund college or support parents; this could force you to rely on your children for financial support when you are elderly — and the cycle will never end.
- Explore college savings such as 529 Plans to fund college expenses. Ask friends and family to contribute to your children’s 529 Plans for holiday or birthday gifts. Choose universities that have competitive funding programs that fit the family budget.
- Evaluate the best health care options for your budget. If you are enrolled in a high-deductible health care plan and you meet certain eligibility requirements, you can contribute to a health savings account (HSA) which will allow you to save pre-tax monies that can be withdrawn for qualified medical expenses free from federal taxes.
Seek assistance with the right professionals and organizations
In today’s busy society it is difficult to find time to do all the requisite planning by ourselves –which requires us to be financial wizards and social workers. Put a team in place and act like a coach!
Consider enlisting the help of a fiduciary financial advisor for college saving, retirement planning and optimal investment advice for your circumstances. An estate attorney is invaluable in preparing wills and powers of attorney.
Look into geriatric care managers who can assist with overseeing the many details and nuances of elder care. The Aging Life Care Association, https://www.aginglifecare.org, is a good place to start. I found a very good geriatric care center in Pittsburgh that has proven to be a good resource for me.
Manage YOUR stress!
Take care of yourself so you can take care of others! Establishing a work-life balance is difficult enough without having emotional and financial caregiving demands on your plate. Easier said than done, I know, but no matter how hectic life gets you must care for yourself, which includes making time for sleep, exercise and recreation, so you have the mental and physical reserves to care for parents and children.
Many sandwich generation caregivers have to change their jobs, reduce hours, take leaves of absence or turn down a promotion to allow for their other obligations. Speak to your employer to let them know that you are committed to your job and want to be productive, and, would like to work with them to have a more flexible work schedule or some other viable solution.
Harvard Business School has released a podcast and paper on “The Caring Company” which addresses how employers can help employees manage their caregiving responsibilities while reducing costs and increasing productivity. It is very interesting reading and addresses how American companies are facing a caregiving crisis and how changing demographics over the years are putting pressure on employees as they attempt to balance work and care responsibilities, and how detrimental this is to a company’s bottom line. https://www.hbs.edu/managing-the-future-of-work/research/Pages/the-caring-company.aspx
Everybody has a stake in this issue!
I speak to my parents every day and rotate monthly visits to them with my two daughters who live on the East coast. I have enlisted the help of local Pittsburgh friends and caregivers to the extent my mother will allow them to help. It has been stressful and emotional. But after I had time to process all that happened, I put a plan in place to try to circumnavigate the future the best we can. I love my parents deeply and seeing them happy and healthy is my motivation daily. To that end, I work. Learn from my mistakes and don’t wait until it is too late to plan for this frequent eventuality.
And, eventually I made it Turks and Caicos and it was fantastic!