People in the Sandwich Generation are faced with taking care of themselves, their children, and their parents, especially when parents haven’t sufficiently planned for their own financial future. Here’s how to protect your household while ensuring your parents receive needed care.
It might seem like a hopeless dilemma. How do you see to the care of three generations without shortchanging any of them? The key is making smart financial decisions.
Retirement first. It might seem selfish, but the fact is you must prepare for your retirement when you’re still relatively young. The last thing you want is to put your children in the same position you find yourself in, of having to take care of financially unprepared parents. Accordingly, you should give top priority to budgeting a fixed percentage of your monthly income for your retirement accounts.
Communicate with your parents. The best time to have a frank discussion with your parents about the care they will need is before a health crisis occurs. Take the time to gather and run the numbers to see how much care will cost and how much your parents can cover. Factor in a realistic plan for how much you can kick in for your parents’ care.
Review your insurance options. Often, the most cost-effective and feasible care plan relies on insurance. Long-term care insurance has become a big industry, with many differentiated products. For example, you can buy life insurance that can also pay for qualified long-term care costs. A reasonable course of action would be to create a cost-sharing arrangement with your parents to cover the insurance premiums.
Protect your spouse and children. You should consider what kind of insurance you need to care for your own family if something were to happen to you. Additionally, you’ll want to set aside money for your kids’ education, such as with a 529 plan. Of course, you’ll also need a short-term emergency fund in case you or your spouse is suddenly unemployed. You’ll need a realistic budget to juggle these obligations.
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