Saving for retirement is something a lot of people struggle with, especially now when many 401(k)s are still recovering from the recession and savings account rates can’t even keep up with inflation. The thought of retirement on the horizon is enough to incite panic in many of today’s employed Americans, but there’s another growing issue these workers probably never saw coming: Supporting parents during their retirement.
The Emergence of the “Sandwich Generation”
Young workers undoubtedly suffered from the recession’s impact on retirement savings, but it’s the older generation–who were about to or already had entered retirement–that really took a hit. With no time to recoup their losses, these people now face retirement without the necessary income to support themselves. Plus, there are those who just weren’t prepared for retirement even before the economy took a downturn.
This has left a large population of the baby boomer workforce, labeled as the “sandwich generation,” to balance raising their own kids and supporting their older parents when they leave the workforce. Plus, they’re expected to save for their own eventual retirement. So if you suspect you might end up in the same situation, what can you do?
Ask the Experts: Sandwich Generation
5 Ways to Prevent Retiring Parents from Becoming a Burden
Many children feel an obligation to support their aging parents, especially if their parents were particularly nurturing or financially supportive earlier in life. However, that obligation is a personal one, and you must decide if providing financial support to your parents is realistic for you and your family. Here are 5 tips for helping your parents get their finances on track before they ruin yours:
1. Have the Talk
The hardest part of addressing your parents’ financial problems is starting the conversation. Even into adulthood, parents often represent the stability and support in a family, financially and otherwise. When that role is reversed, it can be damaging to their egos; not to mention uncomfortable for you to bring up as well.
You may feel like what your parents do with their money isn’t any of your business, but if their choices are impacting your own financial well-being, it is very much your business.
It’s especially important to have a conversation with your spouse as well. Money is already a subject that can put strain on a relationship–add in-laws to the mix and it’s vital you and your spouse both agree to help your parents out before you make any commitment.
2. Set a Budget
Figure out exactly what the deficit between your parents income and expenses is, then determine how much of that you can afford to contribute. You may conclude you can cover it all, a specific monthly amount or decide you can’t afford to support your parents at all.
3. See a Professional
There are a growing number of financial professionals who are educating themselves about the particular challenges the sandwich generation faces. You will probably benefit from speaking with someone who is equipped to assist you in sorting out your situation, while leaving emotion out of the equation. Just be sure you do your research to find someone you can trust.
4. Get Benefits
A number of benefits and tax breaks exist to help people in these circumstances. For example, pharmaceutical company AstraZeneca PLC offers eldercare benefits to employees. Find out if you qualify for some type of benefit that could ease the financial burden of helping your parents out.
5. Make Yourself the Top Priority
Remember, there’s no good in struggling to support your parents if you go broke in the process. Don’t make the sacrifice unless you really can afford it, and that means leaving enough in your budget to save for your own future, too.
Dealing with the financial burden of retired parents without savings, especially when you have your own kids to support, is no easy situation to address. It’s up to you to decide what extent you’re willing to offer support, but the sooner you accomplish the above checklist, the more likely it is you will minimize the toll it takes on your own finances.