By Financial Planning Standards Council
Today many members of the Baby Boom generation — those born between the years 1946 and 1964 — are sandwiched between two generations with unforeseen financial issues.
Caring for both their aging parents and their adult children, who are often struggling to establish themselves, how can Boomers balance their own finances while helping care for their family members?
Certified Financial Planner® professional Lise Andreana advises her clients to approach this squeeze the way travelers are trained to deal with an emergency on an airplane: by putting your own oxygen mask on first. “You have to protect yourself,” she said. “You can’t take care of other people if you’re not taken care of.”
First, she advises people to figure out their own financial number for retirement security – the amount they will need to live comfortably after they stop working – and then build in a contingency cushion of 20-30 percent.
From there, families should initiate a cross-generational conversation to establish an honest assessment of everyone’s financial realities, as well as their priorities, requirements and expectations.
When Ms. Andreana engages in this process with her clients, she often finds that clients have overcommitted to their children or parents in a way that is jeopardizing their own financial security. Many Boomers are borrowing against their retirement savings to help fund down payments on their children’s homes or to finance their wedding plans, lump sum payments Ms. Andreana cautions against.
When it comes to caring for aging parents, the biggest risk most families face is a loss of income associated with taking on the burden of care. Ms. Andreana believes that one option is for families to keep working and hire professional caregivers, reducing the emotional and financial strain on their own lives.
And while it’s emotionally difficult, she believes families need to look at all options – including the possibility of selling their parents’ home and moving them into a long-term care facility. In the long run, Ms. Andreana said, the cost of care is lower in a long-term care facility and adult children can use the value of the house to pay for the required care.
Ms. Andreana said that establishing a relationship with a Certified Financial Planner professional is also a “huge” asset when it comes to addressing the generational squeeze. Outside advice can help families establish a concrete plan of action while also defusing tension between family members by offering an impartial, outside opinion.
“It takes a lot of work to figure out the best way through this kind of pressure,” she said. “You need someone who will look at every piece of the puzzle.”