As life expectancy increases and many adults find it challenging to achieve financial independence, the number of Americans caring for their aging parents continues to rise.
According to the Pew Research Center, more than half of Americans in their 40s have a living parent aged 65 or older. They’re either raising a child younger than 18 or have an adult child they are helping financially. This caught-in-the-middle generation, often referred to as the sandwich generation, is twice as likely to report financial difficulty and more likely to report substantial emotional difficulty than their peers who only act as caregivers to a parent over 65.
As this intergenerational group faces the pressure of navigating an uncertain economy and establishing their own financial security, it’s important that they take the time to not only understand their finances, but also have discussions with their parents about their assets. While these conversations can be difficult, it’s much easier to plan and avoid financial surprises when you have all the information.
Evaluate Your Assets
One of the initial steps you should take before assuming new responsibilities, such as becoming a caregiver, is to assess your personal finances. Start by tracking your overall expenses. Consider inflation to determine how much money you will need for anticipated future family costs (college, weddings, retirement). Once you have a better sense of how you are spending and saving, you can better determine your overall assets and budget accordingly.
Schedule a Meeting with Your Parents
Discussing finances with family is often considered off-limits, but it’s important that you take time to have these conversations, so you can better understand how much help your parents currently need or will need in the future. This includes reviewing their retirement/investment portfolio, income, debt, real estate holdings, and any legal documents they have in place for their estate.
When scheduling a meeting, choose a time when both parties can give the conversation their full attention. It’s also helpful to prepare ahead of time. Make a checklist or draft some talking points to help guide the conversation and take notes during the meeting. Schedule a follow-up meeting at the end to keep the conversation going and address new issues as they arise.
Discuss Healthcare
Similar to finances, conversations about health and well-being can be uncomfortable. However, it’s incredibly important to be proactive and initiate discussions about healthcare early so you’re prepared to navigate medical issues. Where feasible, include individual preferences in care plans. In addition to asking for their preferences, discuss long-term care options. Determine whether any of your dependents will need assistance and legally document their wishes. This may include advance directives such as living wills or a healthcare proxy (also known as a durable power of attorney for healthcare) designating someone to make decisions if needed.
You may also want to check your employer benefits and see if there’s a Health Savings Account (HSA) or Flexible Spending Account (FSA) you can utilize for health-related expenses. Some employers also offer a Dependent Care FSA.
Be on Alert for Scams
Financial scams targeting older adults are widespread, with the most common being government impersonation, sweepstakes, and robocall scams. Educate your parents about the risks and help monitor their accounts for fraudulent activity. Encourage them to be wary of offers that seem “too good to be true” and remind them to never give out their personal information and to avoid clicking on links in emails or texts from unknown sources.
Make a Transition Plan
Once you’ve gathered all the information, talk to your parents about a transition plan. Review all their bills and discuss how you could make gradual changes. Keep other family members informed and create a strong support network of family, friends, and care providers.
Aging is an inevitable journey that requires careful planning, particularly for caregivers in the sandwich generation as they may be experiencing this process in real time. To ensure good financial health for all your family members, it’s important to start planning as soon as possible. Seek guidance from friends and financial experts who can help you navigate this new path.
