There was a great article on Bankrate last week called “Surviving the Sandwich Years.” The reference here is to people typically in their 40’s and 50’s, grappling with paying for aging parents while saving for both kid’s educations and retirement. The article points out that only 20% of people can rely on an inheritance and proper planning should really disregard any potential windfalls. Here are the ‘survival tips’ pertaining to estate planning which are offered by the article along with some of my own commentary:
1- Educating oneself on legal issues – I think the author is talking about estate planning here. The most common issues are: reviewing who the beneficiaries are on your life insurance policies and factoring that into your giving strategy. Also, think through the implications of registering a home to yourself or a child. While registering it to a child may be desirable because it avoids probate, you then need the ‘new owner’ involved in any transactions which may affect the house. This could include taking out a reverse mortgage, renovating, or tax issues.
2- Talk to your parents – Having good lines of communication will always help. People who avoid dealing with financial issues until it’s too late learn this lesson the hard way. Plus, studies show that people in their 30’s and 40’s are much more inclined to speak openly about money than people who grew up in the post-depression era, where financial matters were treated with greater privacy. Open up to parents about financial concerns, college costs, and the idea of meeting with a professional about transfer strategies. One great idea for grandparents (when possible) is to establish college savings plan for grandchildren. The investment in the future will also ease the burden of parents trying to save money for their own issues.
3- Helping parents – Remember when your parents took care of everything for you? Well, the tables have turned. Many parents know less than you think about their healthcare plans, social security, investment choices, and insurance. Ask them about these things to see if they have concerns. If they are overpaying for a health care plan, call the insurance company with them and iron out the options. Perhaps the health plan isn’t strong enough and money could be freed up elsewhere to compensate. You won’t know unless you ask.
4- Considering housing options – For elderly parents, a rental unit or condo may be financially possible, but expensive when considering other financial needs. There are several options for aging parents who need care during the day: Personal home care may actually be the least expensive. Finding somebody who is state-licensed is recommended and will usually provide care during most of the day. You could also consider an assisted living facility or nursing home. Assisted living is expensive, but cheaper than nursing homes, where people may need constant attention. Sometimes Medicare will pay a portion of nursing or home care as well. You could also try checking with HUD (Housing & Urban Development) to see if you qualify for a lower-cost option.
5- Don’t cheap out on yourself – If you’re one of those people who likes to please everyone, and you get around to yourself last, be careful! Retiring with enough money should be a more important concern than pre-paying for college in cash. Your kids are young and can take out government-subsidized loans. If you can afford to, help them pay back the loan later, rather than liquidating your cash now. They have their whole lives ahead of them to earn money, whereas you may not. Just something to think about.
In the end, financial issues are very personal and every person has different amounts and attitudes towards money. The best advice I can give is to pay attention to the issues which could come up in your life.
As always, feel free to contact me with any questions or comments.
Premier Financial Advisors
14 E. 60th St. #402
New York, NY 10022
Securities and certain investment advisory services offered through: First Allied Securities, Inc., a registered Broker/Dealer. Member: FINRA/SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.