A funny thing happened to us boomers as we approached retirement. Just when we thought we had finally paid for our children’s college education, we had to start dealing with “parenting” our parents! Then, when we thought we had a handle on that, the worst recession in a century hits us.
So, our retirement funds have been reduced; our parents’ income has been reduced (when the banks are paying zero percent interest), and our newly-graduated kids can’t find a job and are home again. How much more can we take?
When your finances are being pulled in many directions, it’s important to remember to take care of the caregivers first! That means DO NOT stop contributing to your own retirement plan. While it’s tempting to think short term, if you aren’t saving for your retirement, you will soon be the one needing financial help.
While most of us would like to be able to pay for our children’s choice of college, remember: they can borrow for college, but you can’t borrow for retirement. Attending community college for the first two years can reduce college costs significantly. Just make sure that all the credits will transfer to the college your children plan to earn a four-year degree. Help them make good decisions about where to apply for college, and be sure to apply for financial aid.
The next part may be the hardest, because having the “money” talk with your parents can be just about as hard as having the “birds and bees” talk with your kids. In our culture, it hasn’t been socially acceptable to talk about money and certainly not between the “greatest generation” and us boomers.
Most older people say, when asked, that they want to live in the house they are in now until they die. What can be done if all of your parents’ wealth is tied up in the value of the house, but their retirement income (pension and social security) is not enough to pay ongoing expenses? Well, one solution is a reverse mortgage. In the past, the costs associated with reverse mortgages were so high that I rarely felt it was a good deal for the homeowner. In certain cases, however, this financial tool can be a lifesaver.
The requirements are that the person requesting the reverse mortgage must be at least 62, and have a paid for home, or one that has a small balance compared to the value of the home. The benefit is that while traditional mortgages or equity lines of credit require repayment, a reverse mortgage actually eliminates the house payment, and will either provide a stream of income, or lump sum amounts as needed.
For more information, visit hud.gov, which will also direct you to a HECM (Home Equity Conversion Mortgage) counselor, who can answer questions and help determine eligibility for this program. At the home page, click on HOME, then on Topic Areas, and Information for Senior Citizens. You’ll then see reverse mortgages listed, as well as other topics related to this.
Another way to help your parents (and protect your own retirement savings) is to purchase long-term-care insurance on them. Rather than buying individual policies on each of them, it is possible to buy a family (or joint) policy, which will take care of each of them, but gives a discount for purchasing a “pot” of money together. Generally speaking, the first parent to need care is given care by the other healthy parent.
In the long run, paying (or at least helping to pay) a long-term-care insurance premium now will protect your retirement savings in the future. It will also reduce some of the stress of being the piece of ham in the middle of that Club Sandwich!
