Are You Sandwich Material?

Interesting title, huh? I don't mean "sandwich" in the food sense, but "sandwich" in the stuck between sense. Here's how one MarketWatch writer describes being a sandwich:

I spend my nights worrying about my nearly 80-year-old father and stepmother. My wife and I spend our days worrying about funding college bills for four children (expected cost $1 million at Harvard with no scholarships, loans, grants and the like). And in between those worries, I think about saving $3 million (give or take a million) for retirement.

It used to be that the debate was between simply saving for retirement or saving for college (though almost everyone recommends saving for retirement first -- someone can always borrow for college, most banks won't let you borrow for retirement.) ;-) But now with longer life spans, many people (millions according to the MarketWatch piece) are having to add on (potential) costs to care for their parents. For a couple that could mean four adults (mom and dad on each side) or even more (what if mom and/or dad are remarried and have new spouses?) And we all know that elder care isn't cheap, right?

Of course this isn't much of an issue if mom and dad have saved and planned adequately for the future. But how many Americans save and plan adequately for the future? That's right, not many. Hence a large slice of Americans will be put in the place of trying to pay/save for their own retirement, their kids' college expenses (though I know some will say "let the kids pay their own way"), and their parents' care later in life. Hence they have one big mess of a financial sandwich.

Here's where we stand on this issue:

• We are closing in on having our kids' college expenses covered. A few years from now, we should have that savings goal completed.
• We have been saving for retirement for a long time now and have a decent nest egg saved. That said, we still have a long way to go and need to keep saving to reach the levels I'm comfortable with.
• The wild card is my parents (my wife's parents are deceased.) They have their house paid for, a decent amount of equity in a business (not a fortune by any means), and some savings (not much.) They also have Social Security. Will they have enough money to last them the rest of their lives? I don't know. It's possible that we'll need to support them financially at some point in some way. Will we be ready and able to do this? Probably, but it will likely take out of our retirement savings.

To me, this isn't really that big of a deal because we have saved a good amount (I do practice what I preach here at FMF) already and we live well below our means. Besides, I'm on track to retire early, so if worse came to worse, I could just work longer. In addition, I would be more than happy to support my parents just as they supported me earlier in my life.

But what about those people (and there are many) who haven't been saving for retirement, are facing upcoming college bills they have little idea how they are going to pay, and could/would be crushed by having to support aging parents? What are their options? What can they do if they get hit by all of these at once?

Is anyone thinking about these issues? They better be, because for many these are real situations that they will need to be prepared to answer.

How about you? Anyone out there supporting themselves, their kids, and their parents? Any words of wisdom for those of us yet to face these challenges?

Comments

[Benjamin Bloom]

Have you considered the rising costs of Long-Term Care when you say that you are more than happy to "support" your parents. Could you afford the current nationwide average yearly cost for a facility, which is around $72,000? Could you afford a better place or a home care service that costs $100,000 per year?

Most people could not afford to pay for their parents, especially because of recent economic conditions. So many elderly people are forced to spen down all their assets, keeping only $2,000 of their estate, in order to qualify for Medicaid assistance. The majority of people on Medicaid (almost 90%) are seniors.

If you are concerned about the costs of Long-Term Care, you have good reason to be. The first baby-boomers are beginning to retire... Healhcare in this country is keeping people alive longer... Long-Term Care is not beng addressed in current healthcare reforms, so cost will continue to rise... For most people it is no longer a question of if, but rather when they will need some form of Long-Term Care.

[Budgeting in the Fun Stuff]

My husband and I are in a strange (in a good way) position. We don't have kids yet, and if we do we'll save what we can for their college costs without killing our retirement savings. Both sets of our parents saved very well. If they ever need financial assistance, they could always live with us. In short, we only have to save for our own retirement right now...classic DINK household.

What we have to deal with right now is purely emotional...all our grandparents were still alive up to a month ago. That's when one of my husband's grandma's passed away. We still have 7 grandparents between the ages of 75 and 87...the next decade or so is going to be pretty rough...in regards to this though, all of our grandparents still support themselves on nice retirements too. What can I say, we are the products of savers. :-)

[Holly]

Maybe we can buy LTC insurnace for my mom, since she is surely going to need financial assistance because no, I would not be able to afford $72,000/yr.

[Angela Howard]

Consider a career change anyone? I went back to school for nursing to help with my husband when he became disabled. I ended up taking care of my mother also. Though I do not earn as much as I would going out to work in a hospital or caring for a private duty client, I do not have to commute and we get to spend LOTS of family time together. (Both of my husband's parents are deceased, we have no children)

[Old Limey]

Both my parents and my wife's parents are deceased - Problem 1 solved.
Our three children are aged 46, 49 and 50 and happy and self supporting - Problem 2 solved.
We have been retired for 18 years - Problem 3 solved.
Long-Term Care - we elected to insure ourselves and have sufficient investments to easily cover needed expenses.

We plan to leave almost our entire estate to our three children, whose investments I have managed, and they are already in very good financial shape.
Two granddaughters (ages 21 and 9) get modest bequests when they reach the age of 30.
Two grandsons (both adults), following a divorce, are now the financial responsibility of their wealthy father.

[MC]

I guess I'm fortunate, in a way.

My Dad paid for $30K college total/child (he had 4 children), contributed nothing to our weddings (we refused his help), raised us very frugally, and the rest of his $ I hope he spends on himself. He likes to travel etc and he deserves it. He's saved his whole life; he's a hale 81 years old and he just married his 3rd wife. They've bought into a retirement community that sells condos with the option of in home help and nursing care if needed later. I'd help with whatever he needs, but I think that unfortunately he'll die before he spends down all his money.

I worry a bit about college costs for my 2 kids, but I think they'll do OK. I'm saving some, and also their Dad (I hope; we're divorced and he's threatened not to, but I think he actually is saving). But if our kids have to take some loans to get educated it won't kill them. It also won't kill them to attend a good state school instead of Harvard. I work with grad students all the time--and believe me, what undergrad you attend makes *no* difference as long as it's reasonably competitive and you take good (ie quality/hard) classes and get A's. I am a very highly paid professor myself & I didn't go to a "name" undergrad. I worked all the while I was in college, took out loans to cover expenses that my Dad didn't, and I paid them off later. Then I went to grad school on my own dime and now I have a great career. It's a huge mistake to think that your kids "have to go to Harvard to succeed.

I think kids should realize that it's better in the long run to refuse your parents' "help" for down payments, weddings, and other junk that you don't really need. Your parents are not an ATM!! Make them keep their money and don't even take very much for college! That helps them have more saved for retirement, and it helps you become independent and it also helps family dynamics because they'll respect you as an adult.

[guinness416]

My husband supports his mum (financially, he lives in another country) and has done since before I met him. That's a priority for him which is totally fine. Looking after elderly parents can be more than expense though. I remember when my ill grandfather lived with us when I was a kid and the effect on my folks - it's rough emotionally which can stress you out considerably and take your focus off work, savings and other things.

[ryan]

This post really hits home for me in my situation. I was raised by parents who raised their children to be financially responsible, but married a girl from a family who lived beyond their means and now has NOTHING to show for it. I have a first hand example of how living beyond your means for many years will leave you a financial train wreck! With that said, my in-laws are in their late 60's and already looking for a place to live. I am little frustrated that I now have to pay the price for someone else's poor planning and lack of self discipline. I do feel some responsible to help as they are family, but I still have a young family that is my first priority. Technically, I am not supporting my wife's parents yet, but it looks inevitible.

[MasterPo]

Having been in the position of needing to care for an elderly parent let MasterPo assure you that whatever expenses you *think* you have budgeted for you need to TRIPLE at least.

If it can happen it will happen and be faaaaaaar more expensive than you could imagine.

Don't count on Obamacare or any other gov program for help. If you get something, great. But don't count on it.

[es]

I worry alot about this. We are saving reasonably well for college and retirement but it's our parents I worry about. My husband's parents are 79 and 74 and are on lots of meds and are doing OK healthwise. They don't have a lot of money and are giving everything to our kids including their home. I guess if they get really sick they expect us and the sister to pay. I would love to help them since they do so much for us but we live on a tight budget. Then there is my family. My parents are divorced. My dad, 64, remarried but his wife just passed from cancer. He is alone running a business on the verge of bankruptcy. He has always been a little bit of a dreamer about money thinking his boat will eventually come in. He will do as much as he can to take care of himself but he will never have savings as far as I'm aware. My mom, also 64, plays a victim really well and doesn't really try to do much to help herself. She has only minimal savings which I don't think will last long especially if she lives as long as her 91 year old mom. She doesn't help us now with the kids or even with her own mother (who will be leaving all her money to her). So beyond the money issue there are other issues with relationships, giving and expectations that we still haven't worked out. I just hope and pray things work themselves out.

[PJinNC]

FMF- thank you for this post. I worry about this all the time. Ryan, I feel your pain. My parents (dad deceased, Mom doing fine at 63) were schoolteachers who lived within their means, and dedicated savers for years ON TOP of their regular pensions. Today, Mom is retired and managing well, and looking to downsize. I am reasonably confident she will be okay.

My wife's family is a financial train wreck. I could tell all sorts of tales about bad decisions that would blow your mind. Today's short vignette- my father-in-law's living room ceiling is leaking and shows signs of water damage. His wife calls a handyman to come check it out. He calls the handyman and cancels, saying he'll just paint that part of the ceiling, AGAIN. Then he calls the piano tuner to come over and tune the piano. (which is out of tune because of the moisture in the house) It doesn't occur to him that he has the piano tuner over more than anyone I've ever met.

Anyway, if they're not broke, they will be soon.

Here's a question I have in case anybody knows. Like Ryan, I assume eventually that my in-laws will land on our doorstep looking for help, and I will have to choose to sacrifice my dreams or our son's college funds (or both) to pay for their profligacy.

Because I love my wife, I do not want to turn them out in the street on that day, but I do not want their ways to continue with my money. I HOPE to condition any help given on them signing all of their bank accounts and assets over to ME (not even my wife, ME) via power of attorney. I will then liquidate some of their poor investments (bad real estate purchases, three non-functioning cars), fix and sell their primary residence (which has value) and establish a fund that will release a certain amount of spending money to them each month.

Is what I am thinking about legal/possible? Has anyone done anything like this? Email responses are welcome if people do not want to post. Thanks for any help. Seriously, I have a young child and stay up worrying about this.

[Geoff]

I think about this occasionally. My parents will be fine (3+ pensions, free health care, plenty in retirement). I've started saving for my kid, but she's still young and I'm not too worried. If she needs to get loans, I'm okay with that. My wife's parents, however, I'm not sure about. They've made a lot of bad decisions and are barely surviving as it is, and I'm sure they're waiting for an inheritance to make it by. That would mean generations of wealth that will most likely be wasted away once they get it. They have made their decisions and admit they're terrible with money. We don't have the financial means to pick up their mess and luckily, they know not to ask, and don't expect to ask us for anything.

[Holly]

@ Geoff:

I have 3 sets of parents (mine are divorced, one is remarried). Two of three sets of parents: do not have a will, do not have a living will, no long-term care insurance, and not much in savings.

Problem is: Even though I am sure they don't want to have to 'knock on our door', I am pretty sure there will be no other recourse; I have also read that in Pennsyvlania, there is a very old law that states that if the parents can no longer afford their elder care, then it is up to their children to support them financially. It's one thing to have a moral responsibility...it's another thing to have the law demand it!

Anyone else heard of this law!?

[todd]

This also sounds familiar to my situation as well. PJinNC, I don't see any reason why it would be illegal for the in-laws to sign over POA, but I think that would be a tough sell. I have tried counseling my in-laws and have tried to help with financial matters that have asked for help with, but there is still a fine line that I have to be careful not to cross and offend. I think the most frustrating aspect of parents/in-laws that need assistance, in my point of view, is getting them to understand the root cause - living beyond their means. Yes, a down economy isnt helping matters, but the problem is being over leveraged for many years and emperior with no clothes has been exposed. My in-laws were convinced that a reverse mortgage was the answer to the all of their problems. When I suggested a budget, down sizing to reasonably sized home, selling one of the extra cars, selling extra household items all I received was a puzzled look. I suggested that they read Ramsey's Total Money Makeover, but you know the old saying you can lead a horse to water but you cant make it drink.

[PJinNC]

Todd- thanks for sharing your experience. I share your frustration. With your in-laws still on the train wreck path, what do you and your spouse feel obligated to do/sacrifice if/when the stuff hits the fan? Are you and your spouse on the same page?

[Denise]

I'm also interested in the legal aspect of taking care of your parents. I don't reside in the same state as my parents. I can't imagine that I would be legally obligated to take care of them. Anyone know?

[Todd]

PJ - You ask very good questions...

My wife and I are not on the same page, however we are communicating well and we are still in the process of determining how much we need to "sacrifice." Our discussions have primarily been focused on whether we finish the basement for them so that they have a place to stay. My thought is that if they would like to stay with us, I don't have any concerns with them living here but I think they should pay the $ to finish the basement. If we were to ever move, I would be willing to commit to them that I will either buy a large enough home for all of us or finish another basement for them. My wife thinks that we should pay for the basement finishing costs our selves and not expect any payment in return.

I would estimate the total cost to finish the basement would be about $30K, which would take a good chunk of the in-laws remaining money, but hopefully SS and a small penion annuity payment will get them through the remainder of their retirement.

Does anyone have any thoughts on who should bare the costs to finish the basement?

[Martin]

I've hear that there is a legal way to avoid monetary responsibility. I can't remember the phrase, exactly. Then, the children should take over all of the mother's assets, leaving her basically, broke. Then, when she is infirmed and needs to be placed in a "home", the state will foot the bill. Of course, I would have her assets and use those to help with her care, but the point is the bulk of her care is performed by the state and if I couldn't afford it I wouldn't be legally bound to it. The state would bail us out.
The alternative to this is that the state takes over her estate and uses it the way they please to take care of her. Then, after she dies the remainder of her estate goes to the state.

Without knowing all the details, I once saw a house go up for sale by the state to pay for the owner's care in a nursing home. Apparently, she was too ill to care for herself and the state was helping her out. They sold her home at a short sale for considerably less than it was worth, the lawyers involved made alot. It seemed to me that they stretched out the process as much as possible to run up the "hours" they put into the case. Finally, they sold the house to someone they knew, probably a friend at a lower than market price.

This is all rumor, however. I am not at all sure of the facts or the legality of this situation.

[JimL]

Just a word of caution to note. I understand that some people may want to help out the situation with parents financial matters by having assets transferred to children in hopes of preservation, etc. If a parent ends up depleting assets and then requires future government assistance, the government will take a look at a set period of time preceding the period of care to see if some assets were transferred. If they find such evidence, they will require that the funds/assets be returned and used for the medical care prior to any government assistance. Before making any moves with parents assets, it is best to seek legal assistance.

[Amanda]

I think that college savings for kiddos is an OPTION and a LUXURY, but NOT a requirement. Neither my husband or I had our college paid for by our parents, and we are doing just fine. Here's how:

State School: Costs way less
Merit Scholarships: We applied for every scholarship possible every year and were shocked at how many we were awarded.
Work: We both worked all through college and lived cheaply.
Loans: We have them, but we have paid almost 50 percent back in 20 months since graduation. We hope to be done paying them back in 2ish years.
Parents: They DID help, but not by paying for college. They left us on their cell phone and car insurance plans, got us useful Christmas gifts, sent us home with leftovers when we visited (my parents also helped out with a car payment, but hubby's didn't).

Moral of the story: If you can't pay for your kids college, they can probably still do just fine!

[Julie]

I feel like I'm in this boat. My Father in law will be fine because he gets a pension. My Mother-in-Law (they're divorced) "can't" stop working until he retires so she can get her cut of his retirement. In reality, she would be fine if she didn't get her hair and nails done every week and insist on coffee from a coffee shop every day. My parents do not know the meaning of budget or save. I worry about them because I'm sure I will have to support them. It angers me when my mom in one breath brags that she just bout 20K's worth of Burberry then on the other hand tell me she can't afford the plane tickets to come visit me so would I pay for it.

[Duane]

I know I'll be in this position. I have a father in law who has lived his whole life hand to mouth regardless of how much he earned, and often he has earned large sums of money. I want to do the right Christian thing and be helpful, but it is frustrating to do everything I can to make my family secure while he does nothing to take care of his future.