Many Millennial and Generation X adults find themselves in the situation of unexpectedly caring for their parents who are aging and may have health and/or financial problems.
When parents become sick, have large medical bills and require care, or simply need financial assistance, caregiving responsibilities are thrust upon their adult children who may or may not already have a family to support. This family can include a spouse, young children, teens and young adults. As high as 117 million Americans are expected to provide unpaid caregiving support and services by 2020 according to AARP research. At the same time, the caregiving population of currently a little over 40 million adults is expected to only reach 45 million by 2020. It’s clear that these families will require good financial planning and education to manage all the requirements of caregiving as well as the individual’s own financial planning and self-care.
AARP’s study also revealed that over 20 million caregivers in 2015 were either Millennials or Generation X and many of them had attended college, were female and earned more than $50,000 per year. Caregiving responsibilities can range from simple financial assistance by paying and scheduling payments to daily support with physical activities, taking medications and much more. (For related reading, see: 6 Best Tips for Caring for Aging Parents.)
Taking Care of Both Aging Parents and Children
According to research compiled in 2015 by the Pew Research Center, one in every eight Americans between the ages of 40 and 60 takes care of both a parent and an adult child. This compromises a lot of the Generation X population aged between 35 to 50 years.
When caregiving responsibilities happen unexpectedly because parents become sick unexpectedly or other incidents occur, the family members who step in to take care of parents often can find their own lives completely transformed. They may need to give up a promising career and former activities for relaxation. For parents who have severe health concerns like Alzheimer’s or dementia, caregiving extends to daily management. This can change the caregiver’s life tremendously, leading to anxiety, stress, depression and conflict in marriage and personal relationships.
Providing Financial Support for Parents
As of 2016, Millennials (aged 18-34) have surpassed Baby Boomers (aged 35-50) in population, at 75 million Americans, according to the Pew Research Center. As high as 20% of Millennials surveyed in a 2015 study by TD AmeriTrade supported their parents in a financial way, averaging $12,000 per year.
There still remains a significant gap between the needs (financial, physical and emotional support) of an aging Baby Boomer population and what younger populations are able to provide. Hence financial planning and education is paramount to overcoming this gap. (For related reading, see: Helping Aging Parent Manage Their Money.)
Surviving Retirement: Social Security Is Not Enough
In most instances, Social Security benefits do not sufficiently cover life expenses. Having a defined-benefit plan with 401(k) plan and other retirement savings is necessary to maintain a standard of living and meet monthly expenses.
One of the biggest concerns for both Generation X and Millennial adults regarding their parents involves sufficient retirement savings and planning. A 2016 report by the U.S. Government Accountability Office revealed that:
- 29% did not have a defined benefit plan or retirement savings
- 23% had a DB plan but no retirement savings
Healthcare expenses can be sky high at times and for some parents, there are additional expenses like paying mortgages for a longer period than they originally expected.
Financial Planning for Your Loved Ones
Below are some steps you can take to address these concerns and proactively plan for your loved ones.
1. Save money: Plan ahead by putting some savings for additional expenses that come from supporting your parent in a separate account.
2. Help in simple ways proactively: Your parent may have been a very independent individual most of his or her life. Asking for help may not come naturally. You can offer to help in simple yet very effective ways that could dramatically improve the quality of your parent’s life. For example, you can schedule monthly payments for your parent via their checking accounts and even pay a few bills in advance for them. You could have groceries and medications delivered to their home using a shopping service. You can set up reminders for doctor appointments in their calendars. It is important to be available to your parents at the level they are at so you keep communication channels open and you can anticipate and quickly address problems in many situations. This in turn, will help you become aware of any problems and help you put preventive measures in place. (For related reading, see: How to Parent Your Aging Parents.)
3. Hire a caregiver or housekeeper for a few hours a week: If you can afford it, hire a caregiver or housekeeper to help provide support, maintain the household and be there emotionally for your parent. This is also very helpful if your parent may require help in the future as you will have prepared your parent for receiving assistance and changes in the environment.
(For more from this author, see: 3 Steps to Prepare Financially for Retirement.)