Just when you thought it was safe to retire...
How to cope with the 'senior sandwich' - paying for retirement, your parents' care and college - all at once
NEW YORK (Money Magazine) -- You know you're officially part of a trend when someone gives you a catchy label, and there's a new one out there: the 60-year-old kid.
It means someone who is just short of retirement age and still has at least one parent who's alive and kicking.
Cute, eh? Never have there been so many people in their golden years whose parents are still living, so the fact that the term is entering the lexicon is no surprise.
But while the trend is a wonderful thing - we all want our parents to stay healthy and live to be 100 - the fact that so many more are sticking around than in previous generations is putting unanticipated financial pressure on their adult children.
Neal Cutler, a financial gerontologist (he studies the effect of aging on finances) who coined the term 60-year-old kid, says that at the beginning of the 20th century, between 4 percent and 7 percent of people in their sixties had at least one parent who was still alive. Today that percentage is close to 49 percent and rising.
The people in this squeeze, according to Cutler, are members of the "senior sandwich" generation. They're at least 60 years old and facing the ultimate financial trifecta: college for their kids (either current tuition bills or paying back borrowed money), retirement for themselves and at-home or nursing-home care for one or more parents. All at the same time.
That's precisely where Lee Eisenberg finds himself. The author of the best-selling retirement book "The Number" is 60. His mother is 92, and he has two children in high school.
"A 60-year-old kid is himself grappling with aging and mortality while at the same time watching a parent aging in a much more extreme way," Eisenberg says. "You get a bird's-eye view of what you might be in for financially and physically. It's not a bad thing, but it's a worrisome thing."
How can you turn the situation from a source of concern into an opportunity to create peace of mind? If you're already bumping up against the big six-oh, you have options: Plan on working a little longer, living a little leaner and encouraging your kids to study hard and qualify for merit aid.
If you're 40 or 50, you're in an even better position - especially if you take the following steps.
Fit kids into your budget
Back in 1990, 25 percent of young adults between 18 and 24 lived with their parents. Today more than 50 percent do. How old will your kids be when you hit senior-sandwich age? Do they plan on revisiting their old bedroom as they transition from college to the working world?
Even if they're already out of college, you won't necessarily be in the clear. You might not be supporting them completely (and you probably shouldn't be), but if they bungee-jump back to the nest, you could find yourself spending more on food and utilities, maintaining an extra car, even delaying a planned move out of a big house in a high-tax school district.
When you make projections about your annual nut early in your retirement, be sure to plan for the possibility that one of your kids turns to you for room and board. Just for a little while.
Ask your parents hard questions
Having responsibility for older parents doesn't mean paying for all their expenses. But you'll be better off if you understand what sort of assets your parents have and how they want to live. You may have read in these pages how tough a conversation like this can be. (Search "have the talk".)
To ease into it, bring up a friend's situation or the recent stories in the news about Brooke Astor. (Who said the rich have it easy?)
I thought the approach used by John Migliaccio, an expert on aging and the president of the American Institute of Financial Gerontology, was particularly ingenious. He's the only child of two healthy, independent, working (!) people in their eighties, folks in such good shape that to them the thought of discussing their future frailty was akin to walking under a ladder.
So when Migliaccio was turning 50 and they wanted to give him a gift, he told them he wanted them to really think about the answers to these key questions:
How expensive a liftstyle did they want to live for the rest of their lives?
Where did they want to live, and in what kind of home?
What sort of health-care and lifesaving measures did they want taken, if necessary?
And who, exactly, did they want to put legally in charge of carrying out all of these wishes?
These were hard questions to ask his parents, and they didn't react especially well. But because they really wanted to give him a birthday gift - and he insisted he wanted nothing else - they finally agreed to have a conversation that Migliaccio had been stewing about for years.
Should in-home or nursing-home care become a necessity for you or your parents even decades down the road, long-term-care insurance may make paying for "just" college tuition and retirement seem manageable. For more on how it works, see "afford the care you need."
Look out for No. 1
A recent study by the National Council on Aging found that 50 percent of parents would consider taking funds that had been earmarked for their children's college education and using them to pay for their parents' long-term care.
And many parents sabotage their retirement funds to pay for college.
In other words, if you find yourself in the senior sandwich, you'll likely be tempted to do what many conscientious parents and adult children have done for generations: put your own needs last.
This is a mistake. Borrow money for college if you have to. Exhaust your parents' own assets to fund their care late in life. But remember that no one can contribute to your own retirement savings except you.
Do that part right and your kids won't need to worry about becoming a part of the senior sandwich someday.