Balancing retirement with supporting adult children

  @Money February 18, 2013: 2:26 PM ET
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Saving for retirement while supporting adult children and aging parents can be difficult.

NEW YORK (Money Magazine)

This story is part of Money magazine's retirement special Dream big, act now: Six secrets of retirement, which lays out the key drivers of retirement happiness -- including your investments, health, career, family, midlife changes and debt -- and what you can do about them.

PART 4: THE FAMILY

The secret: Know when to say no to the kids.

The plan was to speed up on retirement saving once your kids were out of school. Then your son lost his job and moved back home -- and Nana is becoming frail and needs help too.

A new survey by Pew Research found that 48% of middle-aged adults with grown children gave them financial support in 2012. Some 21% with a parent age 65 or older gave financially.

Others gave time, which has its own costs; over 60% of those providing care are saving less for retirement as a result, says a survey by the National Alliance for Caregiving.

And 15% in the Pew survey helped both adult kids and parents. "When it's both, it gets overwhelming," says Milwaukee financial planner Alan Moore.

Related: Tips for talking retirement with your spouse

By identifying early on what you can pay -- and what you don't have to -- you can save yourself both money and angst.

TAKE ACTION

With your kid, draw the lines upfront. One of Moore's clients ended up buying his son, who hadn't moved out, a house. "He told me, 'I just wanted my house back,' " says Moore. "I'm not sure he could really afford it."

Even if things haven't gone that far and your kids are on their own, you may still be chipping in for health care insurance or cellphone bills. However you pitch in, "set clear expectations upfront -- even put it in writing," says Theresa Wan, a financial planner in Dumont, N.J.

Related: 5 retirement choices: Get 'em right, live well

Ask: What specific help does she need? If she's living with you, what rent will she pay, and for how long? (You could deposit "rent" into a fund she can use for future costs after she moves out.)

Distinguish between investments in her future, such as a career counselor or job-related courses, and extras that should be her responsibility, like concert tickets.

Get a clear view of your parents' finances. That's often a tough conversation, but you can ease tension by enlisting a third party, such as a financial planner.

If you know what Mom or Dad can afford when a problem arises, you can take steps together with them to avoid unnecessarily damaging your own finances. For example, it might become clear that if your parents downsize to a smaller condo, it would free up some money for paying a home health aide, perhaps forestalling a costlier nursing home stay.

My parents won't listen to my money advice!

Tap senior services. Government and nonprofit agencies offer a range of help for the elderly, says Louise Schroeder, a financial planner in Stillwater, Okla. Services include adult day care and in-home aid, and may be low cost or free. To find help in your area, go to eldercare.gov.

You'll face a time drain, but you can get a hand. Having to provide aid to a parent gets in the way of your career and leaves little time left over for getting on top of your own financial planning. A geriatric care manager can help oversee your parents' home and health services, says Schroeder. Search for one at caremanager.org; expect to pay $150 to $200 an hour.

Don't miss tax breaks. You may be able to claim adult relatives you help as dependents. For them to qualify you must provide more than half their financial support, says CCH tax analyst Mark Luscombe. Their gross income for the year, excluding Social Security, must also be less than $3,900, as of 2013.

More secrets to a dream retirement:

Investing

Health

Career

Midlife changes

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