If you’re over-50, maybe closer to 60 and over, your money may be caught in the “Generation Squeeze”. This is the name given to the phenomenon of Boomers who are financially helping out both their grown kids and elderly parents. You may be working, often, to support 3 groups of people – yourself, your kids, and your parents. Your job income, savings, credit cards, whatever access to money you have, is getting squeezed to the point where you haven’t been able to save anything more for retirement. Don’t feel singled out though. You’re in the same boat with 39% of other American Boomers who report not being able to put anything away for their own retirement.
In a 2012 Market Watch poll, over 90% of American Boomers – 9 out of 10 – are helping their grown children financially. Another 21% are supporting elderly parents. The pressure on Boomers to monetarily help support struggling adult children and elderly parents is so great that the horizon of their retirement is becoming more and more distant. More than 44% of them say that they will be either working part-time in their retirement or waiting until later to retire.
If you’re caught up in the Generation Squeeze, is there anything you can do to brighten this picture? Money experts offer these suggestions:
1. Have a detailed discussion with your kids. Approach the talk as if you were a banker and your kids are asking for a loan. Are you helping support needs or wants? If your adult child has lost his job and you’re helping to keep his heat and lights on, or pay your grandkids’ food bills, that’s one thing. But, if you’re subsidizing the cost of going back to school, or trying to help pay down their credit card debt, or school loans, a better idea might be for them to get a part time job to take some financial burden off you.
2. Make a Realistic Budget. As children of elderly parents, you can easily get caught up in the desire to help so much that you over-extend yourself. Helping your kids/parents financially can quickly run up your credit card debt. Many people also take money out of retirement savings to help kids or parents in a crisis, and then cannot recoup it. Doing that once, maybe twice, may not hurt too much, but several times can drain your entire retirement savings. So, out of your monthly income, not credit cards or savings, how much can you reasonably spare to help your parents or child? Discuss this with your parents and children. Set a limit, how long the help will be needed, and if they can repay some part of it.
3. Consider other living arrangements. If you’re helping to pay for your parents’ home/living expenses, you may consider having them move in with you. It can make a considerable difference in your finances. Similarly, if your grown child has lost a job, consider having them move in with you for a while, if possible. If you also have grandkids, this probably won’t be a solution, unless you have a very large home and live within driving distance of your grandkids’ schools. If your kids have a mortgage, and if moving in with you temporarily is feasible, they could rent out their home to keep up mortgage payments until they get back on their feet again.