SOLVED: Help! I'm Squeezed Between Kids, Parents and My Own Retirement
You have many demands on your finances, but YOU are the top priority.
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Your number-one priority is ... you. Don't even think about funding college for your kids at the expense of your own retirement. An analysis by T. Rowe Price shows that diverting half of your potential retirement savings to college savings for 18 years could reduce your retirement kitty by 35%.
In a pinch, you can tap your retirement funds to help with college by borrowing against your 401(k), or by withdrawing your contributions to your Roth IRA. You can even get penalty-free access to the earnings on your Roth if you use the money for college expenses, though you'll still pay taxes on the earnings.
| Row 0 - Cell 0 | The ABCs of Saving for College |
| Row 1 - Cell 0 | Buying a Long-Term Care Policy |
| Row 2 - Cell 0 | Am I Saving Enough for Retirement? |
But before you dip into your retirement funds, investigate scholarship and other financial opportunities at www.collegeboard.com or www.fastweb.com. Remember that 60% of college students pay less than $6,000 per year for tuition and fees. Your kids will have a lifetime to repay their student loans, and working, at least a little, never killed anyone.
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As long as your parents are alert and in good health, make sure that their paperwork is up-to-date. That includes bank and brokerage statements, insurance policies, deeds, mortgages and wills. Your parents should have a living will that makes clear their wishes regarding medical treatment, plus a directive that allows you to make medical decisions on their behalf and a durable power of attorney that lets you make legal and financial decisions.
When Mom or Dad requires more care, think carefully about the best way to provide it. Sacrificing a career -- especially during your peak earning years -- can be disastrous to your own financial security.
Instead, explore elder-care assistance offered through your employer, or get information on support services at www.eldercare.gov. The Family and Medical Leave Act allows you to take 12 weeks off (unpaid) every year to care for a family member.
Long-term-care insurance can pay for assistance in or out of the home; if your parents can't afford it, consider buying it for them before they are too old or too sick. Average annual premiums (including inflation protection) for a 79-year-old run nearly $7,600 a year. That sounds like a lot until you consider the alternative: quitting your job. If you have siblings who can split the tab with you, that $7,600 premium might start to look like a bargain.
Reverse mortgages can help keep seniors living at home. Alternatively, downsizing lets them use real estate windfalls to purchase a home in a retirement community with assisted-living options when needed.
Or consider remodeling your house to accommodate an elderly family member. One year of nursing-home care costs an average of $74,000. That amount of money could finance a makeover that could also add value to your home.
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