New Strains for the Sandwich Generation

FOR THE PAST SIX years, Peggy Fitzgerald, a 50-year-old substitute teacher from San Augustine, Texas, has been the principal caregiver for her 73-year-old mother who has emphysema, her 75-year-old father who has lung cancer, and his 77-year-old sister who has skin cancer.

On a typical day, Peggy drives 10 miles to her parents' and her aunt's homes to cook their meals and give them their medication. They have health insurance, but Peggy covers the costs of driving them to their doctors' appointments and occasionally driving her father to Houston, a three-hour ride, for radiation treatments. These daily needs forced Peggy to quit her job, leaving her husband, an auto mechanic, to foot the bills. "We're not able to save for retirement or for our [12-year-old] daughter," she says. "I wouldn't wish this on anyone."

According to a 2005 Pew Research Center report, 10 million baby boomers — now known as the sandwich generation — are raising kids or supporting an adult child while providing financial support to an aging parent. As seniors are living well into their 80s and 90s, many boomers, especially those with middle-class incomes, experience financial strains as they try to support the generation both above and below them. By trying to balance health-care and living expenses for their parents — and, at times, for their grandparents and other elderly relatives — with their children's college tuition, many boomers wind up financially drained and unable to save for their own retirement.

Luckily, there are ways to manage these expenses without running through one's life savings. But we'll warn you: Many require advance planning. Here's what you can do preventively, along with some advice on how to stem losses should you already be in a situation.

Health-Care Costs

Obviously, health-care costs are a major expense for most seniors. But what can really bankrupt families is when a senior needs daily care. The average annual cost for an assisted-living facility, which helps relatively healthy seniors with daily activities, such as eating and bathing, is $35,616, according to 2006 data from the MetLife Mature Market Institute. Meanwhile, the average price of a private room at a nursing home is $75,190. In larger cities, like New York or Stamford, nursing homes exceed $100,000. Medicare won't cover these costs for daily care.

"I never thought my mom would live this long," says Neal Cutler, whose 93-year-old mother lives in a nursing home. As an only child, the 63-year-old professor and associate director of the gerontology program at the University of North Carolina Greensboro, pays nearly $8,000 a month to the nursing home and $400 a year for his mother's dental care. He also pays his 19-year-old daughter's college tuition — a whopping $40,000 a year. "I'll probably have to move money out of my nest egg before my daughter graduates to make ends meet," he says.

One way avoid these types of expenses is with long-term-care insurance, which kicks in when a policy holder suffers from a chronic condition and needs constant care. It covers the costs of nursing homes, assisted-living facilities, adult day care and in-house care. The catch? In order to qualify for affordable premiums, the shopper must be in good health and relatively young. "You should consider it when you're in your early 50s," says certified financial planner Michael Boone, founder of MWBoone and Associates in Bellevue, Wash. "It's critical to figure out how you want to handle this risk early on."

Premiums can go up significantly should you wait to buy. A 55-year-old man in Texas looking for a three-year, $150 daily benefit with compound inflation adjustments and a 30-day gap before benefits kick in could pay premiums starting at $1,258, according to StrateCision, an independent company that sells price-comparison software to the insurance industry. A 65-year-old would start at $2,229 while a 79-year-old would pay at least $6,406.

If older parents can't afford long-term-care insurance, boomers should consider splitting the costs of their parents' premiums among their siblings. "If three siblings are paying, the payments will be more manageable to everyone involved," says certified financial planner Shashin Shah, president of SGS Wealth Management in Dallas. If you're an only child, consider sharing the payments with your parents. For help in selecting a policy, click here.

Nursing Home Alternatives

What if your parents are no longer eligible for long-term-care insurance or if you simply can't afford the premiums? While Medicaid — which provides medical services for people with low incomes — will cover long-term care, most middle-class families will dig into their own pockets before they relinquish control to this government system.

For many boomers, that means selling their parents' home and bringing mom or dad in to live with them. While this often isn't the most desirable plan, it can be the most affordable. "Many families are renovating their basements or adding an extra room to their home for their parents," says Sheryl Garrett, CFP and founder of Garrett Planning Network in San Antonio. "This can be a win-win financially all around." The money the parents would have spent on taxes, maintenance and other fees associated with a home, and the money they'll receive from selling it will cover a big chunk of their health-care expenses.

If staying in their home is an absolute top priority, older parents can consider a reverse mortgage, which allows folks to tap the equity in their home without having to pay the loan back for as long as they continue to live there. There are a few caveats, however. Your parents must be 100% certain that they want to stay in their home for the rest of their lives. Also, if they had dreams of leaving their home to you as an inheritance, they should know you will have to sell the house when they pass away or come up with the cash to keep it. Finally, make sure that even with the new income stream they can afford home care should they need it at some point.

Area agencies on aging offer several day-time care options for a parent who is living at home. For example, a home health worker will visit an elder to check vital signs or provide tube feedings. This service costs an average of $19 per hour, according to the MetLife Mature Market Institute. Free services include meals-on-wheels and retired seniors who will drive elders to doctor appointments. Last, check with your community center and place of worship for services they offer.

Put Yourself First

So how do baby boomers who find themselves in the middle of a sandwich balance priorities? A little selfishness is in order. "Boomers must save regardless of pressure to support their older relatives and their college-bound children," says Dr. Janice Wassel, director of the gerontology program at UNC-Greensboro. College bills should be one of the early sacrifices. After all, low-interest loans are available to cover those costs.

Boomers who've already depleted assets caring for others may simply need to work a little longer to replenish their coffers. That's Cutler's plan. "I'll be working for another 10 to 15 years," he says. "That's if I don't break my hips."