Care for yourself first
Whether you're caring for aging parents, adult children or both, Eweka says it's critical to keep your own financial goals for retirement on track. This can be especially tricky if either the older or younger generation you're caring for requires financial support, or if you have to take time away from work in order to care for them. Try to avoid dipping into your retirement savings or lending money without a repayment plan. Your financial advisor can help you determine how changes to your life impact your finances and your retirement plans.
"Having that trusted advisor in place is huge, because there's a lot of planning and work to be done," she says.
Depending on your specific caregiving situation, your financial or tax situation may change as well. For example, you might be able to claim your aging parents as dependents and deduct their medical expenses. Check with your tax advisor on how to manage your unique circumstances.
Financial implications of caring for aging parents
Caregiving duties for aging parents can range from simple household help to completely taking over their finances if they are not able to manage them on their own. If a parent becomes incapacitated, having all the necessary legal documents in place is essential.
"It's not automatic that you can just step in and help them," she says. "You need to make sure you have powers of attorney for financial matters and healthcare directives so you can make decisions on their behalf."
Without those documents in place, the courts could intervene.
"That can be time consuming and could result in decisions that may not be in your loved one's best interests," she says. "You need to be in a position to make decisions quickly, especially those related to healthcare or a family member's living arrangements, rather than waiting to get on a busy court calendar."
Managing someone else's finances means having frank conversations about money, which can be an uncomfortable topic for many families.
"In a lot of families, people don't talk about money openly," Eweka says. "As a result, family members may not know how the bills are currently being paid, which financial institutions family members use, or how to contact their tax, legal or financial advisors."
Your role may also include helping a family member find the resources to create or update an estate plan. People often assume their parents have a will or other important legal documents in place, but that's not always the case. There's a lot of work that goes into estate planning, which requires careful coordination from a legal, tax and financial planning perspective. It’s important to ensure the right legal documents are in place well before a crisis occurs.
Financial implications of caring for younger generations
If you assumed that you'd be done financially supporting children once they reached a certain age, having them move back in with you, or relying on you for financial support, may not be covered in your current financial plan.