Between the financial crisis, taking care of your kids, taking care of your parents, home equity losses and the increased cost of health care, retirement has changed in America. The picture has changed from lobster dinners to peanut butter and jelly. The reality is that this isn’t a temporary cutback; people are faced with a complete lifestyle change which will follow them into retirement years.
One large obstacle facing retirement planning is the increased necessity for adults to take care of their parents in old age. Between health care costs and depleted savings, many currently retired people can no longer support themselves. According to an Ameriprise Financial Survey, 58% of baby boomers reported providing their parents with some form of financial assistance. People are also providing more primary care to their parents, which results in lost wages. According to a Met Life analysis of National Health and Retirement Study data, 17% of men and 28% of women were providing basic parental care in 2008. This will result in an average cost of $324,044 for women and $283,716 for men.
Additionally, parents are supporting their children for longer. One third of baby boomers say that supporting their adult children has slowed down retirement saving, according to the Ameriprise Financial Survey. Financial support has gone beyond help with college to help with bills and general necessities. With college grads and youth in general finding it harder to get jobs, this is no surprise.
This has led some to call this the “sandwich generation,” those having to support others on both sides. Before you commit to supporting everyone around you, it is crucial to consider your responsibility to yourself. You want to avoid creating the same situation for your children. Find where sacrifices can be made, and realize that people need to support themselves. Even though you feel like you have an obligation to your parents and children, they also have responsibility to be self-reliant.
IRS Types of Retirement Plans: http://www.irs.gov/retirement/sponsor/article/0,,id=155347,00.html
Money Magazine ‘Is my high-fee, no-employer match 401(k) worth it?’ http://money.cnn.com/2012/05/21/pf/expert/401k-contribution.moneymag/index.htm
Fox Business Boomers Choose Helping Family Over Retirement: http://www.foxbusiness.com/personal-finance/2012/05/17/boomers-choose-helping-family-over-retirement/