RETIREMENT SECRETS: The Sandwich Generation — Caring for Aging Parents

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karl kimBy KARL KIM, CFP, CLTC

Over the past few years we have seen more and more people in their fifties and sixties caring for not only their high school or college age children, but also their aging parents.

Usually both husband and wife are still working. Taking care of their aging parent or parents has come to a head because of a healthcare crisis such as a fall, stroke or the onset of dementia or Alzheimer’s.

This creates a lot of emotional, financial, family and marriage stress. This stress is doubled or tripled if both sets of parents are experiencing a healthcare crisis.

More than 80% of long-term care in California is provided by family and friends. In 2009, 2 million people (10% of the population) provided this care for their parents or other elderly family members without compensation and also took care of their children.

According to a November 2014 research study from UC Berkeley, the typical California “sandwich generation” person is a middle-aged, well-educated woman, working full-time with a moderate income. This woman is usually married but there are increasingly more single woman caregivers.

The amount of time that sandwich generation caregivers provide uncompensated care is equivalent to a part-time job. According to a 2009 California Health Interview Survey, women provided 25.5 hours of care and men provided 15.9 hours of uncompensated care per week.

In their full-time jobs, women worked 2.5 hours per week less than their non-caregiving associates. Men worked 2 hours per week more than their non-caregiving associates.

Forty percent of sandwich generation caregivers have provided care for at least two years or more. Most have provided care for at least three months.

Research shows that those caring for elders with Alzheimer’s provide substantially more care than the average case. Because the number of Californians with Alzheimer’s is expected to double within the next 10 years, more of the sandwich generation will be providing this demanding care.

Also affecting the amount of time spent caregiving by the sandwich generation is where the person receiving care lives. Thirty four percent of persons receiving care live with their caregiver. When this is the situation, the sandwich generation caregiver provides an average of 35 hours per week providing care.

According to Sandra Timmerman, a gerontologist with MetLife Mature Market Institute, the average caregiver loses $300,000 in wages and benefits over a lifetime.

According to a September 2011 UCLA Center for Health Policy Research paper, 93% of caregivers are not paid for the care they provide or the out-of-pocket costs they incur. This negatively affects their ability to save for retirement, pay for their own healthcare and home expenses.

Not surprisingly, 27% of caregivers in 2009 said that they were experiencing financial hardship brought on by caregiving, according to AARP.

Other negatives include not eating right, poorer mental and emotional health, and depression. Sandwich generation caregivers put off important tasks such as getting their own prescriptions filled and even getting proper medical attention.

Research and my own experience have shown that sandwich generation caregivers are highly educated. The stress of caregiving results in poorer health of these caregivers as compared to their non-caregiving counterparts.

At 80.4 years, California has the third-longest life expectancy of all the states in the country. Only Minnesota and Hawaii have longer life expectancies.

This longevity, combined with an aging baby boomer population (those born between 1946-1964), means that California’s senior population will grow 60% by 2023, according to an AARP study.

More caregivers will be required to deal with this increase. Unfortunately due to fewer children being born, there will be fewer family caregivers to meet the demand.

In addition, because more women are working full-time, they will be put under tremendous pressure to care for their aging parent, maintain their careers and care for their children.

A large amount of stress can be relieved by having a comprehensive plan in place for an aging parent as soon as possible. Ideally, the planning should be done in reverse or looking backwards.

The first part of the plan should address how care in a nursing home will be paid for: personal income and assets, long-term care insurance, or Medi-Cal. The answer could be one, two or all three.

The second part of the plan is based upon the answer(s) in the first part. They determine what assets the parent(s) should have, how they should be titled and the correct beneficiary designations.

For example, if Medi-Cal is going to be the safety net, then they don’t want to own “booger” assets like time shares, vacant land, or other real property.

The final piece of the plan is to have the proper language in the living trust and Durable Power of Attorney for Asset Management.

In my experience, if Medi-Cal is going to be the safety net, then there should be language that allows gifting in excess of the annual federal gift tax exclusion.

In other words, if Mom needs to qualify for Medi-Cal and has too much in the bank, we need to be able to gift more than $14,000 a year to each child to get her qualified.

We have also run into situations, for example, where the only child could not transfer ownership of the family home to themselves to avoid recovery because the Durable Power of Attorney did not allow it.

Just because your parent may have a living trust or Power of Attorney, it doesn’t mean that the right language is in the documents.

The plan should also be flexible. Laws change, regulations change, family situations change. Keeping options open is important.

Having a plan in place to take care of the worst-case “what if” helps to reduce the stress of caring for an aging parent.

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Karl Kim, CFP, CLTC is California’s premier retirement planning specialist. He is the author of Don’t Go Broke Paying The Nursing Home: How Californians Can Protect Their Home, Cash and Retirement Accounts.” His office is located in La Mirada. He can be reached at (714) 994-0599 or at www.ReverseRetirementPlanning.com. He has submitted over 1,000 Medi-Cal applications over the past 20 years with a 99.9% success rate. This is meant to be an educational article. None of the above is to be construed as legal advice. Do not make any decisions solely on the information in this article. Consult your tax advisor, financial advisor or attorney before taking any action. We are not responsible for any inaccuracies or misinformation.

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