For many families, elder care expenses can kick in at the exact same time that children's college tuition looms, and financing both can incur exorbitant expense. According to the National Center for Education Statistics, average tuition and required fees for four years of college can cost well over $80,000. Meanwhile, as elder parents' life expectancy increases, long-term care and health costs rise apace -- the average cost for care in an assisted living facility, for example, is over $3000 a month. Planning for both eventualities helps keep a family's financial stress in check.
Step 1
Plan for college tuition expenses as early as possible by investing in a Section 529 plan or qualified tuition program which allows you to save for future educational expenses. Speak with your financial planner to ascertain which plan -- a college savings plan, or a prepaid tuition plan -- works best for your children's educational needs.
Step 2
Determine your eligibility for an educational tax credit, such as the American Opportunity Credit, which can be claimed for expenses paid for any of the first four years of college, according to the Internal Revenue Service.
Step 3
Encourage your children to contribute to their own education in age appropriate ways. For example, encourage younger children's scholastic pursuits to maintain eligibility for scholarships in later years. Older kids can put some of their part-time earnings into a tax-free savings account earmarked for college.
Step 4
Open the lines of communication between yourself and your parents to get clear on the status of their estate plan. Find out if they have durable power of attorney, healthcare power of attorney, and living wills in place, and if not, help them take the necessary steps to acquire them.
Step 5
Find out about your parents' existing insurance coverage, and uncover any holes. According to the U.S. Department of Health and Human Services, unless your parents have purchased specific long-term care insurance, little or no coverage exists amongst Medicare, Medicare supplement, and HMOs.
Step 6
Investigate other financial options that can bolster your parents' finances in the future and offset care needs, such as a reverse mortgage if they own their own home.
Tips and Warnings
- Some families benefit from an official paid contractual arrangement between the family member who serves as primary caregiver and the parent who receives the care. Caregiving can be full time work, and can cause the caregiver to reduce or relinquish employment, which in turn diminishes his ability to save for his own retirement.
- Avoid falling into the time trap. If your kids are small and your parents are in robust health, it may seem that plans such as these can wait. However, things turn on a dime in life, and especially in the case of elderly parents, serious and expensive health complications can materialize overnight. Take advantage of as many years as you have to squirrel away some financial peace of mind.
Things You'll Need
- A competent financial planner
References
- National Center for Education Statistics: Postsecondary Institutions and Price of Attendance in the United States: Fall 2009
- U.S. Department of Health and Human Services National Clearinghouse for Long-Term Care Information: Cost of Care
- Investopedia: Choosing The Right 529 Education Savings Plan
- IRS.gov: Tax Credit Helps Pay for Higher Education Expenses
- Investopedia: Healthy Survival Guide For Sandwiched Boomers
- New York Times Health: Family Caregiving on Contract
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