Opening your home to your aging parents is a wonderful way to pay tribute to your family and to support your parents as they supported you. It’s also an increasingly common phenomenon: In 2000, 1.4 million people aged 65 and older lived with a family member; by 2010, that number had risen to 1.8 million.1
As baby boomers face the challenge of caring for their parents, they are also saving for their own retirement—and possibly providing assistance to their children, as well. If you’re facing this challenge, here are four steps you can take to help work through the issues:
There is no shortage of challenges when two or more generations live under one roof, each with a unique set of habits and preferences. The best solution is to head off problems early on. “You really need to have a conversation before the move,” advises Robert Pace, a SunTrust financial advisor based in Savannah, Ga. “Knowing what each person expects out of the living situation can help provide smooth living arrangements down the line.”
Come up with a list of subjects to discuss, including medical care needs, living space and money management issues. Then sit down and hash out your goals and expectations so everyone’s on the same page—before the moving trucks pull up to your front door.
New household members mean new expenses (and possibly new income sources from a parent’s Social Security or pension benefits). Drawing up a new family budget can ensure that your daily spending plan will take into account your changed circumstances. Pay attention to both everyday and long-term expenses. For example, if you have to renovate your home to make it wheelchair accessible, who will be responsible for those costs? Will any other family members (siblings living in another state, for example) contribute to your parents’ medical care?
Again, this step is best done before the move in order to head off any misunderstandings. “If you set ground rules in advance,” Pace notes, “you’ll be dealing with fewer surprises.”
If your parent’s gross income is below $3,800 (do not include non-taxable Social Security benefits) and you pay more than half of his or her expenses, you may be able to claim that parent as a dependent on your taxes. Even if your loved one is over the income threshold, you might be able to deduct some of their medical expenses (if you paid for them). A CPA can help you explore whether any tax advantages apply to your situation.
Remember that your own financial future requires caretaking, too. “People need to be careful that they’re not jeopardizing their own financial situation because they’re focused on a loved one,” Pace says. “It’s natural to want to help out, but you shouldn’t do anything that puts your future in jeopardy.” Keep an eye on your own finances and book regular appointments with a financial professional to make sure you’re still on track for your own goals and aspirations.