Will you end up supporting your parents?

Some aging boomers simply didn't plan well enough; others got smacked by the market meltdown. Now Mom and Dad are sleeping in the guest room, and members of a younger generation are wondering just how much they should be meddling in their parents' finances.

Rate this Article

Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest) LowHigh
By Emma Johnson, MSN Money

Will your parents' financial decisions leave you holding the bag?

Many boomers didn't save much for retirement, assuming they had a few years to catch up. According to Boston College researchers, 40% of baby boomers are at risk of not being able to afford their current lifestyles in retirement. Perhaps more worrisome, a 2006 survey of 2,500 boomers found that 59% of the respondents had done no formal retirement planning.

When's the right time to have the conversation?

And the financial crisis and economic upheaval have pushed many parents into their children's laps.

Just ask Anna Hartman. She and her husband -- both 31 -- recently moved her 67-year-old father from his home in the Washington, D.C., area to their 1,000-square-foot house in Oakland, Calif. Hartman's father had recently started a vitamin-supplement business, but it went bust last fall, largely due to the economy.

For years, Hartman had worried that her dad's lack of savings would one day become her burden. But she didn't realize it would be so soon. If she had, she would not have quit her job and started graduate school in September. Now she and her husband are living on credit cards and trying to find low-income housing for her father.

"On top of it all, our house has lost $200,000 in value, so now we're stuck," Hartman said.

"It's very frustrating that he doesn't have a pension and that he didn't have a plan," she said, adding that her long-term houseguest has put pressure on her marriage, despite her husband's openness to the situation.

"I feel like I'm 15 again with my father sleeping a few feet away. Yet I'm the one being the adult here."

How do you broach the subject?

Is it ever too early to meddle in your parents' financial affairs? Is it your responsibility to plan to care for people who are still working and able to save and invest on their own behalf? What if their financial needs compromise your lifestyle or your security? And what if your folks should have known better than to leave retirement to chance -- and yet have?

Barry Lubetkin, the director of the Institute for Behavioral Therapy in New York City, says it is appropriate for children to ask about their parents' finances as early as high school, when college financing first comes up.

"There is an unwritten contract that after all the years the parent supported the child, at some point the child takes on the responsibility of caring for the parent," Lubetkin says. "When that contract is not honored and respected, people lose out, and I've seen families fall apart over these issues. These conversations have to take place so these shifts in responsibility don't happen with too much rancor."

Continued from page 1

Though adult children may have feelings of obligation toward their parents, that does not negate the parents' responsibility for their own finances -- a responsibility that children can and should insist on, says Larry Winget, the folksy yet hard-nosed host of A&E's "Big Spender" and author of "You're Broke Because You Want to Be."

"It sounds real cold and cruel, but my obligation is to my own children and to myself," Winget says. Many experts advise against helping others -- even family -- at the cost of your own financial well-being. "While you may feel obligated to your parents, you're not if they squandered their money when they knew better."

Winget's argument may sound persuasive in the abstract, but in practice, the pull of family tends to win out, says Elaine Morgillo, a financial adviser in North Andover, Mass.

"What is the ethical obligation to bail out someone when there is no legal obligation to do so? Only an individual can answer that question for themselves," Morgillo says. "From what I have seen, people tend to take the high road and do what they need to do to take care of their parents, even when tough love might be more effective."

Morgillo adds that individual family dynamics play a huge role in these decisions; if the parents were nurturing in some way, the now-adult child will be more likely to be supportive of the parents later in life.

While Lubetkin favors open communication about these matters early on, he cautions that children shouldn't expect to take control. At some point, he suggests, the adult child may need to come to terms with the fact that he or she cannot change a parent's money behavior. Further, adult children must understand that their dream for their parents' retirement may not match Mom and Dad's.

That is a lesson that hit home recently with Eric Meadow, 36, of St. Louis. For the past 10 years, the American Equity Mortgage executive has offered unsolicited financial suggestions to his parents. They refuse to address their financial future and instead "bury their heads in the sand," Meadow says.

"It's really frustrating," he says. "It comes from my expectation of what their retirement ought to be like: living quietly in a nice location with good weather, financially independent and enjoying their hobbies."

Instead, Meadow's parents -- she is a medical transcriptionist and he the manager of a trucking company's parts department -- will need to rely on their son. Meadow doesn't worry that his parents will ruin him. But it does bother him that the quality of their future depends on him.

"I'm going to be screwed because I'm having to make decisions on their behalf and not knowing what they really wanted," he says. "The onus is on me to decide if they live in my house or live in Florida. I'll be pissed if they grow old in a retirement home on the northwest side of Chicago. I'm committed to seeing them enjoy their retirement. Family is family, and that is just the way it is."

Published March 11, 2009