Surprise! How to Handle Unexpected Dependents

Having a family reunion this summer? Sometimes reminiscing and catching up with your relatives is the highlight of the season.

Unless it’s one of those unplanned reunions. You know the kind we’re talking about here—the family reunions brought on by the unexpected appearance of a new dependent in your house. Maybe your daughter’s new career isn’t panning out quite as planned. Or your father is getting older and needs more care.  Suddenly you’ve got a roommate you weren’t exactly counting on.

Don’t get us wrong. It’s natural to seek and offer help when family members go through hardship. And the chance to spend more time with a loved one includes plenty of joy. But as Baby Boomers and early Gen Xers are preparing for retirement, many are dealing with the unforeseen financial burden of supporting either an adult child or an elderly parent. Some middle-agers are even facing both at once!

It can really put a squeeze on your financial plans.

The good news is that no matter your age or current financial situation, there are steps you can take to plan ahead and make the transition smoother.

You Thought Your Nest Was Empty

If you’re in your 40s or 50s, maybe your kids are out on their own and you’ve gotten used to their empty bedrooms—not to mention a lighter grocery bill! And then, just when you’re increasing your 401(k) contributions or speeding up on extra mortgage payments, your son gets laid off from his job. Ouch! He’s going to need your couch for a few months.

If you have a boomerang kid on the way, here’s how to stay sane and on track financially.

  • Remember that a son or daughter who returns home is having just as tough a time adjusting as you are, maybe even tougher.
     
  • Before agreeing to live together again, it’s essential to define the timeline of the arrangement and the goals each party has. If you can’t (or don’t want to) host the child forever, be sure they know that fact and specify the date by which you’re expecting them to be back on their feet and in a place of their own.
     
  • Gently remind them that your home is not a hotel and that there are still bills to pay. Depending on the situation and what drove them home, you might even want to agree on a certain amount for rent or utilities. Circumstances vary, but if you have a child who’s just looking for a cheap place to crash, requiring them to share the cost of living can be just the motivation to get them moving in a healthier direction.
     
  • A college student home on a summer break isn’t nearly as taxing as a longer-term live-in kid, but financial boundaries are still key here. Encourage them to work a part-time job or at least to pitch in with household chores and maintenance.

When Mom or Dad Need You

The realization that you have a parent in need of your care can be bittersweet. After all, they’ve given you years of help and guidance, and now you have the privilege of returning some of the same love and service. At the same time, it hurts to see their own independence diminished.

As you welcome an aged parent into your home, here are some tips for making it a little easier.

  • Don’t stop contributing to your retirement. No matter what, you’ve got to keep your own financial plans on track. It may seem counterintuitive, but you’ve got to put the oxygen mask on yourself first before you help elderly parents.
     
  • Examine what you can do within your current means without going into debt. Sure, it would be great to build an annex onto the house for mom or dad, but if that means going into tens of thousands of dollars of debt, it’s not worth it in the long run. If the change will be long-term, take a hard look at resources and look for ways to downsize or free up cash to help your parents without going into the red.
     
  • Many people in this situation choose to stop working or to work less in order to be at home with their elderly parent. If that’s the best option for you, be sure to roll over any employer-provided 401(k) properly. Request your company to send all investments directly to a new IRA, and be sure they don’t issue you a check for the amount. Doing so will result in a big withholding penalty for you.
     
  • If your parents don’t already have it, get them long-term care insurance today! It’s absolutely mandatory for anyone over 60 years of age. Ten years of medical care can easily lead to hundreds of thousands of dollars in medical bills, and long-term care is the best way to protect their assets and yours.

Even If You’re Too Young to Have Dependents, Get Ready Anyway

For those of you in your 20s and 30s, you might not be in range of needing to help an unexpected dependent anytime soon. But it’s never too early to plan for unexpected emergencies. An emergency fund with three to six months’ worth of expenses is absolutely crucial, even in your younger years, and can help avoid financial fires later. Also, if you’ve seen your own parents struggle to balance their work and finances with caring for one of your grandparents, you don’t want to do the same in 20 years. Long-term health care is something you should not only be encouraging your parents to buy, but also something you should plan to have yourself when you turn 60.

And in the meantime, stay on track with the Baby Steps. Keep working your debt snowball, maintaining your emergency fund, and pursuing a healthy amount of investment in retirement accounts. The healthier you are financially, the better you’ll cope and thrive if you someday need to open your home to a child or parent.