The Triple Threat to Baby Boomers' Retirement Plans

The Triple Threat to Baby Boomers' Retirement Plans
The Triple Threat to Baby Boomers' Retirement Plans

After long careers, members of the leading edge of the baby boom generation have gotten to the age where many of them would like to retire. But more baby boomers have chosen to put off their retirement plans -- and the reason may surprise you.

For a long time, baby boomers have been known as the Sandwich Generation. The reason: Many have not only had to provide for their children's financial well-being but are also taking care of aging parents whose own retirement savings have run out.

With two generations of dependents relying on them for their financial survival, baby boomers have found themselves stuck in the middle for years, with a huge financial commitment to family members.

But a recent survey from Scottrade reveals a new source of stress for baby boomers. As their adult children grow up, many boomers now have grandkids -- and with their children in financial straits, these boomers often end up getting called on to cover expenses for those grandchildren as well.

The survey reports that the number of boomers owning a college or education savings account doubled from last year, with one in nine listing saving for a family member's educational expenses as a key reason to invest.

Not surprisingly, if you're a baby boomer, having three generations of family members depending on you creates plenty of stress. In the survey, 73% of boomers said they were at least somewhat stressed about their current financial situation, with many reporting worries about making mortgage payments and paying bills.

Retirement Worries Piling Up

Baby boomers approaching retirement face a combination of challenges all at the same time:

When it comes to financial planning, you simply have to put first things first.

Getting to 'I Quit'

If you're between 45 and 65 and feel stressed about your financial situation, you're not alone. But don't make the mistake of thinking you'll never be able to retire. With some discipline and extra effort, you can set things up so that everyone in your family gets what they need.

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First, make sure that at least part of your income is going toward your own financial future by funding a retirement account for yourself. If your employer offers a retirement plan, nothing could be easier, because the money comes out of your paycheck before you even get it. In addition, many employers offer matching contributions to retirement plan contributions. Even companies like Ford (F), General Motors (GM), and United Parcel Service (UPS) that temporarily suspended their 401(k) matching during the recession have come around and reinstated matching in the past couple of years.

Moreover, don't let yourself get trapped into thinking that bad economic conditions right now equate to a lifetime of financial misery for your kids. Young adults almost always struggle to make ends meet early in their careers, and while times are tougher than normal right now, many of the boomers' children who are relying on their parents for support will eventually become financially independent when the job market starts heating up again -- albeit perhaps later than their parents might have hoped.

Finally, make sure that if you're supporting your parents, they have the tools they need to avoid catastrophic expenses. For instance, if something happens that requires your parents to get nursing-home care or home-health care support, long-term care insurance can kick in to pay for much of the expense associated with those services. In addition, by knowing the rules for government support like Medicaid and other programs, you can ensure that your parents get all the benefits they're entitled to -- rather than having to dip into your own pocket.

Motley Fool contributor Dan Caplinger is in no hurry to retire but thinks he will someday. You can follow him on Twitter here. He doesn't own shares of the companies mentioned. The Motley Fool owns shares of UPS and Ford. Motley Fool newsletter services have recommended buying shares of GM and Ford.

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