Caught Between the Elder Care and Education Money Pits

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BYE-BYE CONVENTIONAL WISDOM

Delaying retirement savings is one of the biggest no-nos in financial planning. Conventional wisdom says kids can always borrow or find a job to pay for college, but no one will lend you money for your later years. "We have this natural instinct to help our kids and sacrifice our own plans," says Rande Spiegelman, vice-president for financial planning at the Schwab Center for Financial Research. "I don't believe you are doing your kids a favor if you go into hock yourself only to turn around and become financially dependent on your kids as you age." Spiegelman, who sees no quick fix for families like the Campbells, stresses the importance of setting a savings target with the help of online retirement calculators and then budgeting to meet those goals.

Some financially savvy people who know what's considered wise advice have nonetheless been pressed to disregard it. Christopher Waddell, a certified financial planner with Raymond James (RJF) in Vienna, Va., has three young children, two of whom have autism. Occupational therapy, drugs, special teachers, and caregivers cost about $60,000 annually. Until recently, Waddell also spent $3,000 a month to keep his mother in a nursing home. (She died in December.) Waddell, 43, would love to channel the former nursing home fees into retirement savings, but he needs the money for his kids.

With the help of his wife, Theresa, 44, an accountant, Waddell has tried to maximize his savings by taking tax deductions for rent and utilities for his caregiver, negotiating cheaper life insurance premiums, and setting up a health savings account that allows small businesses like his to stash away unlimited funds on a pretax basis for medical expenses. "You've got to get it wherever you can," he says. Although his two children with autism, ages 8 and 10, may never be totally self-sufficient, he is saving for his other child's college education—the son is 6—through a 529 savings plan. A live-in au pair who specializes in occupational therapy helps keep down treatment costs.

Home-based caregiving often sounds like a cheaper, better alternative to a nursing home, but it can backfire. Just ask Lori Larson of Edina, Minn., who says her mother's health "fell apart" after her dad died four years ago. With two school-aged children and a husband who traveled weekly for his work in sales at Advanced Medical Optics, now a unit of Abbott Laboratories (ABT), Larson found it increasingly difficult to keep up with her job as an executive at Ameriprise Financial (AMP). "After a year of trying to find services to help keep my mother in her home, with me working and spending most weeknights with her and never seeing my family, I finally gave up and quit my career," she says.

MULTIGENERATIONS

Just before the real estate market tanked, Larson, 50, sold her mother's home for $200,000 to fund the $80,000 annual price tag for assisted living. At the time, Larson's mother was so ill from heart problems and other ailments that she did not expect to outlive her money. But she made a "miraculous" comeback, says Larson. "Here we are two years into it, and she's healthy as anything at 91. Who knows? She could live to be 100."

As the primary decision maker for her mother, Larson now faces some tough choices. Should she opt to save money by moving her mom home even though she is thriving in assisted living? Should she sell her mother's lake house, which the family has had for 60 years? Would a reverse mortgage be a good way to help mom?

"Before the market crash, we thought we had enough money," says Larson, who is considering starting an elder care advisory business in the fall to help pay for everything. "Now it feels more uncomfortable." Her family has cut back on energy use and delayed buying new cars. "

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