Many who are over the age of 40 find themselves saving for college for their children but also caring for aging parents. Says Jeff Clemons, general agent at MassMutual Nevada, “The most critical thing a parent of young children can do, long before their kids reach college age and parents become elderly, is to start putting away money for a child’s education.â€
In addition to investing through a 529 plan, in which all qualified education expenses remain free from federal income tax and many state taxes, Clemons recommends using permanent life insurance. Its cash value allows for greater flexibility and can be used to cover related college expenses not covered by the 529 plan, such as travel costs, says Clemons. It allows for withdrawals or loans against the policy’s cash value, which can continue to grow tax-deferred. To simply pay for a child’s college expenses in the event of a parent’s death, consider term life insurance.
In dealing with the finances of aging parents, future members of the sandwich generation can eliminate significant stress down the road by reviewing their aging parents’ finances. See if parents have either a life insurance policy that includes a long-term care benefit or a stand-alone long-term care policy that provides nursing home care, home healthcare, personal or adult daycare, and other services for people over age 65 who have a chronic or disabling condition. “A lot of people do not even know how to broach the subject with their parents, so it’s helpful to sit down with a good financial adviser,†Clemons says.
Acceleration of death benefits allows for the early withdrawal of the death benefit if the insured has a terminal illness or is placed in a nursing home. Though people are generally not aware of these riders, they are fairly standard options. Depending on the sex of the insured, these riders add 10% to 15% to the premium price. Newer benefits add chronic care riders to policies. Says Prudential’s Cooper, “The policyholder may not be terminally ill, but they may have a chronic care need such as Alzheimer’s and require nursing home or in-home care. You can start to use the funds from your life insurance policy to take care of those expenses. That’s a changing option in the industry.â€
So regardless of your age or situation, make sure that you have adequate protection. Take Dawn DeLavallade, a recently single, 40-year-old mother of one and a teleradiologist in Winter Garden, Florida. She wrote the book She Makes More—Inside The Minds of Female Breadwinners (Create Space; $18.95). She believes in making sure her family and wealth are protected and has $2 million in life insurance coverage. “My parents always taught me to hope for the best, but prepare for the worst,†she says. “Being prepared helps me rest assured that even in the face of unforeseen circumstances, I will always be protected. What I have is a result of both hard work and blessings. If I allowed an unexpected circumstance to wipe me out, where would my son be?â€
We should all share that same vantage point.