Although multi-generational living had fallen out of fashion in the decades prior to this, there are a number of reasons why inviting elderly parents to live with you can benefit the entire family. “By living together, families say they are better able to meet one another’s needs for child and elder care. Moreover, money saved on rent can help finance a graduate degree, a job search or a down payment on a house, or offset the costs of long-term care.”

But setting up housekeeping with your parents (or your kids) isn’t as simple as merely moving furniture, often there are financial—or even legal—details to be worked out.  Here are some of the things you should discuss before you build the “in-law extension” in your home:

Will the situation be permanent or temporary? Whether your kids are moving back in until they find that dream job, or your parents are coming to live with you until they find the right retirement community, it’s important to discuss these goals and practical steps that will be taken to reach them. “Those who prefer a temporary arrangement should work out an exit strategy—for example, by estimating how long it will take a person experiencing financial problems to regain his or her footing.”

Will the “new tenants” pay rent, or make any other contribution to household expenses? If so, it is absolutely imperative to work out a rental agreement before hand.  Also, the “landlord” will need to ascertain whether the rent they collect should be reported to the IRS as income. “Some landlords simply aim to cover the extra expenses they incur. In that case, they owe no taxes on the payments they receive, ” according to the source quoted in the article.

If two generations are looking to purchase a new property together, there are completely different details to be considered. “When generations join forces to purchase or modify a property, each should retain an advisor to review the tax and estate-planning consequences and protect their investment in the event the union dissolves.” Additionally, “joint ownership can pose problems for those who may need to rely on Medicaid to cover future nursing-home costs.” It is a good idea to consult with an elder law attorney before signing any contracts.

There are many benefits to living in a multi-generational household, but even with all these benefits it is hardly an agreement to be entered into lightly.  Families considering taking this step should discuss it not only with the entire family, but with their financial and legal advisors.

The answer to that question will be different for everybody, because the amount that will be taxed upon conversion depends entirely on the kind of contributions you have made to your traditional IRA in the past. If you have made more non-deductible contributions than tax-deductible contributions to your traditional IRA you will almost definitely want to take advantage of the conversion opportunity. If you have made fewer non-deductible contributions you may be looking at a higher tax bill. However, the fact that the tax bill can be spread out over two years (but only if the conversion is made this year) should give even those who have made mainly tax-deductible contributions reason to consider the switch.

If you think you may want to make the switch, talk to your advisor. Your financial specialist can tell you the pros and cons of switching based on your personal IRA history. The nice part is that if you do decide to take advantage of the new rules, the decision doesn’t have to be permanent. Those who convert their traditional IRA to a Roth IRA in 2010 will have until October 15, 2011 to change their minds and switch the account back to a traditional IRA.

It may seem like a small change, but the article reminds us that when planning for retirement “it’s also important to note that many people live far longer than average and life expectancy increases every year.” And time is the great equalizer, it seems. The expectancy gap between the lifespan of men and women is closing, as is the gap between Caucasians and African Americans.

What this means is that if you planned for your retirement based on an equation from 10 years ago, you may need to revisit your plan with your financial advisor. “Most financial advisers recommend budgeting for at least 20 years of retirement and preferably 30 years in case you do live into your 90s.” Planning this way means you may end up with a surplus, but “it’s better to leave something behind for your children than to use up your entire savings and have no income outside of Social Security.”

And if you do think you may have a surplus to pass on to your children and grandchildren, our firm can help you protect your retirement nest-egg right now, AND for future generations.

Of course every parent wants to do what’s best for their child, but Ruth Mantell of the Wall Street Journal writes in her article that in this case, being tough may be what’s best. This isn’t to say that you should refuse if your out-of-work child comes to your door asking for help, but that parents or grandparents need to do what’s necessary to protect themselves before they welcome their adult children back home. “With job losses continuing to mount, older Americans’ wallets are being stretched by their own children,” Mantell writes, but having your adult children back in your home can actually be a good experience for all—if you know what to expect and take the right steps first.

In her article Mantell offers five useful tips to help keep the peace and keep your finances secure, including suggestions such as making sure everyone knows who is boss (you as the homeowner), asking for household contributions (even if all your children can afford is a token financial contribution or a contribution of manual labor), and especially preserving your retirement plans at all costs.

Although the practice has fallen out of style, multi-generational households used to be the norm. It may not be the ideal situation today, but with the right communication, and with everybody on the same page, temporarily sharing the house with your adult children can be an acceptable—and maybe even rewarding—experience.

It seems unlikely that this was ever an accurate portrayal of any phase of human existence, including retirement, but people seemed satisfied to believe it at the time.  Recent events, however, have put retirement under some serious scrutiny, and what has been found is that (especially lately) retirement is just as fraught with losses, gains, and unexpected changes as any other time of life—perhaps more!

In retirement, as with anything else, foreknowledge and preparation can make all the difference.  This recent article in U.S. News and World Report entitled 5 Big Financial Changes for Retirees in 2010 can help prepare retirees for what’s ahead.  And in spite of what general opinion would have you think, the news isn’t all bad!  New Roth IRA rules and a suspension of mandatory retirement plan withdrawals are two changes that will work in retirees’ favor.  But taking advantage of these changes could have a negative effect on your 2009 tax return if you don’t take precautions.

Contact your financial advisor or estate planning attorney for the low-down on how to best use, protect and preserve your retirement income.  With the right preparation, you just may be able to have that relaxing (if not completely care-free) retirement after all.

The tagline of Jaffe’s article is “Raise Retirement Satisfaction By Lowering Your Standards”, but what Jaffe really seems to be saying is not so much to “lower your standards” , but rather to be educated about the market and be realistic about your standards. “Getting a better handle on your future — so that you can either say today you’ll be able to live comfortably in retirement or make plans that raise your comfort level in time — requires sound knowledge of where you actually stand today. That requires taking inventory of your assets, expenses and plans.”  Regretfully,  planning for the cost of Long Term Care is often given little consideration when couple’s plan their future.  The good news, however, is that there are options, but many clients may be unaware of them. See our articles, The “Spousal Protection Plan“,  and “Developing A Long Term Care Plan For An Incapacitated Spouse”.

This is sound advice not just in retirement planning, but in any kind of planning—including estate planning and long term care planning.  There is a lot of conflicting information out there, and a lot of assumptions; our firm can help you navigate the terrain and make an informed choice about your future. More importantly, we can help you create a Long Term Care Plan to coordinate with your estate plan,  in order to help you conserve the value of your estate for your spouse or children.