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Family Finances

Generation S, for Sandwich

If you're squeezed between paying for your children's college, helping your parents or saving for your retirement, make your first priority you.

Editor's note: This article appears in Kiplinger's special issue Success With Your Money.

Midlife is a time when many of us are squeezed between kids, parents and saving for our own retirement. If you're in that situation, your number-one priority is ... you. Don't even think about funding college for your kids at the expense of your retirement. An analysis by T. Rowe Price shows that diverting half of your potential retirement savings to college savings for 18 years could reduce your retirement kitty by 35%.

In a pinch, you can tap your retirement funds to help with college by borrowing against your 401(k) or withdrawing your contributions to your Roth IRA. You can even get penalty-free access to the earnings on your Roth if you use the money for college expenses (you'll still owe taxes).

But before you dip into your retirement funds, investigate scholarship and other financial opportunities at www.collegeboard.com or www.fastweb.com. Remember that 60% of college students pay less than $6,000 per year for tuition and fees. Your kids will have a lifetime to repay their student loans, and working, at least a little, never killed anyone.

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Make sure your parents' paperwork is up-to-date. They should have a living will that makes clear their wishes regarding medical treatment, plus a directive that lets you make medical decisions on their behalf and a durable power of attorney that lets you make legal and financial decisions. Sacrificing a career -- especially during your peak earning years -- can be disastrous to your own financial security. When Mom or Dad requires more care, explore elder-care assistance offered through your employer, or get information on support services at www.eldercare.gov. The Family and Medical Leave Act allows you to take 12 weeks off (unpaid) every year to care for a family member. See How to Discuss Money With Your Parents for tips on starting a conversation about your parents' finances.

Long-term-care insurance can pay for assistance in or out of the home; if your parents can't afford it, consider buying it for them before they are too old or too sick. Average annual premiums (including inflation protection) for a 79-year-old run nearly $7,600 a year. That sounds like a lot until you consider the alternative: quitting your job. If you have siblings who can split the tab with you, that $7,600 premium might start to look like a bargain.