There are tens of millions of them out there – members of what’s often called “the sandwich generation.” These are the people old enough to have adult kids but young enough to have living parents. Typically in their late forties to early sixties, these men and women often feel trapped in a vise-like grip of obligations: they’re desperately trying to save for their own retirement, but they also feel the need to help their aging parents who might be financially strapped, as well as their twenty-or-thirty-something kids struggling to get by in a turbulent and uncertain economy. Whose needs come first?
We know many of our AgingOptions blog readers find themselves caught in precisely that dilemma. So, with that in mind, we hope this recent article from the Kiplinger website, written by financial advisor Kara Duckworth, might provide some helpful insight. “Your parents need your help right now, and so do your adult kids,” the article begins. “But what about saving for your own retirement? If you’re stressed and stretched, it’s time to prioritize. Here’s where to start.”
Caught in the Middle and Spread Too Thin
“Squashed, spread too thin, nothing left,” is the evocative image Duckworth paints of the situation faced by the so-called sandwich generation, an age group characterized by being caught between a financial rock and the proverbial hard place.
Among other dramatic consequences, the COVID-19 pandemic has triggered a big shift in living arrangements as adult children moved home in record numbers, even while their parents still had aging loved ones to care for. The emotional, physical, and financial strain can’t be overstated, “leaving those in the middle to make difficult choices between saving for their own retirement, funding education or living expenses for children, and paying for the health care needs of aging parents,” Duckworth writes.
Family Support Puts Pressure on Personal Finances
The sandwich generation is a wider number of Americans than you might think. According to a nationwide Pew Research Study, the number of adults in their 40s and 50s that still have a parent 65 and older and are supporting a grown child 18 or older is an incredible 47 percent. This double-duty of support has an enormous reported impact on the financial health of the supportive adults who are caught in the middle.
Duckworth explains, “Among those who are providing financial support to an aging parent and supporting a child of any age, 28 percent say they live comfortably, 30 percent say they have enough to meet their basic expenses with a little left over for extras, 30 percent say they are just able to meet their basic expenses, and 11 percent say they don’t have enough to even meet their basic expenses. And if adults are not caring for their parents now, nearly 7 in 10 of the people surveyed said they expected to do so in the future.”
It Takes Planning to Avoid Becoming a Burden
If there’s a silver lining to this increasingly common situation, it’s that there are many in the sandwich generation who want to break the cycle in their own retirement years. No one plans to become a burden to their children, but as Rajiv Nagaich of AgingOptions often says, it does take planning to make sure you avoid that reality.
Those of our readers currently in the sandwich generation might be wondering how you could possibly sort out everyone’s financial needs while taking care of yourself, too. Prioritizing whose financial needs come first is always going to be difficult, but Duckworth offers helpful wisdom for planning your own future.
Priority One Should Be Your Own Retirement
“There are options for elder care and for financing educational needs for children,” Duckworth quips, “but there are not many safety nets for your own retirement.” Such thinking may seem selfish, but it truly isn’t. Priority one should always be your own immediate needs and future retirement goals. Without that stable foundation, you won’t be able to help your family members for very long anyway.
Duckworth advises consulting with a financial adviser to make a tight, workable plan so that you can meet your savings goals and milestones. This may involve forsaking a few luxuries and creature comforts in the short term, but it will pay dividends in the future. Investigate all of the benefits and investments available to you, especially if they are provided through an employer. And it’s always a good idea to ask your financial adviser about whether they think long-term care insurance is a good fit for you and your family’s needs. (Rajiv’s recommendation: make sure your adviser is qualified to prepare a financial dashboard as your number one planning tool.)
Next, Look at Ways to Assist Aging Parents
Aging parents come next in Duckworth’s hierarchy. At this point, getting all the cards on the table is the first step. Review all of your parents’ assets and look into utilizing equity on your parents’ home or a reverse mortgage to help pay for their care.
If assets just aren’t sufficient, Duckworth advises enlisting the advice of your financial adviser again to help identify and maximize any benefits that may be available (like Medicaid). And if possible, consider reaching out to other family members to help with caregiving on a flexible schedule, to spread the costs around more widely.
Helping Your Adult Kids Takes Many Forms
Lastly, your attention can turn to your kids. Planning for their needs should start relatively young – in fact, the earlier you begin, the less pressure you’ll typically face later. Duckworth writes, “If you have minor children who you want to help pay for college, consider whether a 529 savings plan is a good option. Some states provide tax advantages for saving in 529 plans, and other family members can gift funds for the benefit of your children as well.”
For adult children, the current interest rates of college loans are very low, which makes them much more accessible than they might have otherwise been. “Make sure your adult child understands their repayment responsibilities,” says Duckworth, “including the options for loan forgiveness based on occupational choices like public service.”
While the desire to have your child graduate debt-free is admirable and makes perfect sense, you have to weigh that against your retirement needs. Retirement doesn’t have a loan option, so every asset you can get for your child’s college is a win for your all-around future.
Lastly, for adult children who rent an apartment and are saving up for weddings, home purchases, and other large expenses, it’s always worth discussing having them move back home for a time to put the money they would have spent on rent into their savings instead.
“Put On Your Own Oxygen Mask First”
Duckworth concludes, “There is a reason that the safety briefing on an airplane provides instructions specifying that, in case of an emergency, you should put on your own oxygen mask first before helping others around you. For the sandwich generation, you need to evaluate your own financial needs before you can assist other family members.”
No one is asking you to be selfish or miserly with your money. Quite the contrary: an airtight retirement plan will give you the freedom to be less anxious about the support you’re giving your loved ones. Spending a bit of time on yourself and your own goals will go a long way to supporting your family well beyond the sandwich generation.
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(originally reported at www.kiplinger.com)