Financial Planning Tips for the Sandwich Generation

The “Sandwich Generation” Can Focus More on Financial Planning With These Tips

Financial Planning Tips for the Sandwich GenerationHave you ever heard the term “Sandwich Generation” or its short-form “SandGen”? Here’s a hint: it has nothing to do with hoagies, submarines, or even artisanal paninis made with gluten-free tapioca bread. In a financial planning context, the sandwich generation refers to adults who are not only responsible for their own financial needs but also the financial care and support of both their elderly parents and dependent children (dependent children can mean either children under the age of 18 or grown children who rely on their parents’ financial support). Typically, adults who belong to the sandwich generation span in age from mid-30s to 60s.

There’s even a subset of sandwich generation members who belong to a special group that’s called either the “triple decker” or “club sandwich.” Members of this group are caregivers to at least three generations of their family: their parents, their kids, and either (if not both) their grandparents or their grandkids.

The most recent surveys from the Pew Research Center in Washington, DC reveal these key facts and statistics about the sandwich generation[1]:

  • Nearly half of all surveyed adults say they feel responsible to provide financial help to an aging parent in need.
  • Most members of the sandwich generation are middle-aged; 71% span in age from 40 to 59; 19% are under 40; and 10% are 60 or older.
  • Married adults are more likely than unmarried adults to be part of the sandwich generation; survey statistics reveal 38% of married adults fall into the sandwich generation whereas only 13% percent of unmarried adults fall into the sandwich generation.
  • Survey results show that 23% of adults have given financial support to at least one aging parent within the past year; 72% of survey respondents claimed this financial assistance was for ongoing expenses.
  • Hispanic adults are more likely to be in the sandwich generation (31%) than caucasians (24%) and African Americans (21%).
  • Affluent adults (annual income over $100,000) are more likely to be in the sandwich generation (43%), compared to 25% for adults who make between $30,000 and $100,000 and 17% for adults who make less than $30,000.

While being a caregiver can sometimes be a rewarding position, it is more often than not both emotionally and financially stressful and straining. If you are a member of the sandwich generation, here are some financial planning tips to help you cope with this often difficult situation:

  1. Set Your Priorities. In order to help someone else, you need to be able to help yourself first (the airplane oxygen mask analogy works well here: “put on your own mask first before helping others around you”). Money, like nothing else, can tear a family apart. So to avoid future disasters, chaos, and fighting, caregivers must have their own retirement plan in place, set priorities, and have open communication with their entire family (spouses, parents, kids, grandparents, grandkids, and etc.) to determine ways to share the financial, emotional, and time burdens of caring for multiple generations.
  1. Your Retirement Comes First. Do not sabotage your own retirement plan and retirement savings account (i.e., your 401(k)) to take care of aging parents. Dipping into your own retirement savings accounts can lead to a vicious cycle of debt or inadequate savings that may ultimately affect your kids.
  1. Consider Long-Term Care Insurance for Your Parents. You should start talking to your parents about long-term care insurance when they are in their late 50s. Don’t wait till your parents are old or sick to bring up the topic. The cost of this type of insurance only exponentially increases as your parents age and their health deteriorates. Talk with your financial planner or independent financial advisors who have experience dealing with long-term care insurance about whether this is the right move for your family.
  1. Create and/or Update Estate Planning Documents for Both You and Your Parents. Ensure that both you and your parents have named a durable power of attorney, a health care directive, and have updated living wills. Taking such actions can seem morbid, but you must keep in mind that it is a necessary and responsible financial planning action that will help mitigate conflict and legal and financial issues down the line.

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