Planning your financial life sometimes means balancing competing goals. For members of the sandwich generation, it's often a struggle to keep their own objectives in sight while juggling the financial needs of both aging parents and children.
Not surprisingly, many members of the sandwich generation (which encompasses adults in their 30s, 40s, and early 50s) are uneasy about what the future holds. In a 2017 FICO survey, only 32 percent of 38- to 52-year-olds, who are also known as Generation X, felt confident that they'd be able to achieve their long-term financial goals.
Samuella Becker, CEO and founder of New York City-based TigressPR, is experiencing firsthand the challenges of being "sandwiched." Since 2010, she's been covering the cost of assisted living for her mother, a former elementary schoolteacher who was diagnosed with dementia. "I would never in a million years have thought memory loss would be an issue in her golden years of retirement," Becker says.
Since her mother entered a senior living facility, Becker has spent over $400,000 on her mother's care while also helping her son navigate college. That, paired with some health issues that led her husband to an early retirement, has meant putting her own retirement on the back burner.
If you're concerned about your own financial outlook as part of the sandwich generation, these tips can help you better navigate the financial waters.
1. Set expectations early and communicate often.
Keeping the lines of communication open is essential if you anticipate offering financial help to aging parents. Holley G. Cary, a CERTIFIED FINANCIAL PLANNERTM professional with FTB Advisors, says the earlier those dialogues begin, the better. "With parents, you have to find out their level of engagement," Cary says. "They may have a financial planner or other professional they're working with, and some parents may be more open to sharing the details of their financial situation than others."
Becker never had any conversations with her mother about the possibility of her needing care and was completely blindsided by her mother's dementia diagnosis. That left her little time to prepare to assume financial responsibility for her mother's care needs.
In talking over expectations, it's important to be clear on what your parents expect with regard to things like where they'll live if nursing care becomes necessary and how it will be paid for. Cary says it's important to involve siblings as well, especially if parents are reluctant to talk or share specifics about their finances. With everyone involved, you can develop a plan as a group for handling the financial and non-financial aspects of parental caregiving.
An open dialogue is also important to have with your own kids when it comes to things like helping them buy a first car, pay for college, or prepare to buy a home. Cary recommends setting boundaries on how much you're willing — and can afford — to pay to avoid sacrificing your own financial goals.
2. Work to keep your emotions at bay.
Emotions can be a significant driver of financial decision-making, but that can be problematic if you're trying to help both parents and children, while still helping yourself.
Cary says a sense of obligation or guilt may lead you to make choices that aren't necessarily practical or realistic. "The worst decisions you can make from a financial perspective are emotional," Cary says. "You've got to get the emotion out of the equation and analyze the numbers."
Although you may be well intentioned, you still have to plan for the financial impact of your choices. When it was time for Becker's son to attend college, she says that "there was never a thought that my husband and I wouldn't pay for our only child's education," despite the $35,000 per academic year price tag.
She was able to save significantly on college costs because her then employer offered free tuition as part of her benefits package. That perk allowed her and her husband to save close to $200,000 on tuition expenses, as their son double majored, taking five years to graduate, including summer semesters. If you're emotionally committed to paying for college or for caregiving, you need to be sure that it's feasible first.
3. Revisit your spending plan.
A spending plan gives your money direction, so every dollar has a purpose. If you're in the sandwich generation, your spending plan may need to adjust to accommodate new costs associated with caregiving or paying for college. That could mean reducing certain expenses so you can continue to save for retirement at the same pace.
Becker says, if you're caregiving, to consider how costs can change over time.
“You may be quoted a reasonable room and board rate, but be prepared for expenses to climb if your parents require a higher level of care.”
- Samuella Becker
CEO and founder of TigressPR
She says it's also worthwhile to look into additional sources of funding, outside of your savings. Her father, who passed away four months before she was born, was a military veteran. She wasn't aware that she could apply for survivor's benefits from the Veterans Administration for her mother, who never remarried, which she estimates would have provided around $50,000 in funding to help with care costs.
4. Create financial safety nets.
Putting the right safety nets in place can ease some of the pressure of being sandwiched. If you're worried about your parents' cost of care, you may ask them to consider purchasing long-term care insurance.
Long-term care insurance can pay for nursing home care, which isn't covered by Medicare. Medicaid will cover it, but the individual may be required to spend down their assets first, and may have less control over where they end up. Long-term care insurance is something to look into sooner, rather than later, says Cary. "The younger you purchase it, the more bang for your buck, and you're ensuring your insurability because of health."
An annuity is another option for parents. Annuities can provide lifetime income (guaranteed by the insurance company), which could be used to handle long-term care costs. You could also consider purchasing an annuity for yourself to provide income in retirement if you're worried about college or caregiving expenses diminishing your nest egg.
Life insurance is something else that could be beneficial. "Some life insurance policies may have a chronic illness rider so you can accelerate the death benefit and use the money to pay for long-term care," Cary says. While you're considering your parents' life insurance coverage, take a look at your own. If something were to happen to you prematurely, a life insurance policy could assist with your child's college costs, or help provide retirement security for a surviving spouse.
5. Get it in writing — and soon.
It's also important to make sure you've covered yourself with the right documentation, especially in a situation where memory loss for a parent may be an issue. Becker says she ran into trouble when selling her mother's car because she couldn't find the title and her mother wasn't able to tell her where it was.
"Have power of attorney covering health and financial issues drawn up before memory loss sets in," Becker says, so you have a legal record of your rights and responsibilities. If you're keeping those documents in a parent's safe deposit box, make sure you're listed as co-owner so you have access to them.
Power of attorney is something to talk over in your initial discussions about caregiving, Cary says. "Sometimes parents are a little wary of relinquishing power of attorney because they don't know what they're giving up." You should figure out together what you need to have power of attorney for and when your authority takes effect.
6. Seek professional help as needed.
One of the biggest mistakes people in the sandwich generation make is not staying connected with an advisor to keep their own financial picture in view.
"They don't engage the people who could possibly give them the resources, expertise, and calculations that would help them work through these issues," Cary says. The best thing you can do if you're worried about getting squeezed is to make sure your own financial situation is solid, and that's something an advisor can help with.