Sandwiched In: What to Do When Everyone Depends on You
July 23, 2015 | Home and Family
This year, Millennials are expected to surpass Baby Boomers as the largest living generation of Americans, according to a recent Pew Research report. But there’s another group that is growing even faster—and that’s the so-called sandwich generation.
Social worker Dorothy Miller is widely credited with coining the phrase “sandwich generation” back in 1981 to describe middle-aged Americans who were being squeezed between the simultaneous demands of caring for their aging parents and supporting their dependent children. Since then, the ranks of those in the sandwich generation have been steadily growing as a result of shifting demographic and economic trends.
Longer life expectancy is increasing the number of Americans who have elderly parents, many of whom require costly nursing or in-home care. At the same time, many Americans who delayed having children until they were older now have kids who are either still at home or in college. Add to this the lingering impact of the recent recession: The unemployment rate for today’s young adults is nearly double the national rate, which means many Millennials are struggling to gain financial independence. It also means that some members of the sandwich generation also are providing financial support to grown children.
In fact, the Pew Research Center found that nearly half (47 percent) of Americans aged 40 to 60 have a parent over 65 and are also raising a dependent child or financially supporting an adult child. About one in seven (15 percent) of them are providing financial support to both. That support may have long-term implications, especially if helping others financially means you’re sidelining your retirement planning and saving.
To help ensure you don’t lose sight of your own financial goals even as you support your family, consider these five tips:
1. Plan ahead. The U.S. Census Bureau estimates that the number of Americans over the age of 65 will double by the year 2050, to more than 83.7 million. Be sure to consider the possibility that you’ll end up in the sandwich generation as your parents age and require help. Don’t rule out the possibility that one or more of your children also may need to move back home at some point. Even if you don’t provide financial assistance directly, having your parents and/or adult children living with you will increase your monthly costs and maybe even delay any plans you may have to downsize.
2. Have “the talk." When it comes to juggling multiple demands on your time and resources, it pays to be proactive and plan ahead. Talking to your parents about their financial status, long-term care preferences and funding arrangements, end-of-life directives and other important documents, such as their wills and health care and financial powers of attorney, may be difficult. However, these topics are best approached now while your parents are still in relatively good health and can make decisions on their own behalf.
3. Set boundaries. If you have adult children returning home, make sure you discuss your expectations and set clear boundaries around what you’re willing to do to help and what you expect your child to help with in return. If a loan is involved, consider charging a small interest rate—and be sure to put any repayment terms in writing. The more seriously you take the situation, the more likely your child will too.
4. Preserve your assets. Avoid dipping into your own retirement savings to help pay the costs of your children’s college or graduate school or your parents’ long-term care. Instead, help your children secure a loan for higher education; they can pay back that money with their future salaries. In the case of your parents, use their assets to finance their care for as long as possible.
5. Put yourself first. As the airline announcement says, “Put on your own oxygen mask first before you help others with theirs.” Although you may feel financially squeezed between helping your parents and/or children and meeting your everyday expenses, don’t compromise when it comes to your financial future. Remember, the only person who can save for your retirement is you.
It’s hard enough to pay your bills and save for retirement, but it’s even tougher when you’re being pulled in many directions financially. This is where a financial professional can make a difference. A financial professional can help you quantify the potential medical and long-term care costs your parents may face in the years ahead and create a plan for meeting them. He or she can also help you create a sound financial strategy that enables you to meet multiple personal financial planning goals, including retirement income needs. In short, he or she can help you prepare for whatever responsibilities you may face in the years ahead without sacrificing your own financial security in the process.