Defining the Sandwich Generation
No, I’m not talking about the 18th century invention of the sandwich by John Montagu, the 4th Earl of Sandwich. I’m referring to those at a point in life where they are caring for both their children and their parents simultaneously. The Sandwich Generation isn’t defined by the year you were born like Generation X/Y, Millennials, or Baby Boomers. It’s more of a phase of life that many of us will go through at some time. In fact, many of the Sandwich Generation’s parents are Baby Boomers and many of their children are Millennials.
While there aren’t many ways to avoid being sandwiched between dependent children and parents, there are ways we can plan for it.
STRATEGIES FOR THE SANDWICH GENERATION
A growing number of individuals and couples are entering the ranks of the Sandwich Generation. What they have in common is that they are “caught in the middle” between the competing needs and wants of their dependent children and aging parents. In addition, they also need to prepare for their own retirement years and potential long-term care needs.
For example, most members of the Sandwich Generation value higher education and feel compelled to provide that opportunity for their children. Other “sandwichers” are pressed into service by providing financial resources to a divorcing adult child or helping to raise a grandchild. In addition, as life expectancy increases, parents are likely to survive well into their 90’s and require increasing assistance.
As a result, it is the middle generation that bears most of the responsibility for addressing the financial needs of both the younger and older generations. Unfortunately, the unintended result is that their own financial needs and wants are squished, squelched, and squeezed out.
As an alternative, think of ways to balance financial responsibilities across generations. Are their ways we can help our children and our parents without sabotaging our own long-term financial security and quality of life? There is no magic formula, but a proactive approach can improve communication, build financial resiliency, and nurture resourcefulness in all family members. Here are a few suggestions:
Start Early— The negative impact of major life transitions can be mitigated by planning ahead. Expenses like college tuition for kids and long-term care for mom and dad can be huge. Therefore, with the help of a trusted financial advisor, it is essential to research options and make preparations well in advance of important life events.
Expect Contribution & Cooperation— Involve both offspring and parents in planning and preparation for their future needs and wants. Ask and expect them to contribute what they can. For example, children can assume responsibility for a portion of their higher education expenses. In addition, encourage the older generation to think about their eventual needs and to plan ahead both financially and emotionally for their later years.
Encourage & Reward Resourcefulness— In an effort to demonstrate our love, we often do too much for our children and parents. The more we do for others that they can do for themselves, the more we undermine their autonomy. Instead, it is important to nurture a sense of self-confidence in those we love, for that is the very best gift in life that we can give.
Reprinted by permission of Money Quotient, NP
Communication is Key
Having open lines of communication with aging parents is very important when discussing their future plans. Money talk can often be difficult, especially with those we love the most. However, having open discussions with parents as they near or enter retirement can help prevent overwhelming burdens on those in the sandwich generation. The earlier these discussions are held, the better.
Costs for long-term care insurance increases as time goes on and the cost of care itself is increasing dramatically because of the shortage of facilities and skilled workers coupled with an aging population. The ability to save enough for retirement also diminishes as we age. When you talk to your parents about these things it shows that you care deeply and helps ensure their legacy is not one that cripples the next generation.
Communication with children is just as important and can start from a very young age. By teaching children the value of working hard for what they want, they will have a greater sense of accomplishment when they do achieve something great. I know this isn’t easy. It is a daily struggle to not give into the “wants” of my children. I teach them about working for their money and the value of saving some of what they earn. As they age, they will learn more about choosing a career that will be emotionally and financially fulfilling (with an emphasis on the former). From that career they will need to live a lifestyle that fits within their means… and so on.
Hopefully our children will learn from our talks and as we become aging parents they will learn to have these same discussions with their children.
The Impending Sandwich Press
Many that are being “sandwiched” are in their late 40’s or 50’s. They have children that are finishing up high school and are ready to enter college. They have parents who’s golden years of retirement are coming to an end and may need assistance in their daily lives. Those in their 30’s or early 40’s may not be feeling the sandwich press yet. This provides the ability to look ahead and analyze if they are prepared and ready to pay for college and provide for their parents.
Some potential solutions that can be achieved by addressing the needs early:
Develop a plan for your children to go to college. I typically recommend a blend of using 529 plans along with a brokerage account to save for college. When you earmark 50% of your estimated need in each of these two vehicles you will recognize tax savings when the money is used from the 529 plan and flexibility from the brokerage account if your child obtains grants or scholarships. Student Loans can also be considered to take the burden off of parents. Once the child has completed their higher education the parents can help pay down the loans if they are financially able. Remember, there are many ways to pay for college, but nobody is going to offer you financing for your retirement!
Helping with Long-Term Care Funding
An option for aging parents that may not have the means to fund the need for long-term care is to help them pay for insurance. Discuss pooling funds with siblings or others that have an interest in reducing the burden of caring for aging parents. One type of insurance is a life insurance policy with a long-term care rider attached to it. Helping with premiums for a policy like this will help cover the costs of a long-term care event and also provide a death benefit to those paying for it should the parent not need any long-term care coverage. Again, early planning is key as premiums become more costly as the insured ages.
The Sandwich Generation Cycle
I encourage you to open up dialogue with your parents and children to discuss these issues. If you’re entering retirement, approach your adult children because I promise you they are having discussions with their spouses and siblings about these topics.
Keep these discussions ongoing and don’t forget to pass them down to the next generation. Trying to eliminate the sandwich press is a goal that we should all have and spreading the knowledge of its existence can only help.
If you would like help facilitating a conversation with your children or adult parents and planning for the above situations, I’m here to help.