The Sandwich Generation

According to the Pew Research Center, 1 in 7 middle aged adults is providing financial support to both aging parents and their children. The term “Sandwich Generation” is used to describe people between their late 30’s through their early 50’s who are feeling the financial pressure of supporting their aging parents, supporting their children, and saving for their own retirement. People are living longer. Parents may not have saved enough money to fund their retirement and are now relying on their children to help. College tuition continues to increase. Young adult children are returning home to live with their parents after graduating college. Your retirement will probably be longer than you originally planned. For these reasons and more, this specific generation is feeling an extra financial burden. If you are feeling this pinch, it is important to act so you can alleviate some of the stress of this situation.

Put Your Retirement First: To the fullest extent possible, it is important that you continue to stash away money for your retirement. With the added pressure of dealing with aging parents and the possibility of your young adult children returning home, this may feel impossible, but it is paramount that you continue to do so. Try and contribute at least up to any company match at work so you’re not leaving any free money on the table. On the other end of the spectrum, it is equally as important to not tap into your retirement account, through loans or early withdrawals to support your parents or children. If you begin to dip into your retirement savings, you will put your nest egg at risk and could potentially end up dependent on your children for financial support in the future.

Prepare For College Costs And Your Young Adult Children Returning Home:College tuition continues to rise. If you have not started saving for college, you may want to consider getting started. According to the College Board, the average cost per year for a four year, in state public college, including tuition, fees, room and board is $20,770 for the 2017-2018 school year. A four year private college costs $46,950 on average per year. Many parents have cited increasing student loan debt as a major reason their children return home after graduation. By saving in a tax-advantaged account, you can help your child minimize the impact of student loans. If they graduate with less student loan debt, it may limit the amount they depend on from you.

Understand Your Parents’ Finances and Health Care: If you are going to take on the responsibility of caring for aging parents, understanding their current financial situation is vital. What are their current essential living expenses versus their discretionary expenses? Do they have steady income, and if so, from where? Do they have investment income? Looking into all of these factors will help you create a sustainable retirement plan for your parents. It will allow you to see exactly where you will need to help out and how large of a financial obligation this will be. It also makes sense to check into their health care plans. Get details on their health and long-term care insurance, as well as any other available resources. It’s important to bring up the topic to avoid the risk that they will outlive their retirement nest egg. Longevity concerns are real and there is a 45% chance that at least one member of a married couple will live into their 90’s.

As always, if you have any questions about your specific circumstance, please do not hesitate to contact us.