For millions of Americans with young-adult children and aging parents, two unrelated trends are having a profound impact. First of all, a higher than normal unemployment rate for the young-adults combined with increased student debt and graduates working at entry level jobs has many young-adults moving back home and remaining financially dependent well into their twenties or thirties. Secondly, people are living longer and requiring more care than their retirement savings will allow. The generation in the middle has been deemed “the sandwich generation” as they are financially and emotionally supporting their children and parents – essentially being “sandwiched” between the two.
This group is not the minority. As stated in a Forbes article, “Have Kids and Aging Parents? How to Keep on Track for Your Retirement” almost half of all Americans in their 40s and 50s fall in this category. Even more shocking, some of the sandwiched generation are approaching retirement age themselves.
One of the greatest risks for the sandwich generation is to their retirement account. In order to pay for a child’s education parents may use their retirement savings. Similarly, they may take off work to provide care for a parent – hurting the flow of income into their retirement accounts. Despite these obstacles, there are ways for the sandwich generation to maintain their retirement savings and retire on time.
First, it is important to make planning for retirement a priority. This means saving when you can and being sure to pay off all debts. As the Forbes article reminds us, you cannot take out a loan to retire. Saving when in the work force will hopefully allow you to retire sooner. Also, do not be afraid to seek expert assistance. Supporting two generations at once is no easy task and therefore do not be afraid to seek help. A financial advisor is a good start and an elder law attorney can provide more guidance if parents begin to need more specialized (and expensive) care.
Another way to alleviate the financial burden is to push children out of the house. While the current job situation for young-adults may look bleak, there are many fields and industries that are growing. Push your children to pursue careers where there is opportunity for growth and where companies are hiring. Also, children may need to have more than one job (remember those days?) to be able to support themselves. Another option for parents is to simply give a one-time gift to children. Each year you can give up to $14,000 per person without having to pay any taxes. While this gift may seem like a burden initially, it could possibly be enough to get children on their feet and end part of the sandwich burden at once.
Finally, prepare for the long haul with aging parents. While there is hope that children will eventually leave the house and no longer require financial assistance, elderly parents will most likely require more assistance over time. You can plan for parents needing more advanced care down the road by investing in long term care insurance if they are relatively healthy and can still qualify. If you want to become the primary caregiver for your parents consider setting up a caregiver contract. This contract will allow you to receive financial compensation for care and may allow your parents to qualify for some government benefits.
None of these recommendations are permanent fixes to an overwhelming problem. However with careful planning and the right expert assistance, you can manage this difficult situation and maybe even enjoy the added closeness with your family.