Feeling the ‘sandwich generation’ squeeze? Here’s help.
Tips and strategies for dealing with the financial and emotional stress of caring for aging parents while also raising a family of your own
HEADS UP, GEN X, Y AND Z: Someday you’ll likely be part of another generational cohort, the sandwich generation, if you’re not already feeling the squeeze. Nearly a quarter of U.S. adults — and 54% of those in their 40s — find themselves caring for aging parents while raising or supporting their own children, according to Pew Research Center.1 And with longevity increasing on average2 and people delaying having children,3 it’s very likely those numbers will grow.
People in this situation can feel incredible financial stress, says Aubrey Lee, a Merrill financial advisor based in Farmington Hills, Michigan. “You’ve built a nest egg, but then Mom or Dad becomes ill, and you also have a son or daughter trying to get on their feet.” While the desire to help comes from the best of places, it’s easy to underestimate the potential cost to your own future.
To manage the competing demands, Lee suggests, try separating everyone’s needs into three buckets — yours, your parents’ and your kids’. That way you can better understand what you can (and can’t) do based on the resources you have. Then talk with your advisor about ways you can structure your help.
Prioritize your future first
“You’re not doing family members any favors if you ignore your own financial well-being in order to help them.”
“You’re not doing family members any favors if you ignore your own financial well-being in order to help them,” says Cynthia Hutchins, director of Financial Gerontology for Bank of America. “We encourage people not to stop contributing to their 401(k) plans,” adds Mary Mullin, a Merrill financial advisor in Boston. Try to contribute at least enough to earn any matching contributions from your employer and ramp your contributions back up as soon as you’re able, including taking advantage of the catch-up provisions for people 50 or older.
Though your parents’ health may be top-of-mind, don’t forget yours. Contributing to a health savings account (HSA) now could help you weather your own healthcare expenses later on. And consider long-term care insurance, Hutchins advises. “People greatly underestimate their chances of needing such care at some point in their lives.” Planning ahead can help you manage the costs later on.
Women who leave the workforce to take on caregiving responsibilities give up an average of $324,000 in salary and benefits,4 notes Nevenka Vrdoljak, managing director, retirement strategies, in the Chief Investment Office for Merrill and Bank of America Private Bank. If your spouse is working, ask them to create a spousal IRA, building tax-advantaged savings on your behalf.
Next, focus on your parents’ needs
“Get siblings involved in sharing costs and responsibilities of caring for your parents.”
Become familiar with your aging parents’ financial situation and discuss ways they might bolster it before the need becomes critical, suggests Lee. He recalls a Michigan couple who worried that the husband’s mother, who was also a client and in her 80s and experiencing cognitive decline, would run out of money to cover her care. Lee suggested ways to adjust her portfolio to a higher percentage of bonds, which could potentially provide income for the remainder of her life. “They were wise to be proactive,” Lee says.
Explore local resources to help ease the strain of running errands, suggests Hutchins. Helping parents use a ride-sharing app or public transportation could save you time and allow them to maintain their independence. Grocery and meal delivery apps and medication management services are also useful time-savers for caregivers. Check your local agency on aging for more tips and useful resources.
Also, “get siblings involved in sharing the costs and responsibilities,” says Hutchins. To help fill any gaps, the family could bring in a geriatric care manager — a professional who can help with in-home needs, coordinate medical services and even recommend assisted living or continuing care communities, if that becomes necessary.
Teach your kids financial independence
“Be open with your kids about what you can and can’t afford. Then loop them into a ‘family budget’ — a plan that everybody agrees on and is comfortable with.”
Just as with your parents, you want to help your kids without jeopardizing your future — remember, they have time on their side. “Teach your children the basics of budgeting, saving and investing — especially the power of compounding — early on,” suggests Vrdoljak.
Having a clear strategy for your own finances can help you set boundaries, Mullin adds. Mullin worked with a single mother who for years contributed just enough to a 529 education savings plan to pay for about half of her daughter’s education, with the understanding that the daughter would take out student loans for the rest. “It worked well because the arrangement wasn’t sprung on the child,” Mullin says. “That was the expectation all along.”
If you’re helping grown children with expenses — maybe they’ve asked you to contribute to a mortgage down payment or bills coming due — be sure those conversations include their own spending habits, Vrdoljak suggests. And use those discussions to encourage your children to build up an emergency fund and start saving for retirement. If you’re pitching in with ongoing expenses, come up with a timetable for how long you’ll help.
Love doesn’t mean an endlessly open pocketbook. “Be open with your kids about what you can and can’t afford,” she suggests. “Then loop them into a ‘family budget’ — a plan that everybody agrees on and is comfortable with.”
A private wealth advisor can help you get started.
1Pew Research Center, “More than half of Americans in their 40s are ‘sandwiched’ between an aging parent and their own children,” April 8, 2022.
2National Center for Health Statistics, “Provisional Life Expectancy Estimates for 2022,” November 2023.
3National Center for Health Statistics, “Births in the United States, 2022,” August 2023.
4Chief Investment Office, Bank of America, “Financial Security for the Caregiver,” Winter 2023.
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