Planning for the Sandwich Generation


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Andy Hunt

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Nearly 3 in 10 US adults currently have a child under 18 in the home, and 12% also provide unpaid care for an aging elder. Dubbed a “triple-decker sandwich,” multigenerational caregivers provide over 2.5 hours of unpaid care per day, on average. Nearly three-quarters of these caregivers fall between the ages of 40 and 59 — a time when they need to grow their personal wealth to fund retirement.


With college tuition and long-term care facilities tugging at their purse strings, it’s easy to feel stuck. Making decisions for loved ones can be emotionally taxing and result in sacrificing one’s own financial stability, which is why it’s so important to work with a trusted financial advisor who can objectively help you through the challenges that arise.


If you fall into the category of the “sandwich generation,” continue reading. I describe the struggle from a financial advisor’s perspective and break down digestible tips that can help anyone maximize their money.


What is the Sandwich Generation?

Unlike Gen Z, Millennials, and Baby Boomers, people in the “sandwich generation” weren’t born in any particular decade. It’s a point of life you reach when you have a child under 18 living in the home and an aging parent 65+ who needs some sort of support — be it financial, physical, or emotional.


Causes of the Phenomenon 

The term “sandwich generation” was coined by social workers Dorothy Miller and Elaine Brody in 1981. Back then, 47% of adults in their 40s and 50s met the classification. So, what’s changed in recent decades?

  • Family structure: In other parts of the world, the idea of grandma moving in with the eldest son or daughter is expected, so that’s part of their plan from the beginning. Americans, on the other hand, are still reckoning with this.
  • Delayed child rearing: People are marrying and having children later in life, so now you’re caring for a child, as well as a mom and dad — who aren’t in their 40s and 50s, but in their 70s and 80s.
  • Longevity: With people living longer now, healthcare costs are higher. Instead of caring for an ailing parent for two or three years, it could be 10 to 12 years.
  • Healthcare costs: Fidelity put out a study last year that talked about what healthcare costs can be in retirement. A couple hitting the age of 65 last year needed to have saved an additional $315,000 to cover healthcare costs for the rest of their life expectancy.
  • Inflation: The college inflation rate grows an average of 7% a year. It gets worse every year.
  • Job insecurity: We still have a long way to go in terms of developing flexible work policies to support multigenerational caregivers, forcing many workers to reduce their hours, pass up promotions, and even drop out of the workforce altogether to care for their loved ones.


Are You Prepared for Sandwich Generation Struggles?

What I've observed is that a situation can turn on a dime. You could have a solid financial plan, then suddenly mom or dad has a stroke, and you're in a tailspin.

I read an article on Fast Company a few days ago where a 36-year-old woman with two kids under the age of six had a mom who suffered a stroke and became incapacitated from the neck down. In this case, even if you had the space and desire to move her in, you may not be able to provide the time and specialized care she needs.

In 2021, family caregivers spent anywhere from $7,200 to $10,525 on out-of-pocket caregiving costs, but if you need to put mom in a long-term care facility, a private room in a nursing home is now over $108,000 on average. What do you do if you haven’t prepared for that?

I still see a lot of people who think Medicare covers long-term care needs… and it does not.

Every situation is unique, but here’s another example that illustrates how quickly you can move from stable to precarious when you’re in the sandwich generation:

  • I worked with a client several years ago whose father had passed, leaving behind a $2 million nest egg. Sounds like a good chunk of money, right?
  • Mom was living by herself in the same house she raised her children in.
  • The family invested the $2 million very conservatively — all cash in the bank and CDs.
  • Then mom has a stroke, ends up in a private nursing care facility.
  • Over the course of a decade, half that money was gone.

Had they invested 20% or 30% of that money in long-term market investments, they could’ve grown their wealth and overcome inflation. Inheritance is always a good time to talk with a financial advisor who can help you decide where to put your money for maximum gain.


How the Sandwich Generation Can Plan for the Future

The first order of business for anyone in the sandwich generation is to take care of yourself first. Just as if you’re on an airplane and they tell you, in case of an emergency, put your mask on before your child’s. It’s not that your child’s life is less important; it’s that you cannot help them if you have no oxygen and become incapacitated.

The same rule applies here in that, if you have no money, you cannot financially support your child or aging parent.

So, in this situation, let’s first work on your financial plan to make sure you are covered. You need savings and investment management components, including your savings for retirement and safety nets in place in case you lose your job or become disabled.

Beyond that, here are some other steps you can take:

Set priorities using the 80/20 ratio.

A good rule of thumb is to set aside 80% for yourself and put 20% away in case your parents need assistance. Take a bucketed approach, so you have some money in immediate cash reserves in an FDIC-insured savings account and some long-term investments as well.

Save for college.

Now when you’re using the 80/20 rule, your child’s college fund will also be coming out of your 80%. I had a client who was five to seven years from retirement and funding all his children on 529 plans, maxing out the contribution every year. The trouble was, if he kept funding his 529 plans that way, he had a 38% chance of success in meeting his personal retirement goals.

There are other ways to pay for college — grants, scholarships, student loans — that aren’t available for retirement.

Consider long-term care insurance early.

With long-term care insurance, ideally, you’ll consider having it for yourself and for your parents if possible. If your parents are ill and in their 80s, the chance of getting a policy may be slim to none. For you and your spouse it may still be possible. It won’t cover all the expenses, but you can pull multiple levers to make it work inside a reasonable budget.


Ways to Broach the Topic With Aging Parents

It can be a very uncomfortable and even painful conversation to have, talking about your parents' money and maybe having to support them. It can be humiliating for a parent to have a child take care of them. So, what I tell people is to start the conversation off easy enough before your parents get to the point where they’re already in a facility or failing in health.

Just say something like, “Hey, mom. How do you want to live in retirement? Where do you want to live? Do you want to live with one of us?” Just begin talking easily like that. Then you can work your way to how to pay for the desired lifestyle and handle big assets like the house.

I had one sandwich generation client with three siblings whose mom passed away. Dad’s 80 and has started spending a lot of money — very frivolously, to the point where the kids were truly concerned that he’s going to run out of money.

They said, “The problem is, none of us wants to talk to him about it. He’s very stubborn and it’s probably going to damage the relationship permanently.”

So, I said, “Okay, I’ll be the bad guy. Bring me in, we’ll walk through the estate plan, do some retirement planning for him, and if it is in fact the case that he's causing serious damage with his spending I'll have the conversation with him. That way, it's me presenting the bad news, not you."

That’s another way to start the conversation: “Hey dad, what did the financial planner say?”


Caregiving Strategies

When you have to provide long-term care for an elder, you’ll need every possible resource you can get. Here are some effective strategies:

Seek help from community resources.

The AARP website and the Department of Health and Human Services have a lot of good information on this topic on their websites, including resources for caregivers. We’re also seeing a lot of larger organizations include caregiver services in their benefits plan, so it wouldn’t hurt to talk to your HR department and see what the company offers.

Look into tax deductions.

If you’re looking to convert a house to accommodate a disability or special needs, you may be eligible for tax write-offs for those, whether it’s putting in a new tub, a ramp, rails, or lifts. Be sure to consult a tax advisor to make confirm that the deductions would apply to your situation.

Plan for the unexpected as early as possible.

Estate planning attorneys can cover more than just the will. They can put power of attorney in place to carry out your parents’ wishes if they become disabled or incapacitated. It’s always easier to put these pieces into place before something happens. For example, I had a client whose dad had Parkinson’s. He was perfectly okay, but then he was driving and totaled his car and couldn’t drive anymore.

Now the family had to figure out: who's driving dad to his doctor's appointments, or are we Uber-ing everywhere? Dad lives an hour away. That time constraint can be difficult. Are we moving closer? Do we need to move closer to a better medical facility than the one we have in town?

Lean on a financial planner to help get your plan together.

What’s good about working with a firm like EP Wealth is that we are intensely focused on financial education in all the areas I’ve talked about here.

We have expertise in college savings. Beyond a 529 plan, our experts will actually collect data on your child and research all the grant and scholarship opportunities available. We help you go online, fill out the FAFSA form, and maybe get money allocated to you that you didn’t know existed before.

We can help you work through customizable options on the Medicare Advantage plan to serve your healthcare needs. Four months before you turn 65, we can be talking about your healthcare situation and researching the best coverage for your family.

Remember, it’s never too early to start having the difficult conversations about what might happen if you end up in the sandwich generation.

Contact EP Wealth to start your financial health assessment today.



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