As the oldest members of Generation X now begin to turn age 50, they will slowly replace Baby Boomers as the face of what’s known as the “sandwich” generation. The phrase describes those who are caring for kids (and sometimes grandkids), their spouse and their aging parents—all at the same time. AARP estimates there are 66 million Americans who fall into this category of “sandwichers,” and those who do often end up delaying their own retirement—or raiding their 401(k)s to pay for other things like a child’s college education—as they try to juggle financial priorities.
Despite the financial pressures, many find the rewards outweigh the downside. Unsurprisingly, love and familial ties motivate members of the sandwich generation to provide financial support to their parents and children. According to the Pew Research Center, sandwichers are just as happy as those who are not in their predicament, with 31 percent saying they are very happy with their lives and more than half saying they are pretty happy.
For those who sacrifice some of their retirement funds, happiness and a healthy financial future are well within the realm of possibility. The key? Careful strategic planning.
- Save your pennies. Remember that retirement is an inevitable priority, and when the time comes, loans won’t be a possible option. The obvious tactic is to save as much as possible, pay off debts aggressively and budget within reason. It’s often unrealistic to expect to work beyond retirement age.
- Work with an expert. For parents who have no other choice but to pay for their children’s college educations with retirement dollars, a clear-cut action plan is a definite must. A financial advisor can help with realistic goal setting, continuous savings adjustments and account rebalancing. Don’t feel like you’re trapped and alone—experts can provide an objective eye, anchor people to their goals and steer savings and investment plans in a healthy direction. Evaluate and re-evaluate plans based on realities, not dreams.
- Empower the next generation. Sandwichers should also empower their children to make intelligent educational choices. Students can hold part-time jobs, work as teaching assistants, take their own educational loans and focus on building skills that are aligned with careers in high-growth industries like technology, health care, sales and accounting.
- Give the gift of financial security. If you can afford it, consider making a one-time gift to set your children on the path to financial independence. Give them a lump sum to budget rather than trying to pay off all their debt. This will empower them to cut nonessential expenses and the flexibility to stop living paycheck to paycheck. You can give up to $14,000 per person, or you and your spouse can jointly give up to $28,000 without having to pay taxes on the gift.
- Look for tax breaks on eldercare. When it comes to middle-aged adults who are helping to support their parents, consult with a tax professional to see if caregiver expenses for elderly parents in nursing homes are tax deductible. Adult day care is another more affordable option—some cost as little as $25 a day. Sandwichers should also plan to invest in long-term care funding options for both themselves and their parents.
Steady Planning for the Unknown
In an economy in which financial independence is difficult for all age groups, families are leaning on each other more than ever for support. Often it is those who are middle-aged who feel the most pressure to save everyone from ruin. What’s key is open communication and a level-headed approach to saving and investing. Rely on trusted advisors, and be as objective as possible because setting aside emotions to achieve financial stability benefits everyone in your family.
With communication and some strategic planning, you can find a comfortable balance, and find ways to support your family without jeopardizing anyone’s financial security.