If you are at or approaching retirement age, today you live in a different reality than the one you were born into. When you came into this world,
there was a fear that someday you could become a burden to your own children, but it was only a remote possibility.
Life expectancy was shorter, and thus was the time adult offspring would have to devote to being eldercare givers. Also, a single income was enough to provide for a family, so one spouse – the wife, inevitably – would be in position to take on the chore. It helped that she expected this would be part of her life cycle and could rely on her daughter or daughter-in-law to care for her and her husband. Because her children came along while she was still in her 20s, they were fully grown and independent by the time caring for elderly family members became a necessity.
That whole armada has sailed. A baby born today can expect 79 trips around the sun – that’s nine more than those of us of grandma/grandpa age – and we get 10 more than our own nanas and pappies did. Today, almost 60% of married couples with children have dual incomes.
One consequence of two careers is that child rearing is delayed, often by about a decade. Lastly – and the COVID-19 pandemic gets some but by no means all of the blame for this – a majority of young adult Americans live with their parents. This last phenomenon has not occurred since the Great Depression of the 1930s. As the population ages and young adults struggle more than ever to achieve financial responsibility, it is middle-aged Americans who find themselves taking on multi-generational burdens.
Welcome to the Sandwich Generation
The Sandwich Generation’s financial burdens affect those in middle age who are caring for not only their aging parents but also their grown children. The term, though, is a little dated. Social workers first observed the Sandwich Generation 40 years ago. The people they were describing – women in their 30s and 40s – are themselves the elders now. And the adult offspring who care for them have their own children at home.
So, the sandwich has gotten bigger. It’s not just people in their 30s and 40s caring for parents and young children. Now there are many in their 50s and 60s caring for parents, children and even grandchildren. Gerontologists call this a “club sandwich”.
So, the challenge becomes: How does a late middle-aged couple provide for themselves and three other generations? Based on our research, these are the five best practices for the Sandwich Generation’s financial planning in supporting a multi-generational household:
- Communicate: Be sure to speak to your parents and children about your expectations and goals. It is easy to feel isolated when having to care for others, but keep in mind your family’s strengths and how they can help.
- Set realistic goals: Be specific about the amount of income you would need to have a “comfortable” retirement or have your kids attend a “good” school.
- Be flexible with your financial goals: Periodically check in with your advisor and make changes when needed. Your goals may change with time, it is okay to amend your plan to better fit your goals.
- Budget for childcare: Daycare is expensive for children or the elderly. Discuss with your family members how to budget for the Sandwich Generation: who can help with caring for younger children and can older children can help with your parents?
- Plan for emergencies: Expect the best, plan for the worst. The best way to protect your finances from life’s unexpected twists and turns, build an emergency fund.
Sandwich Generation financial burdens involve bringing home the bacon. And the cheese. And the tuna, lettuce, tomatoes and coleslaw.
But you don’t necessarily have to provide all the bread. Your parents very likely have some passive income and some assets they can sell if need be. If your kids are still at home, that suggests that perhaps they’re not making all they expected to, but they’re still making something and it need not all be spending money.
Your financial advisor can help you ensure that your parents live comfortably, you reach your own financial goals, and your accumulated wealth finds its way to the next generation. But taking those first steps toward providing for your multigenerational family is on you. As long as you can, build your sandwich on a foundation of artisanal seven-grain brioche.
Otherwise, you might be toast.
How Can We Help with Financial Planning for the Sandwich Generation?
Our wealth advisors at Smith Anglin can help you every step of the way, from developing your goals to establishing that very important emergency fund. Click on any of the links to listen to our advisors address some of the most challenging aspects of caring for your children and parents.
Hear Dan Drummond discuss planning and paying for long-term care.
Erick Dahl discusses strategies for funding your children’s college needs.
Creating a financial plan can be stressful, listen to Jared Ford discuss the ways Smith Anglin can help you establish and reach your financial goals.