Financial Planning for the Sandwich Generation

The sandwich generation are adults who are caregivers to both their aging parents and their growing children. Being a part of the sandwich generation is more about a season of life than a term to describe when you were born, with most people experiencing this squeeze on their resources in their late 30s through their early 60s. This means that every sequential generation—Baby Boomers, Gen X, millennials, Gen Z, etc.—will find themselves in this position at some point (assuming they have children).

The trends of extending lifespans, having children later in life, and having adult children return home are contributing to the growth of the sandwich generation. And that name is very apt for the position: sandwiched between obligations to their aging parents, who may be ill, need help with everyday tasks, or need financial support, and their children, who need financial, physical, and emotional support across age groups. Talk about competing demands and priorities! It’s no wonder that goals like saving, especially for retirement, can fall by the wayside, with a feeling that there will always be time to focus on it “later.”

If you’re in the sandwich generation, or think you might soon be, there are steps you can take to minimize stress, anxiety, and financial strain during this season of life.

Talk to your parents about sustainable retirement income and long-term care

Money and health concerns are some of the toughest topics to discuss, even with close family members—sometimes especially with them! However, in this case, not talking about it can lead to greater head- and heartache later. Topics that you should discuss as your parents age, or when there is a need for you take over part of their support and care, include medical treatment, advanced health care directives, medical and durable powers of attorney, lifestyle wishes, estate planning, accounts they own and what they pay for (i.e. life insurance plans, any long-term care savings plans). There should also be a contingency plan in case they outlive their retirement nest egg. One of the biggest retirement mistakes people make (besides not saving for it) is spending too much too soon.

Save for your own retirement

According to The National Retirement Risk Index from the Center for Retirement Research at Boston College, more than half of working-age households are at risk of not being able to meet their future retirement income needs. If you find it uncomfortable to be a part of the sandwich generation and trying to pay for the care of your parents, there’s a good chance you’ll feel equally uncomfortable if you end up in a similar situation with your adult children!

It is critical to plan and save for your retirement. Consider at least contributing enough to get the maximum employer match. If you don’t, you’re leaving free money on the table—money that would grow over time. A basic rule of thumb is to aim to replace 70 to 90 percent of income in retirement. If you anticipate high medical costs or lots of international travel, you may need more. An Individual Retirement Account (IRA) is a good way to plan a more secure retirement by supplementing your pension plan and social security benefits. APCI FCU offers Traditional and Roth IRAs with no annual maintenance fees.

College savings for your child(ren)

Once you are on track to reach your retirement income goals, you may consider saving for your children’s college. This can mean investing in a college savings plan. Remember, there are more ways to responsibly pay for college—working part time, scholarships, grants, work-study programs, enrolling in a two-year college at first—than there are to pay for retirement if you fall short. APCI FCU partners with Sallie Mae® to offer a variety of higher education Student Loan options for undergraduate and graduate students.

For more financial-related articles, visit our Financial Resource Center.