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A family dynamic has emerged for many Americans who are saving for retirement but are also taking care of aging parents as well as children. We look at the demographics of this generation, their challenges, and how they can help prioritize expenses from college to long-term care.
In 2019, millennials surpassed baby boomers as the nation’s largest living adult generation, and generation X is projected to do the same within the decade. Meanwhile, nearly half (47%) of adults in their 40s and 50s already have a parent 65 or older and are raising a child or supporting a grown child. One-in-seven of these adults provides financial support for an aging parent as well as a child. As these populations age, the demand for multi-generational planning is increasingly widespread with different generations looking for income options to ease the financial squeeze.
This situation has become so common place that in 2006 Merriam-Webster added the term “sandwich generation” to the dictionary, labeling this group of adults raising a child and caring for a parent. As the baby boomer generation ages, and the Millennial generation becomes the largest in history, more and more of these echo boomers are feeling the squeeze of being a parent and being there for their parents.
Who is the Sandwich Generation?
The sandwich generation consists of a wide age swath. The majority of the cohort, is middle aged: 71 percent of the group is 40 to 59 years old. The same study reports an additional 19 percent are younger than 40, 10 percent are 60-plus. There are no significant differences along gender lines, men and women are equally represented.
Almost half (43 percent) of those with income of $100,000 or more, have a living parent age 65 or older and a dependent child. Accordingly, married adults are more likely than unmarried adults to be sandwiched between one of the sets of parents and their child. Some 36 percent of those married are part of the sandwich generation; compared to 13 percent of their single peers.
How is the Sandwich Generation Coping?
According to the T. Rowe Price 2019 Parents, Kids & Money Survey, more than a third of parents with 8 to 14-year-old kids are caring for an aging family member. Of that group, 68 percent has an older family member living with them. Not only do many provide care and financial support for their parents and children, but nearly four-in-ten (38%) said both their grown children and parents rely on them for emotional support.
While the sandwich generation faces new dilemmas prioritizing finances and family needs, the Pew report found this group is happy with their lives: 31% said they are “very happy” and an additional 25% said they are “pretty happy.” These “very happy” and “pretty happy” figures outpace peers who are not part of the sandwich generation: 28% and 51% respectively.”
The Effects of COVID-19
However, the COVID-19 pandemic has added a new stressful factor to the sandwich generation and providing caregiving to family members. Unforeseen issues emerged in 2020 and beyond, such as social distancing, lockdown measures, vulnerability to the virus because of age and health issues and having limited access to health care.
According to a study from the journal of Gerontology and Geriatric Medicine, “During a time of economic burden and social upheaval, burden is more likely to negatively impact sandwich generation caregivers, especially if there are multiple dependent children or they provide care for both parents.”
Almost 69 percent of the 77 respondents surveyed said their parent’s problem behavior worsened since the onset of lockdown measures. In addition, 45.5 percent of respondents reported receiving less social support since COVID-19 lockdown measures began and 75.3 percent said navigating health care systems, access and appointments was more difficult.
The results from the study also suggested online social supports and telehealth delivery had not yet proven effective at helping to relieve the burden for informal caregivers.
But, there was some positive news. Informal caregivers who have siblings were reportedly less burdened than those without siblings. Siblings and other family members may help provide a relief and source of support during this unprecedented time period.
What’s Next for the Sandwich Generation?
While the pandemic has created new challenges to be aware of and work through, it’s still important for members of the sandwich generation to look toward the future and other long-term financial goals they might have. These may include prioritizing saving for kids’ college funds, helping aging parents with their financial needs, as well as trying to factor in their own retirement savings. It’s helpful to create a well-crafted financial plan and long-term strategy that can help maintain stability in uncertain times.
To help this emerging generation of future retirees, we outline four key tips to long-term stability:
1. Prioritize yourself
Sandwich generation adults are somewhat more likely than other adults to say they are often pressed for time. The Pew Research Study reported, among those with a parent age 65 or older and a dependent child, 31% said they always feel rushed even to do the things they have to do. Among other adults, the share saying they are always rushed is smaller (23%).
Finding small ways to make yourself a priority, can make a big difference. This can be as true with time as with finances. Time is valuable, and only grows more valuable as retirement nears. The measures taken today can lessen the need to play catch up.
2. Talk things through
It's a good idea to get everything out in the open, as you talk to your parents about their approach to the golden years. This way you can talk through retirement outlook, insurance and outline a general plan.
You can begin the conversation by stating how you want them to always receive the care they deserve and then find out if they have a financial representative they have been working with who would help them achieve their goals.
Questions to ask
- Do you have long-term care coverage? This type of insurance may help go toward expenses that come about because of a significant health event and aren’t typically covered by health insurance, Medicare and Medicaid.
- Do you have plans to downsize? Are you planning to move to warmer climates or to be closer to family? An Insured Retirement Institute report found “it is very likely that a higher percentage of future retirees will carry mortgage balances into retirement, and that those mortgages will be more burdensome.”
- How are your funds currently invested? What current assets do you have? What does your retirement portfolio currently look like? People nearing retirement could have funds in multiple savings accounts or investments in stocks. Keeping track of all this information could prove challenging as parents age, move or experience unforeseen events.
3. Insure your retirement
For most pre-retirees, securing lifelong income is a top priority.Protected options like fixed index annuities can offer lifetime income options that protect years of hard-earned dollars and can generate a stable source of income that cannot be outlived. Consider your overall retirement portfolio and how different retirement options address short- and long-term financial needs. A balanced portfolio can be key to planning for lifetime income as well as long-term care options.
4. Meet with a financial professional
Taking care of the day-to-day needs of both children and parents can feel like second job. Unfortunately, so can planning for retirement. Talking to a qualified financial professional can help you identify options and chart a course that encompasses funding family needs while working toward retirement goals.
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