How the Sandwich Generation Can Ease the Money Squeeze
by Robert Powell
I spend my nights worrying about my nearly 80-year-old father and stepmother. My wife and I spend our days worrying about funding college bills for four children (expected cost $1 million at Harvard with no scholarships, loans, grants and the like). And in between those worries, I think about saving $3 million (give or take a million) for retirement.
Yes, I am member of the sandwich generation. The good news is that I am not alone. There are millions upon millions of us caught in the middle. And the even better news is that there seem to be experts aplenty ruminating on solutions for this generation.
Consider: In recent weeks and months, AARP, MetLife, Merrill Lynch, Charles Schwab & Co. and likely many others have all released something having to do with the sandwich generation. The surveys don't necessarily reach the same conclusions. But there are nuggets and tips worth sharing.
The Findings
If you're in the sandwich generation, and especially if you're a woman, and your household has $250,000 or more in investable assets, perhaps you can relate to these findings from the recently released Merrill Lynch Affluent Insights Quarterly. You're probably making some lifestyle sacrifices to support your family, cutting back not just on personal luxuries but also saving less for retirement or delaying retirement or both. What's more, you may have invited your adult children or your parents to move in with you to cut down on expenses.
Meanwhile, many Hispanic boomers who are members of the sandwich generation find themselves stretched pretty thin as well, struggling just like affluent Americans to maintain their own finances and prepare for retirement, AARP recently reported.
And MetLife's Mature Market Institute found in a recent survey that "middle boomers" (the 28 million Americans who are ages 52 to 58) have at least one parent still living and half still have children living at home. Nearly three in four of the middle boomers have been providing financial assistance and support to their children and grandchildren and that's averaged about $38,000 over the past five years. Some 14% are providing care to older parents.
Another survey found that boomer parents aren't spending as much on their adult children, but that it's still significant. Four in 10 sandwich generation parents continue to provide at least some financial support to their young adult children, according to the 2010 Families & Money Survey recently released by Charles Schwab & Co.
Caring for Elder Parents
So what to make of those findings? What's in the tea leaves?
If you're a certified, genuine member of the sandwich generation and you're caring for elder parents, soul-searching is the first order of business, according to Andy Sieg, head of Bank of America Merrill Lynch Retirement & Philanthropic Services. "You have to do as much soul-searching as you do portfolio planning," Sieg said. "You have to identify your core values and priorities."
In some cases, you might be able to do that on your own. In other cases, you might need a shaman or an adviser who has a good deal of experience dealing with the trials and tribulations of those in the sandwich generation. No matter whether you go it alone or not, you'll need to address the potential issues and trade-offs in as forward-looking and proactive a manner as possible.
In a zero-sum world, fulfilling a responsibility to a parent -- paying for a geriatric-care manager for instance -- means cutting back on your lifestyle or saving less for retirement or for college. "It's no fun talking about trade-offs," said Sieg. So, it helps to talk about the financial realities and priorities in a rational and calm conversation, long before there's a crisis.
Make no mistake about it: You don't want to talk about such things in an emotion-filled moment; It will bring out the worst of your family history and sibling rivalries.
By the way, a good book that could help you get a sense of your values and priorities is "Family: The Compact Among Generations," by James E. Hughes Jr. Hughes is a legend in helping mostly wealthy families get a handle on what's important to them, but even average Americans can benefit from his wisdom.
Another issue that those caring for elderly parents should address, according to Sieg, is this: As your parents age, it's quite possible that their mental faculties might diminish. And as that happens, you'll find yourself increasingly involved in decisions about their medical care and finances.
Indeed, even though you're not even close to being eligible for Medicare, you'll likely need to become expert in Medicare and all its parts. What's more, you'll need to determine who your parents' doctors, financial advisers and lawyers are and get a sense of the care and advice they are getting. You might find that some professionals don't have as good a handle on your parents' affairs as you might want and have to take matters into your own hands. In some cases, you might need to get a power of attorney and in some cases become your parents' guardian.
Raising Children, Adult and Otherwise
The other side of the coin for those in the sandwich generation is raising children and, in some cases, supporting adult children, even up to age 30.
There are reasons why some sandwich-generation parents are helping their adult children. According to Carrie Schwab-Pomerantz, president of Charles Schwab Foundation, some adult children have an overwhelming amount of college debt and are unemployed. But the adult children of sandwich-generation parents are dependent for other reasons as well: Some have overspent and have a tremendous amount of consumer debt.
According to Schwab-Pomerantz, sandwich-generation parents who are supporting adult children need to help their children acquire the money skills necessary for financial independence and they need to create a timeline for their children to achieve that independence. "Parents have to teach their children how to budget and save and live within their means," she said.
For instance, she said parents need to teach their children to save more and reduce their expenses. "They have to find creative ways to make it part of their everyday life, just like brushing their teeth," she said.
In addition, she suggested that parents help their children create résumés and search for a job, even if it's an entry-level job or temp work. "It might not be the ultimate job, but at least it puts food on the table," she said.
Parents have to help their children think rationally about their future; it might be better, for instance, to work in a job you don't love than to be unemployed searching for the job you love.
For parents with adult children living at home, Schwab-Pomerantz also suggested creating a timeline for them to leave the nest. "You want to be fair to your child," she said "But you don't want to enable them."
As for sandwich-generation parents with young children and teenagers, the advice is similar -- with a twist. Besides teaching money skills, Schwab-Pomerantz said parents should make sure their children have chores. "Chores play a role in children becoming financially responsible. In addition, she said there's seems to be a correlation between having summer job and being a stellar saver.
So, you might be in the middle, but there are ways out of this, er, sandwich.
Robert Powell is the editor of Retirement Weekly.
Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.
I spend my nights worrying about my nearly 80-year-old father and stepmother. My wife and I spend our days worrying about funding college bills for four children (expected cost $1 million at Harvard with no scholarships, loans, grants and the like). And in between those worries, I think about saving $3 million (give or take a million) for retirement.
Yes, I am member of the sandwich generation. The good news is that I am not alone. There are millions upon millions of us caught in the middle. And the even better news is that there seem to be experts aplenty ruminating on solutions for this generation.
Consider: In recent weeks and months, AARP, MetLife, Merrill Lynch, Charles Schwab & Co. and likely many others have all released something having to do with the sandwich generation. The surveys don't necessarily reach the same conclusions. But there are nuggets and tips worth sharing.
The Findings
If you're in the sandwich generation, and especially if you're a woman, and your household has $250,000 or more in investable assets, perhaps you can relate to these findings from the recently released Merrill Lynch Affluent Insights Quarterly. You're probably making some lifestyle sacrifices to support your family, cutting back not just on personal luxuries but also saving less for retirement or delaying retirement or both. What's more, you may have invited your adult children or your parents to move in with you to cut down on expenses.
Meanwhile, many Hispanic boomers who are members of the sandwich generation find themselves stretched pretty thin as well, struggling just like affluent Americans to maintain their own finances and prepare for retirement, AARP recently reported.
And MetLife's Mature Market Institute found in a recent survey that "middle boomers" (the 28 million Americans who are ages 52 to 58) have at least one parent still living and half still have children living at home. Nearly three in four of the middle boomers have been providing financial assistance and support to their children and grandchildren and that's averaged about $38,000 over the past five years. Some 14% are providing care to older parents.
Another survey found that boomer parents aren't spending as much on their adult children, but that it's still significant. Four in 10 sandwich generation parents continue to provide at least some financial support to their young adult children, according to the 2010 Families & Money Survey recently released by Charles Schwab & Co.
Caring for Elder Parents
So what to make of those findings? What's in the tea leaves?
If you're a certified, genuine member of the sandwich generation and you're caring for elder parents, soul-searching is the first order of business, according to Andy Sieg, head of Bank of America Merrill Lynch Retirement & Philanthropic Services. "You have to do as much soul-searching as you do portfolio planning," Sieg said. "You have to identify your core values and priorities."
In some cases, you might be able to do that on your own. In other cases, you might need a shaman or an adviser who has a good deal of experience dealing with the trials and tribulations of those in the sandwich generation. No matter whether you go it alone or not, you'll need to address the potential issues and trade-offs in as forward-looking and proactive a manner as possible.
In a zero-sum world, fulfilling a responsibility to a parent -- paying for a geriatric-care manager for instance -- means cutting back on your lifestyle or saving less for retirement or for college. "It's no fun talking about trade-offs," said Sieg. So, it helps to talk about the financial realities and priorities in a rational and calm conversation, long before there's a crisis.
Make no mistake about it: You don't want to talk about such things in an emotion-filled moment; It will bring out the worst of your family history and sibling rivalries.
By the way, a good book that could help you get a sense of your values and priorities is "Family: The Compact Among Generations," by James E. Hughes Jr. Hughes is a legend in helping mostly wealthy families get a handle on what's important to them, but even average Americans can benefit from his wisdom.
Another issue that those caring for elderly parents should address, according to Sieg, is this: As your parents age, it's quite possible that their mental faculties might diminish. And as that happens, you'll find yourself increasingly involved in decisions about their medical care and finances.
Indeed, even though you're not even close to being eligible for Medicare, you'll likely need to become expert in Medicare and all its parts. What's more, you'll need to determine who your parents' doctors, financial advisers and lawyers are and get a sense of the care and advice they are getting. You might find that some professionals don't have as good a handle on your parents' affairs as you might want and have to take matters into your own hands. In some cases, you might need to get a power of attorney and in some cases become your parents' guardian.
Raising Children, Adult and Otherwise
The other side of the coin for those in the sandwich generation is raising children and, in some cases, supporting adult children, even up to age 30.
There are reasons why some sandwich-generation parents are helping their adult children. According to Carrie Schwab-Pomerantz, president of Charles Schwab Foundation, some adult children have an overwhelming amount of college debt and are unemployed. But the adult children of sandwich-generation parents are dependent for other reasons as well: Some have overspent and have a tremendous amount of consumer debt.
According to Schwab-Pomerantz, sandwich-generation parents who are supporting adult children need to help their children acquire the money skills necessary for financial independence and they need to create a timeline for their children to achieve that independence. "Parents have to teach their children how to budget and save and live within their means," she said.
For instance, she said parents need to teach their children to save more and reduce their expenses. "They have to find creative ways to make it part of their everyday life, just like brushing their teeth," she said.
In addition, she suggested that parents help their children create résumés and search for a job, even if it's an entry-level job or temp work. "It might not be the ultimate job, but at least it puts food on the table," she said.
Parents have to help their children think rationally about their future; it might be better, for instance, to work in a job you don't love than to be unemployed searching for the job you love.
For parents with adult children living at home, Schwab-Pomerantz also suggested creating a timeline for them to leave the nest. "You want to be fair to your child," she said "But you don't want to enable them."
As for sandwich-generation parents with young children and teenagers, the advice is similar -- with a twist. Besides teaching money skills, Schwab-Pomerantz said parents should make sure their children have chores. "Chores play a role in children becoming financially responsible. In addition, she said there's seems to be a correlation between having summer job and being a stellar saver.
So, you might be in the middle, but there are ways out of this, er, sandwich.
Robert Powell is the editor of Retirement Weekly.
Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.
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