Many adults today fall into a new category called the “Sandwich Generation.” A number of middle-aged adults, usually starting in the 40’s but well extending into the 60’s, find themselves financially supporting children, who may live at home, but may need some assistance living independently such as college students or new parents. Should you be among those helping your aging parents in addition to your own children, well, that much responsibility might make you feel squeezed, or, put another way, sandwiched. Sometimes there are “boomerang” children, adult children who leave the “nest” but return home after college or due to extenuating circumstances. As people live longer we expect to find the number of adults in the sandwich generation continuing to grow.
When this financial commitment arises, don’t be among those who succumb to the temptation to suspend your own retirement savings “just for a little while.” It is still important that you continue the discipline to save for your own secure retirement. Even just making a few minor changes can have substantial impact on your growth over the years. Focusing on your financial future today not only helps you, but will ensure your loved ones won't have to compromise their savings or retirement to take care of you one day. Keep an eye on it so your financial situation stays in order. Make sure you keep the elimination of debt a priority and seriously evaluate any financial help requested. If you are helping children, keep in mind that “loans” to children are often ”gifts.” Are you prepared to make that “gift” and not see the money again? Do not expect repayment as that happens only rarely and it’s not worth straining the family relationship over an unrepaid “loan.” Some parents have made an unrepaid loan an early inheritance by putting it into their estate documents if it has been substantial enough and they want to equalize what each child ultimately receives from them. Usually, there is a balance in life. If you have one child needing help, there is another who is very responsible and never asks for anything, so, if you feel so inclined, the estate documents may be a time to balance it all out.
The Merrill Lynch Affluent Insights Survey found that 82% of the affluent parents surveyed (defined as having investable assets of $250,000 or more) are either supporting their adult children or would if they were asked. Another 55% say they would allow their adult children to move back home, even if they couldn't pay rent. These additional financial responsibilities on parents may make it difficult to save as much as possibly causing you to push out your retirement date. Planning now for unexpected financial burdens will help you and your loved ones gain a more secure future.
If you feel that you may need to help your own aging parents someday, there are steps you can take now to start planning. Although it may be very difficult, one of your most important conversations to have is with your own parents to understand their sources of income, savings or investments, any debts, housing costs, medical costs, and especially long term care options. Proactive family discussions can put the family on the same page for caring for an elderly parent and how any expenses will be managed. It is a sandwich, remember? You are caught in the middle at this stage of life, with pressure on both sides while you still want to move forward to feel secure about your retirement. Life planning will help support you and your family as you near retirement and live through a retirement that mimics a stream, continuously flowing with bumps and eddies. The trick is to navigate and enjoy the scenery.
At Fleming Financial Services, we can assist you with this type of planning.