SANDWICH GENERATION NEEDS TO AVOID FINANCIAL SQUEEZE
Are you a member of the “Sandwich Generation”? This designation — which applies to people caring for their aging parents while supporting their own children—may be applicable to you if you’re either a younger Baby Boomer, born in the late 1950s or early 1960s, or an older member of “Generation X,” born in the mid-1960s. But any way you slice it, being in the “Sandwich” group is probably going to present you with some challenges, particularly of the financial kind—so you’ll need to make the right moves.
Basically, you should consider two areas of decision-making—those affecting the future of you and your children and those affecting your elderly parents’ lifestyle and legacy.
Regarding your future, and that of your children, you’ll need to prioritize your goals. Some people, when weighing the merits of investing for retirement versus saving for their children’s college educations, conclude that while loans are available for college, none are offered to retirees. Consequently, they focus more heavily on retirement. If you’re in this camp, you’ll probably want to contribute as much as you can possibly afford to your IRA and 401(k) or other employer-sponsored retirement plan.
However, if you feel strongly about helping your kids go through college relatively debt-free, you may want to explore some college-savings options, such as Section 529 plans and Coverdell Education Savings Accounts, both of which offer significant tax advantages.
In any case, these goals don’t have to be mutually exclusive—but if you’re going to address them both, you will have to make some key decisions regarding allocation of resources. And while you’re handling these issues for yourself and your children, you’ll need to juggle the needs of your elderly parents. With luck, you won’t have to contribute financially, but you may be required to put in some time and energy to help make sure your parents’ situation remains positive.
This means you’ll need to ask some questions. Where do your parents bank? Do they have a brokerage account? If so, do you know the name of their financial advisor? Have they taken steps to remain financially independent if they ever need to go to a nursing home or employ home health care assistants? Have they drawn up a will, a living trust or other estate plan documents? Would they be willing to have you or another family member assume power of attorney should they become incapacitated?
In raising these questions, you will have to approach your parents with tact and sensitivity. However, you may be pleasantly surprised at your parents’ willingness to talk about these issues; after all, they almost surely want to avoid burdening you with extra financial responsibilities.
The best time to approach your parents is when they are healthy, both mentally and physically. It’s especially important to be aware of even minor-seeming cognitive impairments, such as memory lapses, which can result in paying the same bills two or three times, forgetting to record checks or even falling prey to fraudulent investment schemes. If you suspect your parents may be having these troubles, you’ll need to step in immediately.
It’s not easy being a Sandwich Generation member, but through diligence and proper planning, you should be able to help avoid getting “squished” — while improving the outcomes for all your beloved family members.
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