Finding Help for the Sandwich Generation

Even if you’re squeezed by the competing financial needs of your aging parents and your children, you need to take care of your own financial health.

It’s not easy being a member of the sandwich generation, and it’s increasingly common: A staggering 49 million adults — two-thirds of them women — provide care for other adults (typically their parents), according to the National Alliance for Caregiving and AARP and many of them also help their grown children financially.

“People in this situation are discovering they need to be not only the economic engine but also the emotional and management engines for three generations,” says William Y. Smith, a Financial Advisor at Wells Fargo Advisors in San Diego. The pressures can be enormous, the stress and time commitments overwhelming.
Before taking on a potentially huge financial commitment to your aging parents and your children, make sure you're not threatening your own fiscal health.
Don’t go it alone

Smith understands this firsthand. He and his wife were still in their 20s when his mother-in-law, diagnosed with Alzheimer's, came to live with them. He has spent most of his career helping families deal with similar pressures.

“Most people have no idea how many issues they are going to confront,” he says. “A friend of mine had to sell his mother's house because he was concerned that she would fall down the stairs wandering at night.”

Smith's first suggestion to people facing such challenges is to hire an attorney specializing in eldercare who can help with legal questions, especially about dealing with Medicare and Medicaid. For instance, there are specific rules for how people must deplete their assets before Medicaid will pick up the cost of a nursing home.

“The first inclinations children invariably have, such as selling their home or transferring assets out of the parent's name, can be precisely the wrong thing to do in some situations,” Smith says.
Know your limits

The next step is to make sure your own finances are in order, says Richard Barrett, a Financial Advisor at Wells Fargo Advisors in Hinsdale, Illinois. Barrett also speaks from personal experience, because he and his wife are taking care of his elderly dad and helping out their own children, who have left home.

In fact, the Barretts are something of a club sandwich: They’re providing financial help to Richard’s dad, their adult kids, and their baby grandson through his own 529 plan. “If he attends the same college as his dad, that could cost $375,000,” Barrett says.

Before taking on a potentially huge financial commitment to your aging parents and your children, Barrett says, make sure you're not threatening your own fiscal health. Americans are living longer, so your assistance to your parents could last quite a while. And “forget the idea of an empty nest,” Barrett says. “Kids today may move out, but they don’t go away.”

That’s because many of today’s young adults are effectively priced out of the housing market, and most jobs they find lack the benefits previous generations enjoyed. As a result, parents and grandparents often pick up more of the tab, funding their 529 college savings plans and making down payments on their houses.
Take a few key steps

Financial advisors recommend that sandwich generation people consider various key steps to help reach their goals:

  • Teach your kids well. Young adults starting out today face financial obstacles that you probably never encountered. It’s never too early to teach them about saving, making smart purchases, and the importance of managing their money.

  • Start saving now. When it comes to financial planning, nothing beats the power of investment compounding. The sooner you start a college fund for your children and a retirement nest egg for yourself, the more options and opportunities you create for you and your family down the road.

  • Talk to your parents. Yes, they may be old-school and uncomfortable discussing their finances with you. If they won’t talk with you about their income and assets, maybe they’ll sit down with your financial advisor to discuss their current situation and their plans for the years ahead. That conversation could give all of you more comfort.

  • Consider long-term-care insurance. If your parents have needed nursing home care, you know how those costs can impact even the best investment plan. Buying long-term-care insurance for yourself could spare your kids the cost later. And the earlier you purchase a policy, the more affordable it usually is.
Making choices

For many, depleting their savings to help their parents and their kids can add up to an unsustainable burden, not to mention pushing off their own retirement date. Barrett says that sometimes when he’s speaking with clients, “I have to be the bearer of bad news, telling them that if they keep supporting everyone else they are going to run out of money.”

He uses the Wells Fargo Advisors’ Envision Process to get the message across, showing clients exactly how much money they have and helping them gauge how much they can spend before the well runs dry. “Sometimes we have to act more like psychologists than money managers,” Barrett explains.

And sometimes, a little moral support is all that’s needed. With the right investment planning and a realistic perspective, many of those in the sandwich generation can overcome the challenges and help keep their parents, children, and themselves going strong.

Key Points:

  • Think about hiring an elder care attorney who can explain the sometimes-complicated rules regarding Medicaid and Medicare.
  • Be sure you don’t threaten your own fiscal health while trying to assist your parents and kids.
  • Consider buying a long-term-care insurance policy, to spare your kids the potential cost later.

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