They call it sandwich generation stress for a reason – people in their 40s and 50s caught between raising their kids and caring for their aging parents at the same time.
According to research conducted by the Pew Research Center, early half (47 percent) of adults in their 40s and 50s have a parent age 65 or older and are either raising a young child or financially supporting a grown child (age 18 or older). About one in seven middle-aged adults is providing financial support to both an aging parent and a child.
Skyrocketing costs that add to Sandwich Generation stress
Each year, the costs for those in the Sandwich Generation keep adding up. Even if your parents have been saving for years, they can easily outlive their resources if they need assisted living or skilled nursing care. The Genworth Cost of Care Survey notes that the yearly median cost for assisted living in the U.S. is about $45,000 and nursing home care with a private room is $97,455. That can quickly deplete an older parent’s hard-earned savings.
On the other end of the spectrum are the costs for college. According to The College Board, it will cost $50,900 per year for a student entering a private college, and $25,290/year for an in-state resident at a public college or university.
And those are just the direct financial costs those in the Sandwich Generation may have to absorb. There are many other considerations that can have a financial impact on those adults caught in the middle.
One of the major issues is the cost of lost time. Driving parents to doctor’s appointments, running errands, researching care options or helping with recovery can eat into a caregiver’s schedule, taking time away from his or her professional work. It’s estimated that these responsibilities take up to 18 hours a week. Add in school appointments, ferrying the kids to after school activities and overseeing homework each night, and there’s little time left to work in the office during the day.
Most people who care for aging parents, as well as their own children, tend to be women. Given the time commitment required by their families, many women must either leave their full-time jobs or work part-time to carve out a more flexible schedule. They may have to give up important benefits, or turn away promotions and the higher salary because they can't stay late at the office or travel for business.
If you’re stuck in the middle trying to juggle your own life and career while looking after aging parents and young children, here are some financial strategies to help get you through. Here are some tips from financial planners and other experts to cope with being sandwiched:
1. Keep saving for retirement
It’s not beneficial to sacrifice your own financial future to take care of a parent. The end result will be that your children will have to take care of you one day. Instead, max out your 401(k) account and take advantage of your employer’s company match if they offer one. If you are able, contribute to a Roth IRA. In 2018, most people can contribute up to $18,500 to a 401(k), 403(b) or the federal government's Thrift Savings Plan. Annual IRA contributions are allowed up to $5,500.
Older investors who may have experienced a dent in their retirement savings can still catch up through careful investing strategies. In 2018, those age 50 and older can contribute an additional $6,000 to their 401(k) or 403(b) for a total of $24,500; and they can add $6,500 to their IRA accounts. For more information on the IRS's catch-up policy and eligibility requirements, check out their site for further details.
2. Fund a college savings plan
In addition to your retirement savings, begin putting money away for your children’s higher education expenses. A 529 plan is a terrific way to save, and qualifying educational expenses can be distributed tax free. Other family members and friends can also contribute to the 529 account, which makes it a great idea for birthday and holiday gift giving.
There are no limits to how much you can contribute yearly to a 529 plan, however there are general contribution limits. You cannot exceed the necessary amount that it would cost for your child to go to college, and there may be tax consequences if your contributions exceed $14,000 during the year. The IRS has answered some of your general 529 questions, and you can find those answers here.
Just think: financial experts predict that if you saved $100 a month for 10 years (supposing an 8% return), you would have saved $18,000. That's quite a chunk of change, right?
3. Purchase long-term care insurance
This applies to both you and your parents. The average cost for a couple both aged 60 and above could range anywhere from about $2,700 to $5,600. This may seem expensive for you to spend now, but think of how expensive care is later on down the road. The sooner you buy long-term care insurance, the less expensive it should be, so don't wait until your parents are much older or become ill. Also, put the premium payments on auto pay to ensure that the policy doesn't lapse. That’s a common occurrence with older parents who may have memory problems -- and quite a shock to discover when you need to use the insurance.
4. Get the legal paperwork in order
If your parents don’t have a durable power of attorney, a health-care directive and updated wills, make these a priority. Sure, they are difficult subjects to talk about. However, they are very necessary. A durable power of attorney gives the named person the legal authority to handle bills and finances if a parent becomes disabled. The key is parents need to sign it before they become disabled for it to be legal.
Another necessary form is the health care power of attorney. This gives you the ability to decide on treatment options in case your parent(s) cannot make that choice. The final piece to consider is having a a living will or updated will. This applies to both your parents and yourself.
5. Inventory assets and consolidate accounts
Over the years, people set up multiple savings, checking, investment, credit card and retirement accounts at just as many financial institutions. A good rule of thumb with older parents is to consolidate accounts and assets so you know where to find them, should you need them. If transferring financial accounts to one institution is difficult or would penalize you, then be sure to have a singular place to store account statements so that it’s easier to manage if your parent becomes unable to take care of the finances.
6. Look for outside help
Whether it’s finding a math tutor for your kids or a consultant to recommend how to retrofit your parent’s home as they age, those who experience Sandwich Generation stress need to recognize that they can’t do it all. The National Family Caregiving Support Program is a good place to start. Since rules and regulations change all the time, having someone who can also advise about Medicare and Medicaid can be beneficial.
7. Keep saving
It’s often difficult to know how to juggle a mortgage, car payments, children’s needs, retirement and shouldering costs for aging parents. First, create a budget and stick to it. You don’t need to max out the credit cards and take on unnecessary debt. Then, consult with a qualified financial advisor to create a short-term and long-term game plan.
Navigating the waters of caring for kids and parents isn’t easy. However, there are ways to work around the challenges. With a bit of advanced planning, it can be done.