Many middle-aged Americans are caught between aging parents requiring care and adult children still at home.
Life in the Sandwich Generation
What’s the Sandwich Generation?
The term describes adults caring for aging parents as well as their own children who are “sandwiched” between the older and younger generations. It’s a very big club. Nearly half of adults in their 40s and 50s who are either raising a young child or financially supporting an adult child also have at least one parent age 65 or older. The vast majority of the Sandwich Generation is middle-aged—71 percent are in their 40s and 50s—but 19 percent are younger than 40. Greater longevity also means that a “senior Sandwich Generation” is emerging, with more 60-somethings taking care of parents in their 90s and beyond. The U.S. Census Bureau expects the population of people older than 85, referred to by demographers as the “old old,” to triple from 2012 to 2050 to 18 million. Meanwhile, 48 percent of adults say they provide at least some sort of financial support to their adult children, while 27 per cent say they are their children’s primary support. Saddled with student debt and the lingering effects of the recession, more adults ages 18 to 34 live with their parents than in any other arrangement. The last time that was true was in the 19th century.
What is the financial impact?
It can be severe. Only 28 percent of Sandwich Generation members say they’re living comfortably, while 11 per cent say they don’t have enough money to meet basic expenses, ac cord ing to Pew. The Depart ment of Labor estimates that Sandwich Generation adults spend roughly $10,000 and 1,350 hours on their parents and children combined every year. Among those who care for an aging parent, 22 percent say they’ve had to dip into savings, 14 percent have added to their debt, while a third have delayed saving for retirement, a lack of savings that will weigh on the next generation in turn. “We see that many, many Americans who are retired now have relatively little in savings,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “The natural fallback for a savings shortfall will be family members and, likely, adult children.”
Are parents or kids more expensive?
Adult children typically require more money, while aging parents require more time and attention, especially if they’re unable to live independently. Sandwich Generation parents spend about four times more money supporting their children than their parents, according to the Labor Department. The average adult caregiver, however, spends 24.4 hours each week on that responsibility, according to the AARP.
Is there any way to prepare for this?
Thriving in the Sandwich Generation means getting the most out of every dollar. Beyond careful budgeting, caregivers should tap every possible tax benefit available to them. An elderly parent can be claimed as a dependent provided he or she makes less than $4,050 (excluding tax-free income) and you provide more than half your parent’s financial support. If you’re paying for elder or child care while you work, you may also qualify for the Dependent Care Credit. Likewise, parents who are paying for college should explore options like the American Opportunity Tax Credit. However, some experts recommend that parents should prioritize their own retirement savings before promising to pay for college. People in the Sandwich Generation are usually in their highest earning years—a crucial time to save for retirement. College students can spread their loan payments over decades.
What’s the toughest part?
For many, the mental and emotional strain is even worse than the money worries. By some estimates, up to 70 percent of family caregivers suffer from clinical depression. Experts say that sandwiched adults should ask for psychological and logistical help when they need it. Adult children can be recruited to help with caring for their grandparents. If 20-somethings are living at home, it’s reasonable to create a contract outlining what they’re expected to contribute in rent and other expenses. A financial adviser can work with the family to make sure that everyone is on the same page. Resources like the National Association of Area Agencies can also provide help locating elder care services. Ultimately, it’s most important to establish clear lines of communication early, especially when it comes to setting boundaries and expectations. “You can’t plan if you don’t know all of your assets, liabilities, and cash flow involved in this equation, and you can’t manage effectively unless you know where everything is,” says Mark Struthers, an adviser with Sona Financial. “Be frank, honest, and open with your parents and family members. Let everyone involved know what the costs and available assets are.” ■