Living in the sandwich generation

Seven to 10 million Americans are caring for their aging parents from a long distance away, according to Pew Research Center.

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If you’re a Baby Boomer or Gen X’er, chances are that you are among the 20 million Americans caught in what’s called the Sandwich Generation, people who simultaneously care for aging parents and children. In fact, one out of every eight Baby Boomers – Americans who are roughly between the ages 40 to 60 – is raising a child and providing financial assistance to a parent at the same time.1

It’s no secret that Americans are living longer and starting their families later. In fact, the U.S. Census Bureau estimates that the number of people age 65 or older will double by 2030. So while you may not necessarily be “sandwiched” at the moment, it’s possible that you may be a part of such a scenario in the future.

Careful financial and legal planning can help you avoid many of the pitfalls associated with struggling caregivers. Following are some steps you may consider taking.

Talk to your parents.
If it’s likely that you or your spouse will eventually have to care for a parent, you’ll need to have a frank discussion about personal finances with your parents. Although it may be uncomfortable to discuss such matters, it’s important that you know where their finances stand in case one or both parents become unable to handle paying the bills and other day-to-day tasks. Be sure to cover these subjects:

Sources of income, debts and assets. Are they drawing from retirement accounts or pension plans? Do they have a financial advisor? Where are their accounts and how can you access them? Do they pay their bills electronically (if so, what are the necessary user names and passwords)? What’s the status of all of their debts, including their mortgage?

Insurance. It is essential for your parents to not only have health insurance, but also that you know how to contact their insurance company in case of an emergency. Ask your parents if they also have life and long-term care insurance to help defray any costs in the event of serious illness or death. If they don’t have them, you can suggest consulting two to three insurance companies to see what kind and how much insurance coverage would work best for them.

Always remember to maintain an open dialogue about your own family’s finances with your spouse. In addition to a regular discussion about your income and expenses, talk about how caring for your parents could impact your family’s budget.

Get your docs in a row.
Making sure all legal documents are in place before you need them can save you time, headaches and heartaches. And don’t just make sure that your parents have all of their documents; you’ll need to do the same to protect your spouse and children. You should always have these handy:

  • Durable Power of Attorney (a written authorization to represent or act on another's behalf)
  • Healthcare Proxy (a document which outlines who is appointed to make medical decisions on your parents’ behalf if they are no longer able to do so themselves)
  • Living Will (a statement that describes your parents’ specific wishes when it comes to medical treatment, should your parents be unable to make these decisions during a time when it is necessary)
  • Last Will and Testament (a legal document that defines how an estate or property will be managed or divided after someone has passed away)
  • Access to key bank accounts and a list of doctors they currently visit (should one or both of your parents be unable to make decisions for themselves, it will be critical that you have information on all of their financial accounts as well as the ability to speak to their current physicians about their condition)

Take care of yourself.
While it’s easy to get caught up with helping a sick parent or child, remember that your family’s future depends greatly on how you plan and prepare for that future today. It’s important to stay healthy and take care of yourself – your parents (and children, if you have any) are counting on you!

Retirement accounts. Don’t stop putting money away for retirement. By saving for retirement, you are ensuring your own financial future, which will put you and your children in a better position when you get older. Consider taking a set amount of money out of each paycheck and investing it into a retirement savings account, such as an individual retirement account (IRA) or your employer-sponsored 401(k).

Emergency funds. Most financial planners advise putting away six months’ worth of living expenses for emergencies. This can be especially important if you have to take time off work to care for elderly parents or sick children.

Ask for help.
Caring for your parents and children at the same time can be overwhelming, so don’t be afraid to ask for help. Seek community resources, such as your local office on aging. And you may want to schedule an appointment with a financial advisor to make sure you and your parents are on the right track. Meeting with an experienced financial advisor can help ensure that you won’t be caught off guard in the event of a family crisis.

Move forward.
Living in the Sandwich Generation can certainly bring with it additional burdens and responsibilities. But with sound financial and legal planning, hopefully some of those burdens will be alleviated so you can embrace this newfound reversal in roles and focus on what matters most – caring for those who cared for you for so long.

Need more information?
Visit tiaa-cref.org for broader Financial Education, including a variety of resources to help you improve your financial well-being.

1 Pew Research Center (December 2005). From the Age of Aquarius to the Age of Responsibility.
http://pewresearch.org/assets/social/pdf/socialtrends-boomers120805.pdf (PDF)

While it is not our purpose or intent to provide specific investment advice or financial planning services, the above information may be helpful in understanding issues relating to financial planning for elderly dependents. We urge you to seek advice based on your own particular circumstances from a financial advisor.

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