Over 20% of Americans today are part of what's known as the Sandwich Generation: adults with a parent aged 65 or older, who are also raising their own kids. The demand for multi-generational planning is increasingly widespread, with different generations looking for income options to ease the financial squeeze.
Who is the Sandwich Generation?
Right now, Americans in their 40s are the largest group of Sandwich Generation members. In fact, one in five people in their 40s and 50s are part of it. According to the latest numbers, more than half of them have a parent they care for and also carry financial responsibility for a child. Naturally, sandwich generation members live in multigenerational households but don’t necessarily live with the people they are supporting.
Married adults are more likely than unmarried adults to support one of the sets of parents and their child. Some 32 percent of those married are part of the sandwich generation; compared to 23 percent of their single peers. This is an over 10 percent increase from 2019.
The Income bracket doesn't seem to make much of a difference in which families are "sandwiched". Higher income families are most likely to be “sandwiched” with lower and middle right behind them. They are all separated by a maximum of 6 percentage points.
How is the Sandwich Generation Coping?
Research shows, a majority of sandwich generation families experience stress about affording their family’s financial obligations over the next decade. Combine that with how Americans feel about health care in retirement and overall worry about stability in retirement, the future outlook for many can be a tremendous stressor. Eighty percent of Americans getting ready to retire are worried about health care and long-term care during retirement. Close to half think Social Security and pensions will not cover their cost of living in retirement, not even considering caring for children or living parents.
According to research in the Journal of the American Geriatrics Society, sandwich caregivers expressed substantial financial and emotional difficulties compared to non-sandwich caregivers.
At the same time, 48% of surveyed sandwich generation members are very satisfied with their family life. This also relates to those in their 40s (largest groups of sandwich generation members). Almost half of them are very satisfied with their family life.
What’s Next for the Sandwich Generation?
From health care to college tuition and their own retirement income, Sandwich Generation members face a multi-layer expenses. It’s helpful to create a well-crafted financial plan and long-term strategy that can help maintain stability in uncertain times. Research supports that especially those getting ready for retirement, feeling more secure and comfortable is “strongly tied to having more in retirement savings and having a higher level of guaranteed income.”
To help this emerging generation of future retirees, we outline four key tips to long-term stability:
1. Prioritize yourself
Finding small ways to make yourself a priority can make a big difference. This can be as true with time as with finances. Time is valuable, and only grows more valuable as retirement nears. The measures taken today can lessen the need to play catch up. We know caregivers work and face career challenges connected to their status as caregiver in a Sandwich Generation context. Reduced career opportunities, lost income and savings can all relate to lower Social Security and other benefits.
2. Talk things through
It's a good idea to get everything out in the open as you talk to your parents about their approach to the golden years. This way you can talk through retirement outlook, insurance and outline a general plan. A recent survey shows only about 53% of those retired have a relationship with a financial advisor verses 46% of near-retirees.
You can begin the conversation by stating how you want them to always receive the care they deserve and then find out if they have a financial representative they have been working with who would help them achieve their goals.
In fact, having a conversation that involves you and other family members is beneficial. 61% near-retirees said they prefer getting a referral for financial help from someone they know.
Questions to ask
- Do you have long-term care coverage? This type of insurance may help go toward expenses that come about because of a significant health event and aren’t typically covered by health insurance, Medicare and Medicaid.
- Do you have plans to downsize? Are you planning to move to warmer climates or to be closer to family? Is your lifestyle in retirement going to drastically contrast your life before? This can impact the need for tailored retirement income strategies.
- How are your funds currently invested? What current assets do you have? What does your retirement portfolio currently look like? People nearing retirement could have funds in multiple savings accounts or investments in stocks. Keeping track of all this information could prove challenging as parents age, move or experience unforeseen events.
3. Insure your retirement
For most pre-retirees, securing lifelong income is a top priority. Protected options like
fixed index annuities can offer lifetime income options that protect years of hard-earned dollars and can generate a stable source of income that cannot be outlived. Consider your overall retirement portfolio and how different retirement options address short- and long-term financial needs. A balanced portfolio can be key to planning for lifetime income as well as long-term care options.
4. Meet with a financial professional
Taking care of the day-to-day needs of both children and parents can feel like second job. Unfortunately, so can planning for retirement. Most Americans are not doing research on financial planning or how to get the best information possible. At the same time, we know that consumers prefer to have product options explained to them by professionals. The advantage here being that they can explain the product but also adjust strategy and make sure everything fits in a holistic retirement plan.
Talking to a qualified financial professional can help you identify options and chart a course that encompasses funding family needs while working toward individual retirement goals.
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