Life events are often the drivers for people to seek advice, and financial advice is no different. However, most people are surprised at how much financial advice they need. We were recently talking to a friend, and she mentioned her mother suffered a stroke. She was cutting back her hours at work to care for her mom, taking her to physical therapy and helping around the house. Because she also had pre-teens at home and a partner who worked long hours, she was complaining at how she felt spread too thin.
This investor is considered the Sandwich Generation—individuals sandwiched between the responsibilities for their children and their parents. She’s not alone—demographics show roughly 47% of parents in this age bracket also have parents older than 65 who may need care. Unfortunately, with taking time away from work to care for family, she’ll could experience significant financial consequences—both out-of-pocket costs and long-term retirement security.
Additionally, your 40s and 50s are the decades of competing financial goals. These are generally the highest earning years before retirement with opportunities to save additional money for your future. However, at the same time, your financial goals may include sending your children to college and providing your parents with specialized care.
Despite the desire to take care of others first, Sandwich Generation investors need to set their priorities as this life phase has the potential to last several years. First and foremost, investors in this situation need to get their own financial house in order. Stick to a household budget and continue to invest in your future saving as much as you can into your retirement plans. Take full advantage of IRAs and employer-sponsored retirement plans such as 401(k)s. Once you reach age 50, utilize special “catch-up” rules that let you make additional contributions above the normal limits. Discuss college plans with your children and be realistic about what you will be able to contribute. Students can apply for scholarships, education loans, and work to contribute to their education costs. There are no loans available for your retirement.
Next, take inventory of your parents’ assets. Make sure they have established a financial power of attorney and health care directive that will allow you to handle financial and health-care decisions should they become unable to do so themselves. Make sure that living wills and wills are in place and up to date and explore what insurance policies they have in place that could offset the financial burden of their care. Familiarize yourself with your parents’ Social Security and Medicare benefits. You may also consider consulting estate planning attorneys, financial planners, and your tax adviser. The elderly and children of a certain age enrolled in higher education often qualify for tax benefits and breaks. Siblings may also want to discuss who is taking the majority responsibility of care for their parents in context of their estate plan.
Having the essential estate planning tools in place and clearly defined financial priorities can alleviate some of the strain that comes with being a primary caregiver who is also trying to balance a career. Finally, consider instituting many of the same tools for your future to prevent yourself from becoming a financial burden on your children in your old age. You may be able to reduce family tension, protect your children’s financial future, and ensure your own comfort.
If you have questions on caring for aging parents while prioritizing your own retirement, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the April 1, 2023 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
