Financial Planning for the Sandwich Generation

In the chaotic juggling act of modern family life, there's a growing group feeling the squeeze – the "sandwich generation." These are folks caught between the hustle of raising children, the unexpected role of caretaker for their aging parents, and very often - paid employment.

But the good news is that from the growth in employer-sponsored benefits to the explosion in assistive technologies for aging, there are plenty of ways that the sandwich generation can prepare for - and lessen the burden - of managing care for their parents and loved ones.

Welcome to the sandwich generation, the term used to describe adults balancing care for their own family; minor children, elders and life partners. And while it's been a long road to get here, there are five demographic trends that have conspired to make the sandwich generation so important to the care of their elderly parents:

• Adults are living longer: Data shows that almost one third of children born in 2010 will live to be a whopping 100 years old! And baby boomers are living longer too - they’re redefining what aging looks like for the rest of us. While we get more time with our loved ones, that means we're also likely to play a caregiver or care manager role for a longer period of time.
• Birth Rates are declining: Since 1950, birth rates have been on the decline. For all of us, caregiving responsibilities will be more concentrated among fewer people. With fewer siblings, the primary caregiver role is often relegated to a single person - often the person who is closest.
• Increase of women in the workforce: we're so excited to report that women make up over half of the U.S. college-educated workforce, according to the Pew Research Center.  And while that is definite progress, many women are now faced with balancing caregiving and paid employment.
• Working mothers holding steady: In 2022, the Bureau of Labor Statistics reported that working mothers participation in the labor force is holding fairly steady at just over 72%.
• Kids at home for longer: Compounding these factors is the phenomenon of kids staying in their parent's home for longer; 2022 data shows that nearly 20% of men and 12% of women between the ages of 25-34 are still residing with their parents. This extended dependence adds an additional layer of responsibility for sandwich generation caregivers.

A note about caregiving vs managing care 

In the realm of caregiving, there exists a profound yet often overlooked paradox — a substantial 50% of caregivers do not readily identify themselves as such, despite the fact that they collectively contribute over $600 million in unpaid caregiving services.

In reality, the term "caregiver" extends far beyond the conventional image of those providing direct physical assistance to aging parents or loved ones. It also describes those of us engaged in the sometimes complicated role of managing care for someone else. This idea of managing care covers a myriad of tasks, from picking up prescriptions to buying groceries to driving to essential doctor's appointments.

Multiple roles, multiplied stress

A Modern Family Index Study confirms that expectations of caregivers are intense.  From scheduling doctor’s appointments to confirming carpools to slicing oranges for soccer practice, caregiver duties can seem endless. And while women tend to bear more of the responsibility, both men and women are experiencing financial strain.

In addition to managing care, sandwich caregivers are also managing some of the financial burden. Sandwich generation caregivers were more than twice as likely to report financial difficulty, and 52% are also providing financial support and expect that supporting an aging parent or parents will cost just as much as supporting their children over a five year period. 

While many hope that Medicare will cover long-term residential care (spoiler alert; it does not), almost 20% expect to manage the financial responsibilities themselves. So how do you  manage the stress of financial planning when you are part of a multi-generation household?

1) Take charge of your own finances

It's the old “safety mask” analogy; before you can help anyone else, you first need to make sure your own financial health is in order. So before you embark on the journey of preparing for a parent's retirement, it's crucial to first establish a solid financial foundation for yourself.

Engaging with a financial advisor or qualified expert is a crucial step in assessing your financial goals in support your own aging experience  - and potential education costs related to your children. Will you need to provide financial support for a spouse or child through college? Are our own retirement savings enough to provide for the future?

Most financial planners will focus on practical financial tips like taking advantage of benefits programs like 529 plans, 401K programs, HSA spending accounts, and deferred compensation plans.  Early savings habits are one way to ensure that you're adequately equipped for your older years. If your parent is living with you, it might even make sense to have a conversation about financial contributions to the household. Some caregivers will ask for a small contribution to cover food, medical or other supplies, and even rent. It may not always be comfortable, but it can be a reasonable request in some cases.

If you're wondering how to find a financial planners, here are a few resources: 

• National Association of Personal Financial Planners (NAPFA)
• Certified Financial Planning Board (CFP.net)

2) Talk to your parents about their vision for the future 

Before diving into the nitty-gritty of finances and senior living plans, it's essential to have some heart-to-heart talks with your parents about getting older. Instead of jumping straight into logistics, start by chatting about what makes their ideal aging experience. Do they want to stick around friends and family or do they dream of moving to a sunny spot? Are they into staying active, maybe playing some sports, or do they just love strolling through the woods every day? These conversations, focusing on hopes and dreams, can make the tougher talks that you'll have down the road. It's like breaking the ice with the good stuff before tackling the trickier topics. Stuck on how to start the conversation? We've got a few questions that might help you get the conversation going:

• Are you finding it harder to manage keeping up with household tasks?
• Do you ever think about moving? 
• Does weather or climate play a role in where you think you want to spend time in the future?
• Do you have any friends who have moved to senior living? How are they liking it?

3) Understand the cost of senior care and housing

Figuring out the costs of senior care and housing is one of the best things you can do to be an effective support for your parents, so it's essential to get a lay of the land. Do some research to get a sense of what senior care and senior living might cost in the area where your parent wants to be. And before you experience sticker shock, we'll warn you: much like early education, senior care is expensive. But like early education, quality senior care is worth the price tag.  

• Senior housing: Seniorly hosts an senior living pricing hub that houses estimated pricing for every senior housing community in the country. 
• In-Home Care: And if you're curious about the price tag on in-home care, Genworth has estimated hourly costs for in-home care across the U.S. 

Getting a handle on these numbers will help you plan better, so you're not caught off guard. Remember, knowledge empowers great decision-making, making the journey towards senior care smoother and more transparent.

4) Assess your parent's financial health

Once you've had some conversations that give you an idea of how your parents want to age, now is the time for an honest conversation about financial assets and liabilities. Understanding your parent’s finances will help both of you develop a timeline that could include paid support for caregiving responsibilities, whether that is engaging in-home care or transitioning to an assisted living community.  

Yet these can be difficult conversations to manage, as the “role reversal” is front and center. As CEO of Seniorly Arthur Bretschneider shares “the dynamic of these conversations can be complicated, as the unspoken center of the conversation is really about the reality of aging”.  Bretschneider recommends having shorter and more frequent conversations instead of “trying for resolution in a single sitting”.  

Use what you've learned about their hopes and plans for the future to start a conversation about their ability to fund their senior housing and care costs.  Here are some easy conversation-starters:

• Have you worked with a financial planner at any point to talk through what you want for the future?
• How are your savings or investments looking?  Are you worried at all about how to fund future care and housing?
• Have you thought about whether you have any benefits, like Veterans Benefits or long-term care insurance, that might help you?
• Do you have a sense of what the equity is in your home and how you can preserve and protect it?

If you're feeling like you need more in-depth help, Wellahead is one of our favorite financial resource companies in the senior care sector. They have one-to-one concierge consultants who work with families to help them find solutions for funding senior care.  

5) Make it Legal 

Getting your parents' legal and administrative affairs in order is a crucial step in ensuring a smooth and well-prepared journey through the aging process. Find an elder care lawyer who can provide legal or tax advice, including:

• Power of Attorney (POA): Establishing a power of attorney is vital, granting a trusted individual the authority to make financial or healthcare decisions on behalf of your parent if they become unable to do so. This ensures someone is equipped to handle important matters when needed.
• Wills: Crafting a clear and updated will is essential for outlining your parent's wishes regarding the distribution of assets after their passing. It provides a legal roadmap, minimizing potential conflicts and ensuring their intentions are honored.
• Living Will: Different from a will, a living will is a document that outlines specific medical treatments and interventions your parent does or does not want in the event of a serious illness or injury. It complements advanced directives and provides clear guidance to healthcare professionals.
• Advanced Directives: Addressing advanced directives involves documenting your parent's preferences for medical treatments in case they cannot communicate their wishes. This includes decisions about life-sustaining measures, organ donation, and other critical healthcare choices. Having these directives in place helps guide healthcare professionals and family members in alignment with your parent's desires. Taking care of these legal aspects early on brings peace of mind and ensures that your parents' wishes are respected during critical junctures.
• Trusts: Establishing a trust can be beneficial for managing and distributing assets, especially if there are complex financial arrangements or specific conditions for distribution that need to be addressed.
• HIPAA Authorization: Ensuring that there is a Health Insurance Portability and Accountability Act (HIPAA) authorization in place allows designated individuals to access medical information. This is crucial for effective communication between healthcare providers and family members.
• Digital Estate Planning: In today's digital age, considering the management and access to online accounts and digital assets is important. Provide a list of passwords or designate someone to manage these accounts in case of incapacity or passing.
• Long-Term Care Planning: If applicable, exploring long-term care insurance options or Medicaid planning can be essential for addressing potential future care needs and associated costs.

6) Assemble your team

If you're feeling overwhelmed, don't worry. There are quite a few things to sort through and it's natural to have moments in which it all feels like too much.  It's important to know that there are resources which can support sandwich generation families trying to prepare for the future: 

• Senior Living Advisors: Certified Senior Advisors are expert at working with older adults and their families to build support systems for sandwich generation caregivers. They can assess overall health, coordinate in-home care and even help you decide when it’s time to consider a move to a senior living community. They also have excellent connections with elder law professionals, financial planners, realtors and so much more.  They are paid by referrals, so they are free of cost to the families with whom they work.
• Geriatric Care Managers: A Geriatric Care Manager (GCM) is a professional who will assume responsibility for oversight of certain elements of care. They don’t deliver care themselves but they can source caregivers, manage schedules, and ensure payment. While this is not always the most cost-efficient option (GCMs generally charge an hourly fee plus a percentage of care services), they can help caregivers through crisis by assuming some of the mental load that sandwich generation caregivers tend to carry.
• Family Members: Collaborate with siblings or other family members to determine the level of commitment each is able to make in support of your parents. When one sibling is spending more time or money to support a parent, it's easy for resentments to surface. Set clear expectations from the start in order to manage relationships among family members.