Mutual Funds

"Sandwich Generation" Survival Guide

Are you simultaneously saving for retirement, helping launch a 20-something child and caring for your aging parents? Welcome to the "sandwich generation."

Consisting mostly of adults ages 40 to 60, these caught-in-the middle individuals struggle to balance multiple financial priorities and multiple generations—all at the same time. This is not a small group. Around 42% of Generation Xers and 33% of baby boomers feel the squeeze, according to Pew Research.1

There is no playbook on how best to navigate these difficult years. So it's not surprising that only 28 percent of middle-aged adults providing financial support to children and parents say they live comfortably, the Pew study found.2

Doing right by your children and your parents can make it challenging to prioritize your finances. The dos and don'ts below won't eliminate your financial burdens, but they might help you make money decisions that can help protect your financial health over the long term.

DO put your retirement first. You've likely heard the adage: "Your kids can borrow for college, but you can't borrow for retirement." Though the cost of college is high — and rising — scholarships, work-study and loans can make a college education attainable. Retirees can't tap into similar financial resources. If your grown children need financial help, make sure you give to yourself before you open your wallet to them.

DON'T dip into your retirement savings. When you feel stretched, you might be tempted to use whatever cash you can find, and a 401(k) plan or an individual retirement account can look mighty inviting. But taking money out of retirement accounts could come with a stiff 10 percent penalty if you are under 59½. Plus, you will owe ordinary income tax if your contributions were pretax. Even more worrisome, you forfeit that money's compounding potential. No money means no growth.

DO encourage your parents to get long-term care insurance. This insurance can help defray the potential costs of nursing homes or home-based assistance. The younger and healthier your parents are, the more affordable the coverage.

DON'T forget tax incentives. If your parents live with you and you provide significant financial support, you may be able to claim them as dependents. Your tax advisor can help with the details. In general your parents can't earn more than $3,950, not including Social Security, disability and tax-free income. 3 If you pay their medical expenses, you may be able to take those costs off your personal income tax return.

DO get everyone on the same page. Have a frank talk with your children and your parents to discuss everyone's financial needs and how best to meet them. Will you pick up the full tab for your children's college tuition, or do you expect them to contribute? Will your parents live with you if they can no longer care for themselves, or do they have enough money to pay for in-home care?

DON'T go it alone. Spread the financial burden by asking your siblings if they can help shoulder some of the costs of caring for your parents. Investigate potential sources of financial help for prescription drugs and food at the National Council on Aging. 4 If your grown children have boomeranged back into your life, consider asking them to contribute to household expenses to help cover the added utilities and midnight refrigerator raids. Also help them set a goal date to move out and, together, make a plan to reach it.


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