The Sandwich Generation and You

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Recently, I read a fascinating study by the Pew Research Center indicating that somewhere around one in seven adults have simultaneously provided financial assistance to a parent aged 65 and older and to one of their own children of any age in the past year. A quick overview of this study:

With an aging population and a generation of young adults struggling to achieve financial independence, the burdens and responsibilities of middle-aged Americans are increasing. Nearly half (47%) of adults in their 40s and 50s have a parent age 65 or older and are either raising a young child or financially supporting a grown child (age 18 or older). And about one-in-seven middle-aged adults (15%) is providing financial support to both an aging parent and a child.

Who are these people?

Adults who are part of the sandwich generation—that is, those who have a living parent age 65 or older and are either raising a child under age 18 or supporting a grown child—are pulled in many directions.2 Not only do many provide care and financial support to their parents and their children, but nearly four-in-ten (38%) say both their grown children and their parents rely on them for emotional support.

Who is the sandwich generation? Its members are mostly middle-aged: 71% of this group is ages 40 to 59. An additional 19% are younger than 40 and 10% are age 60 or older. Men and women are equally likely to be members of the sandwich generation. Hispanics are more likely than whites or blacks to be in this situation. Three-in-ten Hispanic adults (31%) have a parent age 65 or older and a dependent child. This compares with 24% of whites and 21% of blacks.

Another interesting factor:

More affluent adults, those with annual household incomes of $100,000 or more, are more likely than less affluent adults to be in the sandwich generation. Among those with incomes of $100,000 or more, 43% have a living parent age 65 or older and a dependent child. This compares with 25% of those making between $30,000 and $100,000 a year and only 17% of those making less than $30,000.

This study really hits home for Sarah and I, as it’s a scenario that we see ourselves potentially facing in the coming years. We’re going to have at least one dependent child for, at a minimum, sixteen more years. In that many years, all of their grandparents will be well into their seventies, and one of them will be in his eighties.

The likelihood is pretty strong that, at some point in the next twenty years, we will have some degree of financial responsibility for some number of our parents as well as some number of children. That’s a scary prospect to face, and it’s a prospect that many people between the ages of 30 and 60 are either facing right now or are going to be facing in the relatively near future.

Given that we know there is at least a one in seven chance of being a part of this “sandwich generation” in the relatively near future, what can we do to prepare for it?

The first step, one that we can take right now, is to have some real conversations with our parents. Do they have enough to retire on? Are they going to be financially secure, no matter what? Or is there a reality in which we’re going to have to help out?

This can be a very difficult conversation to have, but it needs to happen for all of your financial sakes. If there is any chance at all that you will need to provide financial support to a parent in the future, you need to know it as early as possible. If a parent gives false or misleading information to their child and then later needs assistance that contradicts that information, they shouldn’t be shocked to find that their child can’t help them.

Both the parents and the children need to know and understand what the financial situation is and what kind of assistance is actually going to be available as things progress. Not doing that sets both sides up for hard times in the future.

The second step is to research this issue – and the expected health of your parents – thoroughly. Don’t be afraid to use tools like life expectancy calculators to get a bead as to when your parents health may begin failing. Note, of course, that such results are only approximations.

I’ve actually done this with my own parents, as painful as it might sound, and my best estimate is that we have about five to seven years until they’re in a life position where they’re going to need some degree of financial help from us. That gives us a timeline to work with.

The final step is to adequately prepare your own finances for that money crunch. As always, spending less than you earn – preferably significantly less – makes all the difference in the world. If you’re not actively increasing your net worth (either by decreasing debt or increasing savings) each and every year, you’re making a grave financial mistake.

It’s not just a mistake for the sandwich generation, either, though they’re going to have a severe financial crunch in the future. It’s a mistake for everyone who has to fill out an income tax form and mark a dependent on it… or will do so in the next ten years. If anyone in your life – including you – depends on your income or will depend on it, you need to get in the practice of spending less than you earn and saving the leftovers.

If you see any prospect of yourself becoming part of this so-called “sandwich generation,” thinking about it now and even planning for it a bit right now can make an enormous difference when that time comes around.

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