Should You Prioritize Preparing for Retirement? Guidance for the Sandwich Generation

If you’ve ever taken a flight, you’ve likely heard those famous words of caution, “In case of emergency, put your own oxygen mask on before assisting others.”

Both in the air and in life, this phrase is often used to remind us that we can’t give others our all unless we’ve taken the necessary steps to care for ourselves first. Of course, as a parent and caretaker to your loved ones, these words are often easier to hear than to live by.

If you feel pulled in multiple directions — caring for your aging parents and supporting your children — you may be part of a larger phenomenon known as the “sandwich generation.”

For many people in their 40s or early 50s, several financial and emotional obligations may come all at once. Kids may be college-bound or freshly graduated, and parents are getting older, to the point where they may no longer be able to fully care for themselves. At the same time, these are the critical years leading up to retirement — ideally, your retirement savings strategy should be ramping up, not taking a backseat to other obligations. 

If you’re feeling financially squeezed and pulled in a million directions, you’re certainly not alone. Let’s talk about what you can do to balance out your obligations in a way that ensures your oxygen mask doesn’t get left behind.

First, a closer look at the sandwich generation

The sandwich generation consists primarily of Gen Xers — though some older millennials are nearing this stage in life as well.

While anyone can feel the financial squeeze of multiple dependents, women overwhelmingly are tasked with being caregivers to older relatives — and therefore may be more prone to the challenges of saving for retirement while caring for others. Currently, women spend 20 hours per week on average providing care for older relatives, which is around 50% more time than male caregivers.¹

Here’s why that’s significant from a financial standpoint: Women caregivers lose around $320,000 on average in both income and Social Security benefits as a result of their caregiving.²

So why is the whole premise of a sandwich generation a relatively recent concept?

A few reasons:

• People are living longer, which means more long-term care is required as they age.³ 
• People are starting families later in life.⁴ 
• Healthcare and long-term care expenses for older adults are rising.
• Young adults are saddled with student loan debt and otherwise have trouble affording to live on their own after college.

Combined, these factors have created a perfect storm, making it more expensive to both raise and financially support children, while aging parents rely on families for their ongoing care needs.

Caring for your parents

The type and amount of care you provide your parents will depend greatly on their physical and mental health. Perhaps they can manage activities of daily living just fine, but can no longer drive themselves to doctor appointments. Or, if they’ve recently experienced cognitive decline, they may need more ongoing supervision and continuous caretaking.

Wherever their current needs lie, here are a few ways we think you can more effectively manage your caretaking responsibilities for your parents, while keeping your own financial well-being in mind.

Understand their financial picture

Every family is different, but it’s not uncommon for older generations to be hush-hush about their finances — especially with their children. If that’s the case, you may have never really discussed money with your parents before. But as they age and you take on this caretaker role, it’s going to make your life much, much easier to have honest and transparent conversations with them about their finances.

You should have an understanding of their savings, investments, fixed income (pensions, annuities, Social Security benefits, etc.), and any other income sources, such as rental properties. In addition, you’ll need to know what insurance policies they have, and what’s covered (or not covered).

These might include:

• Medicare or Medicaid
• Long-term care insurance
• Homeowners or renters insurance
• Life insurance

If they have a team of professionals, ask your parents to provide their contact information and make an introduction. It’s better to familiarize yourself with your parents’ team of professionals now while they’re still able to engage in the conversations. 

Common professionals to contact include:

• Financial advisor or investment professional
• Insurance agents
• Tax preparer or accountant
• Estate attorney
• Real estate agent

The lines can easily blur between a caregiver’s own finances and those of their aging loved ones. But if you can assess what your parents have, you may be better able to leverage their resources to cover their ongoing needs and costs. Doing so can help reduce the strain caretaking puts on your own financial standings.

Establish legal documents

Your life as a caretaker will become infinitely easier if your parents are able to grant you legal access to act on their behalf.

If you haven’t already, talk to your parents about the benefits of establishing power of attorney (POA). Once established, you may be able to make decisions on their behalf, either in regard to their finances, healthcare decisions, or both. 

The sooner you’re able to establish POA, the better — even if you don’t end up having to use it until much later (or never). Your parents must be in a clear headspace in order to grant power of attorney, and it can take time to meet with a lawyer and get the legal paperwork in order. 

Caring for your kids

Again, the amount of care you provide to your kids will depend on their ages and your family’s unique circumstances. If your kids are in middle or high school, they still primarily depend on you for all their financial needs.

But for those who are preparing to head off to college or have recently graduated, they may have a bit more financial independence, but not enough to fully support themselves.

If your child is still in grade school...

When your kids still rely on you fully for their financial needs, it can be difficult to say no or set boundaries. However, you can still take time to teach your children about the value of a dollar — and how to make forward-focused financial decisions.

If you still give them an allowance or they plan on getting a summer job, help them learn the power of goal-setting by putting some money in savings each month. Then, rather than relying on you for big purchases, they can save up and experience what it’s like to pay for their own things.

While you may not want to open your whole financial ledger up to your child just yet, you can still take them “behind the scenes” and demonstrate how important concepts like saving and investing work, and what sort of decision process you go through when deciding whether to splurge or skip on an expensive item.

Having your children be more informed and financially literate at a young age may help them better understand why you’re in a tighter financial position than usual, and give them the tools to become financially independent earlier in life. 

If your child is heading off to college...

Considering the rising costs of tuition and concerns over mounting student loan debt, you may want to help your child cover the cost of college.

Talk to your child about setting a realistic budget for their expected expenses:

• Groceries (if they aren’t on a meal plan)
• Going out and fun money
• Clothes and school supplies
• Tech (laptop, headphones, new phone, etc.)
• Furniture and decor
• Laundry
• Utilities

Let them know you aren’t an ATM with unlimited withdrawals, but you’re here to help them feel less financially strained as they leave home for the first time. 

Perhaps you could set up a joint checking account and deposit a certain amount each month — making them responsible for paying for anything beyond what you’ve provided. Or, you could consider co-signing for their student loans, which may yield better loan terms (like a lower interest rate). Doing so would help provide some future financial relief, without taking away from your other financial obligations — just be sure they understand what it means to take on debt and what they’ll be responsible for paying after graduation.

If your child is a post-graduate...

With a tough housing market and high cost of living, it’s not uncommon for adult children to head back home after graduating from college. If that’s the case for your family, you may find it helpful to have an honest and transparent talk with your kids about the type of support you’re able to provide.

Perhaps they can live at home rent-free, but you expect them to pay for their own groceries or chip in for utilities. Or, maybe you don’t expect them to cover any costs, but you’d like them to help with some caretaking responsibilities for your aging loved ones.

Use this opportunity to teach your children some of the important financial foundational skills (budgeting, saving, investing, paying down debt, etc.) they can use to form healthy money habits in the future. Being a resource and educational guide is another important way to support your children on their journey toward financial independence.

Caring for yourself

When you feel financially pulled in many directions, it can feel impossible — even selfish — to put your own financial priorities first. But, like we said before, you must prioritize your own financial security to be able to help others. In fact, doing so is both for your benefit and the benefit of your children or other family members. 

Contribute to your retirement accounts

If you aren’t already, focus on contributing as much as you’re able (up to the annual maximum limit) to your employer-sponsored retirement plan, like a 401(k) or 403(b). If your employer offers matching contributions, make sure to take advantage of the full matching amount — this is free money that will compound in the coming years to hopefully create even more retirement income.

Reframe your financial priorities

Reassess your current budget, if you're following one, to see if your savings and spending are in line with your long-term goals. It’s not uncommon for people to stick whatever’s left at the end of the month in savings, but this strategy is inconsistent and unreliable. Instead, focus on “paying yourself first” by prioritizing your retirement contributions above all else, once your financial debts and obligations are met.

Follow a long-term investing strategy

You have enough responsibility on your plate, which means you likely don’t have the time or desire to continuously monitor your portfolio. A long-term investment strategy can help your portfolio stay focused on your greater goals (like retirement). By maintaining an appropriate amount of diversification and risk, your portfolio can more effectively weather market volatility over time.

Prioritizing your own financial wellbeing

If you’re someone who feels stretched thin between caring for an aging parent and providing financial support for a child, you still need to keep your own financial wellness a top priority. Why? Because you don’t want to face the possibility of outliving your resources — which could mean relying on your children financially in the future, essentially creating an ongoing cycle of support and dependence.

You deserve to enjoy the retirement of your dreams, and with a bit of strategizing, you should be able to prioritize your savings while there’s still plenty of time to prepare.