How the sandwich generation can avoid getting squeezed
CHICAGO (Reuters) - Children of the baby boomers, the so-called sandwich generation, face household fiscal strains unlike any other time in history, often with the obligation to support their parents as they age and their children as they enter college, with one eye on their own retirement funds.
Here's the bottom line: More than 60 percent of young adults ages 19-22 receive financial help from their parents, according to a 2012 study co-authored by Patrick Wightman and Robert Schoeni at the University of Michigan. The tally comes to about $7,500 a year when help with rent, transportation and college tuition are included.
As for elder care, the sandwich generation faces frightening costs. More than 10 million Americans currently need long-term care, according to the Kaiser Family Foundation. Today's average annual cost of nursing home care is $72,000; assisted living, $38,000; and home health care services up to $30,000 a year, according to Kaiser Health News. The U.S. Census Bureau says the number of Americans aged 65 or older will double to more than 70 million by the year 2030.
Even the affluent have their sandwich-related worries. A new Merrill Edge report finds that in April 2012, 49 percent cited caring for an aging parent and/or adult children as a major financial concern. Half of adults ages 18-46, along with 42 percent of baby boomers, reported paying medical expenses for aging parents and relatives, according to U.S. Trust's 2012 survey of high and ultra-high net worth Americans.
How the elderly have prepared for retirement also plays a role. The recession damaged or wiped out many retirement nest eggs. Now many older adults may plan to keep working, but this may not always pan out. "This significant portion of the boomer generation may rely upon their family for support," says independent financial adviser John Graves, editor of the Retirement Journal and author of "The 7% Solution," a book about affordable retirement. Graves has a name for these sandwich seniors, who represent the opposite of empty nesters: "return-to-the-roost-ers."
The overarching problem is so bad that some politicians, while perhaps lacking a battle plan, at least want to raise awareness. In Michigan, Gov. Rick Snyder has proclaimed July 2012 as Sandwich Generation Month.
So how can you survive the sandwich years, and guard against getting your pockets picked by unforeseen expenses? Experts recommend these courses of action.
1. See it coming
It wasn't hard for Mark Roma of Voorhees, New Jersey, to see his jump into the sandwich generation looming. The 48-year-old has four daughters (18, 15, 10 and 9), and he's about to start paying for college tuition in the fall - the first in a long string of tuition bills that will likely stack up for the next 16 years.
His parents are 69 and 70 and lack long-term health insurance. His wife Amy, who works part-time as an administrative assistant, has a father who's 81. To top it all off, he has survived two layoffs in the last four years as a senior business development manager in factory automation and IT.
"At the end of a day, you can only divide a quarter so many ways," he says, so some planning is in order.
2. Find a financial adviser - now.
For many sandwich adults who lack an adviser, "They either think they don't have enough money or they can't afford it," says Luke J. Vandermillen, vice president of retirement and investor services for the Principal Financial Group.
But those who work with an adviser make big changes. According to the latest Principal Well-Being Index, 83 percent of workers who use a financial professional have an emergency fund, compared with 58 percent of workers who do not use one.
3. Do the crucial paperwork.
Many documents that can ease sandwich years fears - from a living will or power of attorney to trusts and a 529 education saving plan - require busy adults to take time out and consider the big picture, says Katie Libbe, vice president of consumer insights for Allianz.
You will want to include other professionals in your planning, such as a lawyer and/or accountant, says William Smayda, a director and regional sales manager for Merrill Edge in Los Angeles.
4. Talk to older parents to help them - and you - prepare.
Many sandwich adults start retirement planning when their own parents are healthy and working, but things can change. You might not relish talking to Mom and Dad about worst-case scenarios, "But you have to have these conversations," Libbe says. "What if all of a sudden when someone has a stroke or is diagnosed with Alzheimer's? If the family has played these what-if scenarios, they won't have to treat it like it's a fire drill."
5. Have older kids help out in practical ways.
We're not talking the odd babysitting gig. While 1 in 8 kids now return home to live with parents after college, there's no reason why those children can't contribute something to footing household expenses. "It's not always a financial drag with more responsible children who pay rent," Smayda says.
As for college tuition, since 1976, the cost of a year of school has risen by a factor of eight, U.S. Department of Education statistics show. Put another way, the price tag of college triples roughly every 17 years; over time, tuition has risen at twice the rate of inflation.
6. Balance short-term expenses with long-term goals.
Many sandwich families get in a bind because they're so busy paying for everyday expenses that they allocate little or nothing to bulwarks that can ease their biggest fiscal burdens. What's more, they often lose lots of traction from impulse spending. Big categories where people can cut back - make room for college, retirement or healthcare planning - include entertainment and dining out, new second cars and personal luxuries, the Merrill Edge report states.
(Follow us @ReutersMoney or here. Editing by Beth Pinsker Gladstone and Dan Grebler)
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