Financially Sandwiched Generation

For some of my clients, the “accumulation years” (namely the years just before retirement) have become a time of financial hemorrhage. Sandwiched between adult children seeking (multiple?) degrees or grounded by a lack of available jobs and aging parents needing care and support, these clients are finding themselves having to keep multiple generations afloat, often at the expense of their own long-term financial plans.

The question for those in this situation becomes this: “How can I say “yes” to my own financial needs and goals, when it is impossible to say “no” to a family member in need?” The short answer is this: it’s very difficult to have your cake, and let others eat it too. Like many other things in life, one needs to prioritize and compromise. There are trade-offs to be made, and everyone in the situation needs to come together to find workable solutions. In these scenarios, we are here to offer council and advice to facilitate open and honest conversations.

Here are some suggestions to get you started:

1. First, set expectations and define boundaries. As a parent of three young ones, I know how important it is to explain in simple terms to my kids, “this is O.K.” and “this is not O.K.” Don’t lose sight of this parenting 101 principal with your young adults. If your child can’t find a job and in turn needs financial assistance/their old bedroom back, it’s important to discuss the expectations. Are they on YOUR payroll? Or are you simply loaning them money? You need to think like a bank. Set an interest rate and time period of any loans extended, as well as consequences for defaults. And if you’re uncomfortable with suggesting a loan, specify how they can earn their keep by helping with the tasks of the household.
2. Second, document. What about taking care of Mom or Dad? Clearly articulate (I suggest in writing) what type and amount of care is needed. Log your expenditures, mileage and time. These could be critical both for tax purposes, as well as providing a justification for possible reimbursement from the parents’ assets or estate if there are other siblings involved. What type of advanced or end-of-life care is desired? Has their Will been updated recently? Not having these documents can be extremely costly to caretaking family members.
3. Third, ask yourself, “Do you still need to earn a living?” Caring for others can be a full-time job. Working while doing so can sometimes feel like it’s just too much. Is quitting an option? Avoid this, if at all possible. Keep in mind that there are costs to quitting. And those costs often times will be far greater than the foregone paycheck. You lose retirement benefits and Social Security benefits will be permanently reduced. Time is the one thing we can’t make up for. Not to mention re-entry into the workforce at a comparable level can be extremely difficult. If leaving work to care for an ailing relative becomes absolutely necessary, be sure to look into your eligibility for unpaid leave under the Family Medical Leave Act.

As always, consider talking to a CFP® professional. Financial and physical caretaking has all sorts of ramifications, in terms of taxes, cash flow, insurance coverage, and asset management. It’s tough to be sandwiched between the needs of your kids and your parents. It’s only compounded if the tasks, financial strain and emotional turmoil cause you to lose your own sense of self. I hope these steps help provide ideas for transforming the job of supporting family from a burden to an obligation of love and pride.

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