Conversations for the Sandwich Generation

by admin 12. November 2014 11:54


By Karen DeRose, CFP® & Anthony DeRose, JD*, MBA, CPA*

Individuals and couples caught between providing emotional and financial support to their children and their own parents simultaneously are sometimes called the “sandwich generation”—a catchy phrase for what can fast become a financially draining predicament if you are not prepared to juggle everybody’s needs, including your own.

But the situation doesn’t have to pit your children against their grandparents or be detrimental to your own retirement plans. With some advanced preparation, you can stay on track with your own goals while managing your family’s expectations. Your financial planner can help you factor in the considerations involved with your own situation.

The most important thing to know is where you are financially and emotionally. If you are stretched already, having to take care of others creates a huge burden. Once you know what your capabilities are, you can decide what support you can offer or whether you will modify your own goals to support your children and parents.

Difficult conversations

While it can be hard sometimes to talk about finances, expectations and needs, communication is essential for the situation. If you don’t talk to your children and parents about what support you can provide before it’s needed, your family may expect you to be more of a resource than you had intended.

Before talking with your family about their needs, talk with your spouse to identify which things you both feel you must do in support of your children and parents, which things you want to do, and which things would be nice to do. While some of your decisions may be cultural, others will be rooted in the situation or in the personalities involved.

Talk to your kids

Let your children know when they are in high school what the savings plan for college is and whether you expect them to fund part of it, work while they are in school or take out loans. When the time is right, discuss your financial strategies for paying for their wedding or providing a down payment on a first home.

Use these discussions to help guide your children in their own long-term financial planning. Educate your children about budgets, lifestyles, retirement accounts, savings and investing. No one wants to see their kids overextend themselves and spend years recovering from debt, but it’s important for your children to understand that you have your own priorities to support.

If the kids expect Grandma to be a nanny to their newborn, they may be shocked to hear that while you want to spend time with your grandchild occasionally, you may not want to be responsible for babysitting. You can offer help by suggesting creative ways for them to meet their needs using their own resources.

Approaching your parents

It can be difficult to get your parents to talk with you about their finances, so you may have to coax a discussion by sharing your own long-term strategies to reinforce the benefits of planning. Ask whether your parents have updated their wills, powers of attorney and health care proxies, and encourage them to consult an elder care lawyer or a financial planner who can work with them on managing their estate.

The best time to approach your parents about their financial security and long-term care plans is while they are happy and healthy, even though there may be some resistance on their part.

Long-term care needs are perhaps the most daunting consideration when dealing with aging or ill parents. Do your parents have a financial plan in place? A common strategy for the sandwich generation to minimize their financial risk is to purchase long-term care policies for their parents. If it costs $5,000 a year for two long-term care policies, you’d have put in $100,000 after 20 years, but if one of your parents needs nursing-home care at a cost of $5,000 or more per month, you’ve made a good investment in a policy that minimizes the risks to their estate and yours.

No matter how good your relationship with your spouse is, if your parents or in-laws put pressure on you to support them in some way, it creates stress. Your own mental health is the biggest potential victim. In the end, being honest with yourself about what emotional, physical and financial resources you can share is essential to approaching family situations in a way that makes sense in the long run.

Talk to your financial planner about:

  • Which assets are most appropriate to draw from to help your children pay for college or a wedding or to purchase their first home
  • How gift strategies can help reduce estate taxes and provide for family needs
  • Evaluating the need for long-term care insurance

Karen DeRose and Anthony DeRose are  registered representatives of Lincoln Financial Advisors Corp. Securities offered through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and a registered investment advisor. DeRose Financial Planning Group is not an affiliate of Lincoln Financial Advisors Corp. Lincoln Financial Advisors does not provide legal or tax advice. CRN-907779-042114
*Licensed, not practicing on behalf of Lincoln Financial Advisors Corp.


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