Sandwiches are great – but when you're the filling, it's a different story.
A recent survey by the Pew Research Center found that more than half of adults in their 40s have both a parent over 65 and a child under age 18 (or have financially helped an older child in the past year). That’s a lot of multi-generational responsibility, with your own financial hopes & dreams competing for resources.
Even if you do not support your parent financially, the time, worry, and care that an aging parent may need can take a toll and have an emotional cost. And what about sending those kiddos to college? Higher education fees continue to increase faster than other expenses, leaving many struggling to keep up.
Add in trying to save for your own retirement, a big purchase, or even just a nice family vacation and you can feel like you’re being spread awfully thin.
How can you navigate this period with your goals on track? The key is to create & maintain balance.
Your Retirement Fulcrum
Imagine for a moment a seesaw with two happy children enjoying the heck out of that thing. A seesaw works by pivoting on a stationary fulcrum, or balancing point. With too much weight on one side, it stops being a seesaw and becomes a ramp – and not much fun for the kid stuck at the top.
Now imagine your own seesaw, with your working life on one side and your post-work life on the other. (You can call that retirement or financial independence, but let’s agree that it would be great to not be obligated to work.) In this case the fulcrum represents when you choose to retire. In order for it to work, both sides need to balance out.
You can create that balance for yourself by tending to both your current quality of life and your financial future. Your resources are limited and committing too much to either side will leave one side of your seesaw in a bad position. Spend with abandon now and you may be forced to push your retirement date further and further into the future; but sacrificing your happiness (and sanity!) for the next 20-25 years is no recipe for success. Tend to your present with an eye on your future.
Saving for retirement is critical – and your 40s is a key period for saving. It can be tempting to put retirement saving on the back burner when you have competing demands for your cash. But the money you save now is more valuable than the money you put in later because it has longer to grow.
As an added incentive: contributing to retirement accounts and taking advantage of Healthcare Spending Accounts (HSAs) doesn't just build your retirement nest egg – it can also help lower your tax bill!
Having a plan in place to make sure your retirement savings are on track can help remove one potential source of stress and provide clarity for other areas of your financial plan.
Competing for Your Resources – Managing College & Aging Parents
The sandwich generation has two competing constituencies: children and parents. As you work towards preparing your children to leave the next, there might also be pressure to help your parents navigate a significantly more complicated – and much more expensive – environment than they experienced with their parents.
Planning is vital, which requires both knowledge and strategy.
Even for those who have already set something aside, most parents' biggest concern is paying for college. It's expensive and overwhelming, potentially derailing your own plans, but it's hard to be practical when something means so much to your child. Besides setting money aside, there are a lot of ways to prepare:
• Research the college selection process, setting a realistic budget of what you can afford, and make scholarships, grants, and merit awards central to the selection criteria.
• File the FAFSA – even if you think you don’t qualify!
• Contribute to 529 plans, even if college is imminent. The tax savings over several years can be significant and your money grows & earns interest.
• Add college expenses to your cash flow plan.
Knowledge is the first step when it comes to helping aging parents. Whatever their situation – managing just fine or on the edge of crisis – it's important to begin with an open-ended conversation about what they want and what’s important to them. Once you’ve established a dialogue, you can move into more practical areas:
• Do you understand their expenses? Do they?
• Do they have adequate insurance coverage?
• Get necessary documents in place – wills, trusts, medical power of attorney, etc. Is anything missing? Do any documents need to be updated? Knowing where these documents are in a time of crisis can remove a huge (and unnecessary) source of stress.
• Research additional resources for help. Are there local agencies, like an elder council? Are they veterans? Do they belong to social groups with friends & neighbors regularly checking in?
Protect Yourself by Managing Risk
Don’t forget to look out for yourself! Even the best plans for retirement, college funding, or helping an aging parent can fall apart with an unforeseen accident or crisis. What happens to your plans if you are unable to work for a year? Or if the breadwinner in the family passes away? This period of your life is a good time to make sure you have your assets – and liabilities – protected.
• Do you have enough life insurance?
• Are you covered for an extended disability?
• How can an umbrella policy augment existing liability insurance?
• Do you have long-term care insurance?
Create a Cash Flow Plan with some Flexibility
A cash flow plans isn’t the same as a budget, although budgeting is part of the process. Instead, a cash flow plan connects your current income, expenses, & saving to your long-term hopes & dreams, so you can see the big picture more clearly before making decisions.
A good cash flow plan helps you see where you are (the first step in knowing where you’re going), understand your true expenses (not just what you think you spend), and where you can save money (spotting leaks in your bucket). But it can also be a catalyst for more strategic conversations.
Are you holding enough cash? Too much cash? Is this the right time to refinance your mortgage or wipe out some debt? Are you taking the right amount of risk in your investment accounts? And are you investing your money in the right accounts? These strategies all play into a functional cash flow plan.
The Bottom Line
If you’re in that sandwich generation juggling kids at home, aging parents, and your own goals, you have a lot on your plate. But there are resources to help you sort it all out. Working with a financial advisor that understands the unique challenges of this generation can help you feel more comfortable in your current reality – and more confident about the future.
Ready to learn more? Click here to complete your scorecard and receive a free financial assessment. These quick 2-3 minute videos are a great way to identify what’s going well, what could use some attention, and the kinds of conversations you should be having around money.
Timothy Iseler, CFP®
Founder & Lead Advisor
Iseler Financial, LLC | Durham NC | (919) 666-7604
Iseler Financial helps creative professionals remove stress while taking control of their financial futures. As both advisor and accountability partner, we help identify current strengths and weaknesses, clarify and refine your long-term goals, and prioritize understandable, manageable, and repeatable actions to bring long-term financial well-being. Reach out today to take the first step.
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