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Financial Planning Strategies for those Caring for Children and Aging Parents

Picture of Randall E. White

Randall E. White


A growing group of Americans in their 30s, 40s, and 50s find themselves caring for both growing children and aging parents at the same time. Labeled the “Sandwich Generation,” these caregivers have unique financial planning needs – and they face unique financial stress, too.

Aging parents often have health-related expenses, while minors and college-age children require substantial financial resources as well. At the same time, these caregivers caught in the middle need to be saving for retirement and they may still be paying off debts of their own.

To guard against the stress and anxiety such a scenario may cause, it’s important to plan strategically for this time in your life. It’s easy to neglect your own health – financial and otherwise – when caring for others, but the following steps can aid you in balancing your own needs with your ability to continue providing support for loved ones.

1.     Assess How Your Parents Can Plan for Sustainable Retirement Income

Talking about money makes many people uncomfortable, and this can be especially true when broaching the subject with your parents. However, having the “money talk” is important because you can help them guard against outliving their retirement nest egg. This is a real concern as baby boomers have begun to live longer, and many are unsure of how to pay for medical care they may need.

A major factor in running out of money in retirement is spending too much too soon. However, having a retirement income plan can help retirees avoid this troubling scenario. Proper planning allows retirees or those on the cusp of retirement to thoroughly examine all the factors that will affect their retirement income, including types of investments, rates of return, inflation, tax implications, and spending habits.

2.     Stay on Track with Your Own Retirement Savings

It is critical to continue saving money for your own retirement needs even as you care for others, and here’s why: Statistics from the National Retirement Risk Index show that more than half of working-age households are at risk of not having the resources to fully meet their needs in retirement.

It’s difficult to save, of course, if you’re managing the strain of both your children and your parents on your finances. Focus on contributing enough to get the maximum employer match so that you aren’t missing out on free money. If possible, think about contributing to other tax-advantaged accounts, too, such as a Roth IRA or a Health Savings Account.

It’s worthwhile to use a retirement calculator to see if you’re on track for the retirement savings you’ll need. Typically, retirees should plan to replace between 70 – 90 percent of their income in retirement. If you have concerns about your medical needs, or if you plan to travel extensively, you may want to shoot for a higher percentage. Regardless, it’s important not to neglect your own retirement savings needs even while you’re supporting others.

3.     Consider Ways to Pay for Long-Term Care

According to the U.S. Department of Health and Human Services, 70 percent of people aged 65 or older will require some type of long-term care in retirement. This can include nursing home stays and in-home care, both of which can quickly drain your assets.

One way to pay for long-term care needs is through an insurance policy. However, these can be costly and not everyone qualifies due to medical history. You may also want to investigate whether your state offers a long-term care partnership program. This would allow you to purchase a long-term care policy and use the associated benefits while also maintaining some of your assets while Medicaid pays for a portion of your care.

4.     Consider a 529 College Savings Plan

If you’re on track financially to meet your own retirement income goals, you may want to also begin saving for your children’s college education. Tuition and fees are likely to continue to rise substantially, and a 529 College Savings Plan could allow you to prepare to help your children meet these costs. A 529 offers opportunities for saving, as well as pre-paying tuition. Initially designed specifically for college costs, the Tax Cuts and Jobs Act extended 529 use to K-12 tuition and fees as well.

Whether or not you utilize a 529, encourage your children to think about how they can contribute independently to their own college educations, too. This could include applying for scholarships and grants, as well as participating in work-study programs. Many scholarships and grants go unclaimed every year so some digging and hard work can really pay off.

5.     Get Your Estate Planning Documents in Order – For Your Parents and for Yourself

Estate planning conversations can be uncomfortable, especially if your parents are hesitant to have a “who gets what” discussion. Remind them that estate planning is about much more than just transferring wealth; these documents can be used to pass on important stories and family values, too.

Estate planning should include naming an executor to carry out plans. It should also include documents like a will, trust, power of attorney and medical power of attorney, as well as any advanced health care directives you might want. Encourage your parents to prepare all of these, and include them in your own estate planning, too. These documents provide peace of mind and ensure your wishes will be met.

6.     Take Inventory of Your Assets and Organize Them

It can be difficult to find the time to keep track of your financial assets, especially if your days are filled with caring for children and aging parents. Rather than neglect your financial planning, though, think of ways to organize and create efficiencies.

User-friendly financial apps are useful for organizing your financial life all in one easily accessible place. If your parents are averse to technology, make sure you know where all their important financial documents are located. Most people have accounts across a variety of financial institutions, so ensure you stay up to date on all necessary account documentation. If you’re faced with tracking down account information once your parents are gone, the process can serve as an unnecessary stressor during an already difficult time.

7.     Ask for Support

Caregiving can drain your energy as well as your finances. Consider exploring shared caregiving responsibilities with other family members or seek out professional support. Either will allow you to build up your emotional reserves and get a well-deserved rest.

Professional services are also available to help with estate planning. Attorneys and financial planners can help you prepare documents and stay on track with your personal financial plan. This can be very helpful when you’re facing competing financial priorities.

Final Considerations

Those in the “Sandwich Generation” often have difficulty finding balance among multiple priorities competing for their time and money. Children have homework, lessons and practices and ongoing monetary needs, and aging parents may require quite a lot of time and money, too.

When you’re devoted to others’ care, it’s easy to lose track of financial planning considerations and your own long-term money goals. Remember that proactive planning reduces stress and anxiety and use the above steps to help you find balance as you navigate life’s family and financial challenges.

Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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