How to Save For Retirement When You're Sandwiched In

Jan 17, 2020

Reading time: 12 Minutes

You finally understand why “time flies” is such a popular saying. The weeks seem to fly by as you balance busy family life with focusing on your career. But your wellness also needs to be a priority, including your financial health.


While working hard and putting family first is important, you also must plan for your future.


The sooner you put more attention on saving for retirement, the longer your money can work for you. Time is a critical factor in building wealth through compound interest. You want your money making more money as early as possible.


Shifting your attention to your own future doesn’t mean you’ll have to stop helping your children or aging parents. There are still plenty of money moves you can make to boost your retirement savings without sacrificing what matters most to you.


Let’s take a look at the sandwich generation and the challenges they face, along with steps that will help them secure their future.


Multi-generational family walking on beach


What is the Sandwich Generation?

The term “sandwich generation” was coined almost 40 years ago to describe (mostly) women caregivers of elderly parents and maturing children. While it was recognized that “women in the middle” were overburdened and emotionally stressed, their financial wellness was often in jeopardy too.


With an average life expectancy approaching 79 years and a growing number of women becoming mothers later in life, the number of middle-aged men and women providing care to help generations above and below them continues to grow.


If you are putting time and/or financial resources toward helping your children and aging parents, you’re in the sandwich generation.


Even though taking care of multiple generations within a family isn’t new, the emotional and financial issues facing the sandwich generation have changed. Some families can easily adjust their schedules and budgets to support multi-generational care. But others face major challenges and end up putting their own needs aside.


Sandwich Generation Challenges

Your time ‘sandwiched in’ won’t last forever. Elderly parents pass away and most kids eventually move out and start living on their own.


But that doesn’t mean the years other generations are dependent on you won’t impact you emotionally, physically, and financially.

While there are plenty of rewards from helping those you love, caregivers are also at risk for social isolation, anxiety, and depression. Your sleep patterns, exercise, weight, and mood can all feel the effects.


Additionally, some people suffer injuries when caregiving. Others may turn to alcohol or drugs to deal with caregiver stress.


Three generations of women eating sandwiches


You may be so busy taking care of your loved ones that you fail to recognize the toll it’s taking on your finances. Even if you live a fairly frugal lifestyle, research shows it can cost over $200,000 to raise a child to the age of 18. And that doesn’t include the cost of college.


Researchers also estimate more than 3 million people are raising grandchildren. Even if there are other family members offering support, this adds one more financial and emotional layer for many sandwich generation adults.


Your parents may also need financial help due to increasing medical costs in retirement, longer life expectancies, and lingering impacts from the Great Recession. If they live a long distance from you, additional travel costs may also increase your expenses each year.


A recent article in USA Today explained how “Nearly four in 10 middle-aged Americans have no emergency savings fund and a third have less than $25,000 socked away for retirement as many grapple with the financial strain of helping support children, aging parents, or both.”


It makes sense that your expenses may rise when you care for others. But you may not realize how extensively your long-term financial plans can be affected by you taking periods off from work, passing on opportunities for advancement, and not increasing contributions to your retirement savings as you tend to the needs of others.



Facing Your Future

Depending on your family’s needs, it might make sense to put a temporary hold on saving for retirement (although we don’t encourage that). But even if one generation you’re caring for becomes self-supporting, you may still be supporting the other generation for some time.

If you feel you’re already behind in saving for the future, delaying contributions could increase the number of years you have to work or affect the lifestyle you’re hoping for in retirement.


Getting your financial house in order is crucial so that you can continue to care for your family. You can take some time doing this but starting now (or very soon) is key.


Here are five action steps you can take to save more for retirement while still supporting loved ones:

1.  Give Yourself a Financial Check-Up.

Set aside time in your schedule to do a thorough review of your personal finances. This includes checking all the balances on existing credit cards, loans, and bank and investment accounts. Also, take note of the interest rates you are paying or earning.

Get a free copy of your credit report online and review its accuracy. If there are errors or accounts you don’t recognize, address the situation promptly with the credit bureaus. You can also get your credit score for free and watch it over time.


Calculate your net worth by taking the value of everything you own minus the value of everything you owe or your assets minus your liabilities. As you pay down debt and boost savings and investments, you’ll see your net worth starting to climb.


A financial check-up helps you take control of your finances. If you’ve saved more than you realized, stay on course, and avoid lifestyle inflation. If you’ve fallen behind, any changes you can make are steps in the right direction.


2.  Track Your Expenses and Set Up a Budget

Your goal is to grow the gap between your income and spending so that you’ll have more money to save for retirement.

If you aren’t tracking your spending, start there. To record your transactions, you can use a simple notebook or spreadsheet, or apps such as Mint or EveryDollar.


After gathering your information, identify your essential vs. discretionary spending. There are always some expenses that you can reduce or cut - including services and subscriptions you don’t really use.


But also, be careful not to cut out things you really need during this stressful time.


If you’ve never used a budget, consider setting up a spending plan. Even if you can’t always stick to it, having an idea of how much you should be spending each month should help keep you focused.


Your emergency fund is an important budget line if you don’t have any money saved for unexpected events. You don’t want to go into debt if you must take some time off work to help care for a family member.


A couple completing a budget


3.  Write a Financial Mission Statement.

Keeping your focus on financial goals can be difficult during the best of times. But when you’re under significant stress, it can be a real challenge to remain dedicated to a list of goals.


Writing a financial mission statement helps you visualize your financial goals, the steps you’ll follow, and the why behind wanting to accomplish them.


Here is an example:

While still supplying support to our loved ones, we want to increase our retirement savings by tracking expenses, using a budget, creating an investment plan, and automating our contributions. Caring for our family is incredibly important but to take care of ourselves as we age, we also need to take responsibility for our financial future.


4.  Create an Investment Plan.

Creating an investment or retirement income plan involves considering your current financial situation and goals, along with defining your timeline and risk tolerance.


While you can find “DIY” investment planning tools online, it might make sense to consult a financial professional. To learn the basics about retirement savings and asset management, consider working with a fee-only investment advisor with a fiduciary duty to you as the client.


Just like a financial mission statement keeps your focus on the “why” behind your financial goals, an investment plan will keep your emotions in check during market swings. You don’t want fear to cause you more stress resulting in you making poor decisions with your investments.


5.  Automate Your Retirement Contributions.

When you automate your retirement contributions, you’re prioritizing your future self. If possible, contribute to a reliable retirement savings program. The most common place people invest is in their employer-sponsored 401(k) or 457(b).


While it would be ideal to contribute 10-15% of your income (or more) toward retirement, make sure you are contributing at least up to any employer match or you’re passing up “free” money. Any amount you contribute to your 401(k) or 457(b) will make a substantial difference to your retirement fund, especially over time.


Helping Your Children and Aging Parents

At this point, you may be feeling quite selfish about focusing so much on yourself. But remember, you’re not giving up on supporting the people you love. You’re trying to find a balance so you’ll be able to support yourself financially when you become the elderly parent.


Define Expectations & Limits with Your Kids

As much as you love your children, they need to become financially independent young adults. One of the best things you can do for them is to set clear limits about how you’ll support them financially as they mature.


You’ve probably heard that “your kids can take out loans for college, but you can’t take a loan for retirement.” And now is the time to listen.


Since time favors your child, you paying for all or even some of their college expenses may no longer be wise. Putting your child’s future ahead of your own is a significant financial risk. Get your own retirement savings on track before committing funds to college expenses.


Work with your children to find ways to save on college expenses. Consider ideas such as obtaining college credits during high school, working while going to school, attending a community college for the first two years, and applying for grants and scholarships.


Finally, remember you can always help with student loan payments after meeting your retirement saving goals.


If you have an adult child living at home, it’s important to ensure they are paying their fair share too. Supporting them for an extensive amount of time hurts their ability to become financially independent while reducing your ability to increase your retirement savings.


If they’re rooted in debt, help them find a way out. Aid them in creating a budget, establishing a debt payoff plan, and setting financial goals for their future.


Steer them towards personal finance blogs or check out some personal finance books from the library if they won’t listen to your advice. A financial coach or a fee-only financial planner might be worth hiring depending on the circumstances.


Helping your teens or young adults take control of their own finances benefits everyone.


Financial Advisor with couple


Discuss Finances with Your Parents

Should your parents already have an estate plan, you may just need to review it with them and continue to have conversations about their needs and wishes.


But if money isn’t a part of regular discussions, it may be very difficult to talk with your parents about their finances. Yet these are also some of the most important conversations you could have with them.


Also, keep in mind that avoiding these discussions can become much more challenging if your parents start suffering cognitive decline.


If you have siblings, set up a family meeting to talk about your parents’ future. In addition to their finances, you’ll also want to discuss legal and medical issues with your parents too.


Here are some things to consider:

  • Who will handle their finances if they are unable to themselves?
  • Are their wills up to date? What are their final wishes?
  • Have they obtained legal advice on power of attorney, living trust, living will, or other advanced medical directive documents?
  • Do they plan on aging in place or moving to an assisted living facility and have they planned for the costs?
  • Did they plan for increasing medical expenses and long-term care?


There are comprehensive resources available to assist you with having these conversations including Cameron Huddleston’s book, MOM and DAD, We Need to Talk.


When discussing funding your parents’ care, review any retirement accounts, savings, Social Security, pensions, insurance policies, Medicare, VA benefits, and other assets such as equity they have in their home.


Should your parents need financial help be sure to check into any benefits and resources accessible to seniors in their area. Senior centers, charitable organizations, and veteran organizations are good places to look.


You may find transportation, health screenings, meals, and other caregiving services available for free or at a very low-cost.


While discussing these matters with your parents may not be easy, it’s important to do so now so you won’t be questioning what they would want or how it will be paid for as you deal with their care or grieve their passing.


Putting Your Future First

Putting the needs of our children and our parents before our own comes natural to many of us. But if you’ve traveled by plane, you’ve heard the part of the safety talk reminding you to put on your own oxygen mask before helping others.


When you put your needs first, you come from a position of strength as you care for other generations.


Keep a focus on your finances and retirement savings, so you don’t let poor retirement planning shift the costs of your caregiving onto your children. It may take some work and a few discussions, but you can find a balance between funding your future and helping your maturing children and aging parents.


Finally, don’t forget your health. Being physically, mentally, and fiscally fit will help you endure and enjoy the years you’re caught in the middle.


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