Financial Advice for the Sandwich Generation

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UPPER MARLBORO, MD- AUGUST 16: Daniel Sherrett, 28, who returned home to live with his mother, Marie, and older brother Mark, 31, after completing his bachelor's degree at the Culinary Institute of America, prepares dinner as part of his deal to live at home, on Tuesday, August 16, 2011.  (Photo by Michael Temchine/For The Washington Post via Getty Images)
Michael Temchine/For The Washington Post via Getty Images Daniel Sherrett, 28, who returned home to live with his mother, Marie, and older brother Mark, 31, after completing his bachelor's degree at the Culinary Institute of America, prepares dinner as part of his deal to live at home.
Between the growing number of adult children moving back in with their parents, and a growing population of senior citizens becoming financially dependent on their children, the Sandwich Generation can't seem to catch a break.

Nearly half of all adults between the ages of 40-59 are giving financial support either to a parent over the age of 65 or to their offspring. Nearly one in seven adults are supporting both. So says a new study by Pew on the rising financial burdens of those adults -- the generation that overlaps both the Baby Boomers and Generation X.

Multigenerational Impacts of Unemployment

The middle-aged Sandwich Generation has been hit especially hard by the recession and its aftermath. With unemployment still at 7.7 percent in February, and mass layoffs of nearly 135,000 in January alone, the long-term financial pressure is hitting those supporting multiple generations particularly hard.
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Older parents may face forced retirement, and its sudden impacts. Parents of teens may face impending college expenses. Grown children with children of their own may suddenly face their own unemployment and be forced to move back home.

Although older workers were more likely to have held onto their jobs during the recession than their less experienced counterparts, workers over 50 who were laid off during the recession are finding it difficult to find new work. Too young to retire, this age group was recently called "the new unemployable" by the Sloan Center on Aging and Work at Boston College.

Meanwhile, younger workers are less likely to be employed than they were just a few years ago, and those with jobs are earning lower wages, due in part to the competition from older, underemployed workers willing to work for less.

How to Navigate the New Terrain

Even though being financially sandwiched seems like being stuck in a vise that can only get tighter, with tax breaks and deductions for long-term care, retirement planning doesn't have to be a pipe dream. If you find yourself in this situation, here's some advice:

Don't dip into savings: Sandwichers should avoid dipping into personal and retirement savings if possible. Instead, evaluate all options for both the care of parents and the well-being of children. Investigating long-term care insurance before it's needed for aging parents, and knowing what expenses will have to be paid out-of-pocket might help make difficult decisions easier.

Explore all cost-savings options: Families with students heading off to college should explore less expensive options. Doing two years at a community college or an in-state school before transferring to a more expensive school for the fancy diploma, going part-time while working, and obtaining scholarships, fellowships or teaching assistantships are all options that can help lessen the financial burden for both parents and students.

Seek out tax breaks: With a wide array of financial scenarios presenting themselves in managing multiple generations, filing taxes can be tricky. Children, and even some caregiver expenses, may be deductible, or offset by tax credits. Adult children living at home may qualify as dependents, provided their income doesn't surpass a certain threshold. Elderly parents living in a nursing home can also qualify for dependent status, if a certain amount of financial care is given.

Reevaluate: Many people who established a financial plan several years ago are finding that it's no longer viable in the face of new challenges. Being realistic about the current financial challenges, revisiting a retirement plan, and rebalancing a portfolio for a change in risk-readiness can help keep retirement a reality, even in the face of economic uncertainty.

In the midst of such pressure, continuing to plan for retirement can be a daunting task for those stuck in the middle. But attending to your own financial security, and setting solid examples for your children, is as important as ensuring the financial well-being of others.

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The 7 Cities Where Americans Are Least Prepared For Retirement
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Financial Advice for the Sandwich Generation

Preparation ranking: 26/30
Confidence ranking: 22/30

Chalk Cleveland's lower ranking up to anxiety over future healthcare costs (31%) and potential changes to Social Security (24%). They cited these two reasons as the most likely road blocks to their retirement goals. The region also lives up to its reputation as a litmus test for national voter sentiment. Its scores on positive and negative sentiments were right on par with national averages, the report found.

Rankings of the U.S.'s 30 largest metro areas by Ameriprise Financial.

By Business Insider

Preparation ranking: 30/30
Confidence ranking: 24/30

Baltimore residents can't seem to get on a steady retirement track. Just 73 percent have begun retirement preparations, down 7 points from last year and a full 13 points lower than 2010. "In particular, locals are less likely than people across the U.S. to say they're making plans to spend more time with family (30% vs. 40%) or determining how they'll rest and relax (17% vs. 24%)," the report found. What's more, the 23 percent of locals who've delayed retirement blame job loss or setback (37%), health (33%), lack of savings (27%) and loss of equity in their home (13%).

Rankings of the U.S.'s 30 largest metro areas by Ameriprise Financial.

By Business Insider

Preparation ranking: 24/30
Confidence ranking: 26/30

New York City is no stranger to the bottom five, and its inhabitants are even further behind in their retirement plans this year. They're eight points behind the 70 percent of Americans who've started retirement planning, and a full 12 percent fewer New Yorkers have started saving. The number of residents taking advantage of employer-sponsored retirement plans also dropped, from more than half to just 40 percent. A bright spot: Fewer people feel negatively about retirement than last year, 30 percent vs. 41 percent.

Rankings of the U.S.'s 30 largest metro areas by Ameriprise Financial.

By Business Insider

Preparation ranking: 20/30
Confidence ranking: 27/30

Some dire findings from the report: Fewer Chicagoans say they are setting aside money for retirement (65% vs. 70%) or contributing to an employer-sponsored plan (47% vs. 53%) compared to 2011. But where Ameriprise says they're truly failing is estimating how much they'll need to get by in retirement. Just 16 percent have a figure in mind, versus 29 percent last year. Planning appears to be the issue. They've seen a 10 percent drop in the number of residents seeking professional financial planning assistance over last year and their confidence levels have dropped as a result––just 10 percent feel ready to retire.

Rankings of the U.S.'s 30 largest metro areas by Ameriprise Financial.

By Business Insider

Preparation ranking: 21/30
Confidence ranking: 28/30

Indianapolis locals may be more likely than the average American to set aside money for retirement (69% vs. 63%), but student loan debt is a thorn in their side. "They are more likely ... to say student loans are impacting their current  financial situation (21% vs. 14%)," the report says, and "one-third of those who share this concern say it's because they've assumed payments on loans they co-signed for a child or grandchild who is currently unable to make payments." They are also more unsure of where they'll retire than the rest of the nation (18% vs. 24%).

Rankings of the U.S.'s 30 largest metro areas by Ameriprise Financial.

By Business Insider

Preparation ranking: 25/30
Confidence ranking: 29/30

Falling behind big metro neighbors like Atlanta, Nashville, and Raleigh, Charlotte's high unemployment rate has done a number on the locals' retirement confidence. Per the report: "Compared to previous years, the number of metro area residents who say they are setting aside money in an employer sponsored plan (53%), determining the income they'll need for retirement (21%) or consulting with a financial advisor (22%) have all declined since 2010." They've also seen a 12-point drop in those who feel optimistic about their retirement plans, from 42 percent last year to 30 percent in 2012.

Rankings of the U.S.'s 30 largest metro areas by Ameriprise Financial.

By Business Insider

Preparation ranking: 27/30
Confidence ranking: 30/30

Time has done a lot to change the retirement plans of D.C. residents. Eight in 10 said they were preparing for retirement in 2010, which has fallen to just 68 percent this year. "Those who report setting aside money in their own savings in investments (50%), determining how much they need to save for retirement (17%) and consulting with a financial advisor (22%) also declined during this period," the report says. The result? A near 50 percent loss in confidence, which dropped from 21 percent to 12 percent and earned them the top spot as least prepared for retirement.

Rankings of the U.S.'s 30 largest metro areas by Ameriprise Financial.

By Business Insider

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