Financial Advice for the Sandwich Generation

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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