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Caught in the Club-Sandwich Generation

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There has been an increase in the number of baby boomers who have taken on the responsibility of caring for their children and their grandchildren. This sub-culture is also known as the “Club-Sandwich Generation.” Many are initially willing to financially support their relatives but don’t realize that, by doing so, they may be putting their own financial security at risk.

In recent years, I have encountered such scenarios more frequently in my own practice. Many of my clients are retired, but several are pre-retirees. In the following cases, I’ve helped clients examine the effects of giving financial support to others, and what it will mean to them today and, more importantly, tomorrow. 

Case No. 1: A 26-year old moved home following his divorce and asked my clients to help bail him out of debt. Tragically, at the same time, my client’s mother became ill and passed away. The financial burden coupled with the loss of a loved one was stressful on the family. After providing my clients with financial recommendations, they have lined up to retire and hope to have the last of their son’s debt paid off before then.

Case No. 2: A 51-year-old son asked my clients, who are retired and in their 70s, to help him repay his debt and medical bills. He has been out of work for some time. During our annual review, I noticed they had a mortgage of $1,100/month, which hadn’t been an expense the year prior. They revealed their decision to help their son as the reason for the newly acquired debt. He had not applied for unemployment, turning instead to his aging parents. This unfortunate situation introduced financial insecurity to my clients who have worked extremely hard to enjoy a secure retirement.

Both situations present great risks. For some, these added responsibilities simply require a slight reduction in living standards; others are forced to make major life changes, such as selling their home or re-entering the workforce. In still other cases, clients can tolerate the pull from both sides financially, but still suffer from an emotional burden. 

As advisors, we need to help our clients understand the reality of their own financial situation, so that they can make smart decisions about helping others. We can help clients understand the risks of transferring their wealth to others; ultimately, however, it is ultimately their choice. If a client has decided to help others against your recommendation, you must decide whether to continue to help the client stay as financially stable as possible under the circumstances, or discontinue the working relationship.

For more exclusive coverage on the baby boomer generation, see:

The 7 Biggest Retirement Planning Mistakes

Protecting Boomers from Themselves

5 Steps for Boomers, Gen X and Gen Y to Prepare for Retirement


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