Study after study shows a growing number of boomers find themselves sandwiched by a sense of obligation to their children, the duties of caring for aging parents and the need to keep their own finances on track. These complex planning problems rarely come with easy solutions.
For anyone who questions the merits of planning ahead for the potential crush of a “sandwich” situation, Marguerite Cheng, CFP, has a tale to tell. It’s the story of a member of Generation X wrestling with the demands of looking out for aging parents and children while keeping her own financial ship on course.
Cheng, co-founder and CEO of Blue Ocean Global Wealth, a financial planning and asset management firm in Rockville, Maryland, notes that the Gen Xer acted proactively. She initiated dialogue with her senior parents about their overall vision for retirement before issues like long-term care and its costs became real instead of hypothetical. At their daughter’s urging, the parents purchased long-term care insurance (LTCI) when the father, the elder of the two, was age 68. Five years later, he was diagnosed with Parkinson’s disease. As his condition deteriorated, the cost for his care rose to $6,000 per month, which the LTCI policy covered for the more than two years he needed care.
“It’s all about managing risk,” Cheng explains. “The premium [for the LTCI policy] was high, but it was a known number, and it covered most of his care expenses.”
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This is a story Cheng knows intimately well, because she lived it. The story took a sad turn this February when her father passed away. “I was caring for my eight-year-old daughter and my 80-year old father at the same time. My parents had their financial house in order, but I still felt sandwiched.”
Painful as parts of her story are, Cheng says she doesn’t mind repeating it, so long as it helps open the eyes of clients who could find themselves in situations similar to hers, sandwiched by a sense of obligation to their children, a sense of filial duty to care for aging parents, and a desire to keep their own retirement plan on track amid the strain and stress of those other demands.
“This is fresh for me,” she says. “I’m giving people a real-life story that people can relate to. That’s very valuable.”
Cheng’s is the type of story advisors frequently hear from baby boomers and GenXers who have aging parents as well as their own kids to worry about. Fifty-six percent of Americans are providing some form of financial support to either their elder parents or young adult children, according to a 2014 survey by the not-for-profit organization American Consumer Credit Counseling. That includes 31 percent who provide support to adult children and 21 percent to an aging parent or elder. Meanwhile, about 15 percent of adults in their 40s and 50s are providing financial support to both an aging parent and a child, according to separate findings from the Pew Research Center.
Stats such as these coupled with stories like Cheng’s, suggest advisors need to consider an extra level of planning to protect clients from a potential sandwich situation. For example, generating liquidity for an unexpected outlay to help support an adult child or parent in need, finding ways to juggle retirement savings with paying for a child’s college education and/or a parent’s care, and evaluating long-term care coverage options for their parents.
As Cheng and many like her have discovered, these complex planning problems rarely come with easy solutions.
Priorities and hard choices
The problem-solving process typically starts with an advisor breaking the ice and opening a dialogue with the involved parties; no easy task given sometimes sticky family dynamics and the sensitive issues sandwich situations tend to raise.
“You need to have open, up-front conversations, whether it’s with your parents, your kids, or both,” says Ellen Rogin, CPA, CFP, founder of Strategic Financial Designs, a wealth management firm in Northfield, Illinois. “And as an advisor, it can help if you’re there as that objective third party who can shape the conversation and offer input.”
Initiating these conversations before a crisis occurs allows them to unfold in a less pressurized atmosphere, adds Cheng. “You can talk about the issues in small steps over a period of time.”