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.”

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.”

Reconciling a client’s own retirement planning priorities with the pressure they may feel to support their aging parents and/or an adult child is one of the toughest challenges members of the sandwich generation and their advisors face. While the solution is rarely cut-and-dried, the default should be to prioritize “paying yourself first” — for example, staying on course with retirement plan contributions rather than foregoing them in order to cover the cost of a child’s college education, says Jon Ten Haagen, CFP, RPC, founder of Ten Haagen Financial Group in Huntington, New York. “There are no scholarships or grants or loans for retirement, like there are for college. Parents don’t have the luxury of time [to rebuild their retirement nest egg] like kids do.”

Although tax rules allow penalty-free early withdrawals from a retirement account such as a 401(k) or IRA before age 59.5 to cover certain higher education and medical expenses, these “hardship” withdrawals should also be viewed as a last resort due to the potentially permanent damage they can inflict upon one’s nest egg and retirement income outlook, says Ten Haagen. “You don’t want to take a penny of qualified money out your retirement if you can help it.”

A better alternative to cover unexpected sandwich-related expenses is to create a robust and readily accessible cash reserve. For people confronting a potential sandwich situation, Ten Haagen recommends having enough in reserve—in a liquid fixed-income vehicle like municipal bonds, CDs or a money market account—to cover two years’ worth of their own expenses. If that money needs to go to support a child or parent, so be it.

If cash reserves aren’t adequate to cover expenses incurred from a sandwich situation such as college tuition for a child or care expenses for a parent, “you have to be willing to take on some additional debt,” says Cheng. That debt might come in the form of a home-equity line of credit, which in many instances is preferable to selling low-basis stock, she notes, for reasons related to tax exposure and growth potential.

Care questions

Another fundamental sandwich generation issue is whether to take on a caregiving role for aging parents. “Many parents expect their kids will take care of them later in life,” Rogin observes.

But the potential financial ramifications suggest clients should be wary of doing so. On average, according to the ACCC, a person sacrifices an average of $303,880 in lifetime wages and retirement benefits by opting to serve in the caregiving role. “You lose a lot in terms of accumulation potential and employee benefits if you take time off to care for someone,” says Ten Haagen.

Steering parents to some form of long-term care insurance coverage (if they don’t have it already) is, in many cases, the more financially prudent choice. Here’s an instance where the sandwiched client’s advisor can step in to provide guidance about whether it makes the most sense for their client’s parents to get traditional LTCI (with which health, age and financial wherewithal can be impediments) or to look into a life insurance policy that comes with some form of LTC coverage, such as asset-based life insurance + LTC. The latter often can make sense due to its ability to multipurpose one’s money, whereby if money is not drawn down to cover the cost of a care event, it remains in the policy for eventual tax-free transfer via the death benefit.

The underwriting with these hybrid policies tends to be quicker and less restrictive than with traditional LTCI. What’s more, notes Rogin, since many of these hybrid life insurance products are single-premium, they cater to people who have “rainy day” money sitting in a low-interest fixed account such as a CD or savings account. “If the money is available for that premium, it can make perfect sense.”

Creative solutions

If they have the means, it may make sense to ask aging parents to share in the extra financial burden their children take on to house them, care for them, transport them and the like. For example, the parents can gift money (up to $14,000 tax-free in 2015) to members of the sandwiched household. It may also be tax-efficient for the parents to sell off certain low-basis stock to raise funds to help defray the costs their kids incur caring for them, notes Cheng.

If the parents have money sitting in a low-earning fixed account or coming out of a retirement account via a required minimum distribution, it also may be worth considering using that money to purchase a single-premium immediate annuity to create an income stream that can be used to cover costs related to care and other needs.

Clients in a sandwich situation who want to provide a home for their aging parents or their adult children, and who have the means and the desire to invest in real estate, might also consider purchasing an apartment, condo or house as an investment property, then allow their family member to live there (and pay rent, if possible), according to Rogin. A real estate asset can provide diversity to a client’s portfolio while also satisfying their inclination to provide a home to a family member. Here’s another instance where it can make sense to bring parents’ money to bear.

As complicated as it is to help a sandwiched client navigate all these issues, doing so not only helps advisors strengthen relationships with clients who find themselves in such a situation, it also “makes good business sense,” says Cheng, whose practice emphasizes multi-generational planning. “You’re making yourself indispensible to a family, which is a good retention strategy. And in the process, you’re building relationships with the older and the younger generations your clients’ parents and kids. There’s a lot of opportunity there.”