Helping the "Sandwich Generation" Plan for Two Retirements

Americans are living longer than in past centuries. A 2010 study conducted by the Stanford Center on Longevity found that the number of Americans age 65 and over will double over the next 30 years to 80 million, with their share of the population increasing from 13 percent in 2010 to 20 percent in 2030.

A longer lifespan is generally welcomed news. However, increased longevity means that many Americans find themselves sandwiched between the financial responsibilities of caring for their own children as well as their aging parents. In the midst of this complex predicament, these individuals, appropriately nicknamed the “sandwich generation,” are also in the midst of planning for their own retirement.

Your ability to help clients devise a financial plan that addresses their unique retirement income needs in addition to the needs of their elders and children will elevate your value as a trusted advisor. But first, you need to understand the intricate issues they face. Only then can you determine a meaningful course of education and action to hone your expertise in these areas. This article will discuss three vital eldercare concerns harbored by members of the sandwich generation and details about how earning an advanced financial designation like a Retirement Income Certified Professional® (RICP®) prepares you to effectively provide them with guidance and support.

1. How to pay for long term care

Seventy percent of people age 65 and older will need long-term care (LTC) at some point, reports LongTermCare.gov. But custodial and medical assistance related to LTC carries a premium cost and your clients need to understand just how much they’ll have to save to afford even the most modest LTC option. The Genworth Cost of Care Survey shows the average cost of monthly elder care as follows:

• Adult day health center: $1,473
• Assisted living: $3,628
• In-home health aide- $3,861
• Nursing home (semi-private room): $6,844
• Nursing home (private room): $7,698

Now consider that according to a recent Time magazine survey, 1-in-3 retirees have nothing saved for retirement and 23 percent of retirees have saved less than $10,000. The problem is clear and you can see why it’s critical to help sandwich generation clients acknowledge the risks and costs associated with long-term care. Help them avoid depleting their own or parent’s finances prematurely, or, facing the often undesirable position of caring for parents in their home without help. A financial advisor with deep expertise in retirement income strategies can equip relatives of elders with knowledge about options options such as buying LTC insurance, identifying potential care sources or reviewing government solutions such as Medicaid and veteran programs. As an RICP®, you can recommend an LTC solution that protects other retirement planning initiatives and complements a holistic retirement income plan.

2. Developing a budget keeps parents from depleting income too quickly

A 2014 Caring.com survey of 1,345 baby boomers found that fewer than half have had conversations with loved ones about management of medical treatment, funeral wishes, plans when they can no longer take care of themselves, and how to pay for care. One of the important steps in managing expenses for retirees includes creating a budget that takes into account existing sources of income such as veteran benefits, Social Security, pensions, life insurance and other investments. Financial advisors should help clients responsible for eldercare determine how to uncover all potential income and investment sources then work with them to design a budget that can maintain aging parents’ desired (or required) lifestyle.

A properly planned budget must account for basic needs like food, housing, health care, clothing, utilities and transportation. And whether they can afford it or not, most people spend money on things like entertainment, gifts, and unforeseen expenses like car and home repairs. When budgeting, it’s necessary to also consider one-off incidentals like stamps, batteries, light bulbs, and pet food if applicable. Small yet necessary expenses such as these can derail a modest budget. More significant purchases like new appliances, furniture and travel may not be necessities, but often can’t be avoided, even when living on a strict fixed income. For some clients, their parents’ income will be enough to cover necessities plus niceties, some will have just enough to cover needs, however other clients will find their parents working with an income deficit. All three scenarios can be improved and optimized with a meticulously line itemed budget. Once a well thought through budget has been developed, advisors can recommend investments carrying appropriate risk-levels and a suitable retirement income strategy. Courses offered through the RICP® curriculum prepare advisors to identify and optimize all available income sources, monetize investments in the most tax-efficient way possible and create an income plan that satisfies their wants, hopes and needs.

3. Talking about wills and estate planning

Discussing finances is often an uncomfortable subject between younger and older family members. Forbes notes that 7-in-10 adults find it difficult to discuss financial decisions with family, especially as it pertains to caring for an aging parent. Procrastination is dangerous however because it often leaves a family with high levels of uncertainty about important decisions that must be made when an elderly parent starts losing the ability to care for themselves. In these situations, financial advisors can find themselves managing awkward or even volatile familial dynamics, many of which could be simply avoided with preemptive retirement income planning. Legal issues regarding finances is an especially critical topic to discuss with aging parents. Children should know about any estate planning, attorneys, wills, trusts or power of attorney for finances and health directives. Documents should be stored in a safe but accessible location for future reference, when needed. Explain to your clients that talking about the estate and their parents’ end-of-life wishes before a dire situation occurs can help alleviate tremendous stress during difficult times. As an RICP®, you can provide guidance in estate issues as part of the financial planning process for both parents and children. Retirement Income Certified Professionals® can confidently review existing documents and answer questions related to estate plans, trusts, wills and powers of appointment.  

Your expert advice will help them have difficult conversations more easily and even more importantly, with RICP® training you’ll be capable of developing a plan that makes sense and satisfies all parties involved. Estate planning expertise is just another way you can solidify your position as your clients’ trusted advisor.  

Baby boomers are entering retirement at an astounding rate of 10,000 each day, and younger generations are anxiously awaiting the opportunity to begin their so-called golden years. Many of your clients are simultaneously balancing their own retirement income needs with those of their aging parents. Qualified and competent advisors are surrounded by opportunities to assist with this dual financial responsibility. An advanced designation like the RICP® equips you with expertise and confidence that will help you best serve clients who are part of the “sandwich generation.” The designation distinguishes you as a retirement income specialist making you a preferred source for financial advice. Find out how to become a retirement income expert by downloading The Guide to Being a Successful Retirement Income Planner.