The “Sandwich Generation” and the Changing Family Dynamic

Posted on May 14, 2012 by Tony — No Comments ↓

The “Sandwich Generation” is becoming a more commonly used term as more and more individuals begin caring for not only their aging parents, but their children as well, all the while planning for their own personal retirement. According to an April 2010 Merrill Lynch Affluent Insights Quarterly survey, more than one-third of affluent Americans financially support their children and parents while trying to maintain and build upon what they have set aside for retirement. According to the Pew Research Center, 1 of every 8 Americans aged 40 to 60 is both raising a child and caring for a parent, in addition to between 7 to 10 million adults caring for their aging parents from a long distance. The US Census Bureau statistics indicate that the number of older Americans aged 65 or older will double by the year 2030, to over 70 million.

With the complex equation of most individuals within the sandwich generation being baby boomers, added to the intricate family dynamics, financial advisors are finding themselves advising over three generations. What is the family dynamic like? Many boomers work full time jobs while raising a family or supporting children in college, in addition to serving as the primary caregiver to one or both parents. How do these families cope with the changing dynamic? Most consider trade-offs, such as significantly cutting back on personal luxuries, making lifestyle sacrifices to support their family’s needs, and even cutting back on their own personal retirement.

So, what kind of help can advisors give to those facing the pending or already existent sandwich generation? First and foremost, ease the stress of competing demands by identifying core values and priorities to find balance in life. Always keep open lines of communication – of course it’s difficult to discuss the financial impact of diminishing health and the eventual loss of a loved one, but putting off that conversation can leave you unprepared for the consequences. Implementing a plan of affairs for aging parents can off-set the negative consequences of a life-changing event. Be sure to know where your family members keep important financial and medical documents, as well as the contact information of doctors, lawyers and advisors. Always know the type of long term care, and how much it will cost.

When it comes to financing children’s education, only 12% of the sandwich generation said they were cutting back on contributions. What’s the biggest tip for parents? Start saving early. Teach your children early on the skills necessary to embrace financial independence, budgeting, and the importance of credit and planning for retirement. You can even bring your kids with you to an advisor meeting to discuss all these great education finance tips.

I’m sure you’re thinking: but what about me? Get with an advisor and review your investment strategy, as well as home financing, asset allocation, insurance, securities, your portfolio, and your general retirement strategy in general. This way, advisors can help shift financial securities based on the family’s specific dynamic. According to the survey, 54% of the members of the sandwich generation work with an adviser, and among them, 32% wish that they had started working with one sooner. Among the remaining 46% who don’t work with an adviser, 83% think that they would benefit from such a relationship.

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Cause & Effect: Household Numbers on the Rise

Posted on April 30, 2012 by Tony — No Comments ↓

It may not be what you think – according to the Census Bureau, the number of individuals and families living together have taken a big jump in the past several years – and it’s not because grandma and grandpa are living with their grandkids. The report found that 69.2 million, or 30% of families were “doubled-up” (households that include at least one person 18 or older who isn’t enrolled in school and isn’t the householder, spouse or cohabiting partner of the householder) in 2011, up from 61.7 million adults, or 27.7%, in 2007. The surprising part? The biggest increase comes from young people, ages 25-34, living with their parents. Some 5.9 million, or 14.2% of 25-to-34 year olds, lived with their parents in 2011, up from 4.7 million before the recession.

The Cause: With high unemployment rates, a meek economy and a surplus of students graduating from college with a laundry list of student loans to pay off, it’s not surprising that more and more young adults are living or moving back in with their parents. What better way to save some money, look for a job and improve their financial standing? Another interesting cause I read the other day was that unlike the past, many young adults find it quite pleasant to live with their parents these days. With child-rearing strategies changing, more parents and their children are nurturing lasting relationships together.

The Effect: The Census Bureau is having a tough time in figuring out the actual poverty rate of the United States: “These young adults who lived with their parents had an official poverty rate of only 8.4%, since the income of their entire family is compared with the poverty threshold,” David Johnson chief of the Housing and Household Economic Statistics Division at the U.S. Census Bureau said. “If their poverty status were determined by their own income, 45.3% would have had income falling below the poverty threshold for a single person under age 65.”

Another effect that affects the economy is a smaller number of households. A reduced number of overall households leads to a reduction of consumers, including those in the housing market, which puts a huge drag on the economy. Regardless of the misleading statistics, the biggest impact can be felt much closer to home. While young adults living with their folks may be reaping the benefits, parents supporting adult children have less money to spend on themselves, not to mention less income to save for retirement.
Some experts say that there is a silver lining. They believe that these young adults “doubling up” will eventually become financially stable and be able to move out, enter the housing market and start consuming again. This boost in consumption would lead to an improvement in the broader economy.

Unfortunately, there’s no telling when that will happen, and in the meantime it’s not fair to many retirement-saving parents to allow their children to hurt their futures. If you’re going to provide a home and various necessities for your post-graduates or financially-unstable children, make sure you set parameters that keep them from getting to comfortable in your house. Don’t feel bad charging them some sort of rental fee and giving them a timeline in which they must move out or find a job. Without structure the situation could get worse and put too much pressure on your financial future.

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