Retirement

Financial Planning for the Sandwich Generation

By Chris Duderstadt

October 10, 2024

Financial Planning for the Sandwich Generation


Key Points – Financial Planning for the Sandwich Generation

  • What Is the Sandwich Generation?
  • The Impact of Longevity Risk on the Sandwich Generation
  • Why Stress Testing Your Financial Plan Is Key
  • Iterations of the Sandwich Generation
  • An Estate Plan Is a Critical Component of a Financial Plan
  • 5-Minute Read | 23-Minute Watch

What Is the Sandwich Generation?

Have you heard of the sandwich generation? No, we’re not talking about a generation that really likes to eat sandwiches. The term “sandwich generation” is defined in the Merriam-Webster dictionary as “a generation of people who are caring for their aging parents while supporting their own children.1” So, are you a part of the sandwich generation? Whether you are or could be in the future, we want to address some important financial planning considerations for the sandwich generation.

Schedule a Meeting Get the Retirement Plan Checklist

Building Generational Wealth

If you’re currently a member of the sandwich generation, are you feeling an increased level of financial and emotional stress? If so, know that you aren’t alone. Having the responsibility of caring for and financially supporting yourself, your spouse, your kids, and your parents can potentially be very overwhelming depending on your situation. It’s important to take a multigenerational outlook on financial planning and understand strategies that may be helpful with building generational wealth.

People Are Living Longer

The sandwich generation is only expected to keep growing because people are living longer. According to the World Health Organization, the number of people 60 or older worldwide is projected to increase from 1 billion in 2020 to 1.4 billion by 2030.2 And by 2050, that number is projected to jump to 2.1 billion.

Think about that for a minute. The number of people 60 or older is projected to more than double over a 30-year period. To take it one step further, the WHO projects the number of people 80 or older to triple over that same timeframe, reaching 426 million by 2050.

Longevity Risk Is a Very Real Risk

Those statistics can obviously be very encouraging. Living longer can equate to spending more time with grandchildren, traveling the world, and doing other things that you love. However, what if you aren’t healthy enough to do those things and don’t have the money to pay for those healthcare expenses or other expenses in retirement? That could force you to move in with your adult children and/or put them in a position to cover some of your expenses. This is a big reason why financial planning for the sandwich generation is critical.

Sandwich Generation Demographics

We also want to review an October 2021 Pew Research Center survey to better understand the importance of financial planning for the sandwich generation.3 The survey found that 23% of U.S. adults are a part of the sandwich generation. But look at Figure 1 below. The survey found that adults in their 40s and 50s are most likely to be members of the sandwich generation.

Sandwich Generation

FIGURE 1 – Sandwich Generation by Ages – Pew Research Center

Stress Testing Your Financial Plan

Keep in mind that your 40s, 50s, and early 60s are typically when people are in their peak-earning years and are at least thinking about when they want to retire. As you’re trying to mitigate the risk of outliving your money, it’s important to understand that the decision of when to retire isn’t just about you and your goals.

Will you still be OK if something were to happen to your spouse (and vice versa)? What if you unexpectedly have an aging parent(s) and/or children that rely on you for financial support? Those are situations that you need to stress test against. Hedging against various forms of risk is a critical component of wealth management and retirement planning. To learn more about stress testing your financial plan and key retirement planning considerations, download a copy of our Retirement Plan Checklist.

Sandwich Generation

Retirement Plan Checklist

Iterations of the Sandwich Generation

So far, we’ve just outlined what the sandwich generation looks like from the perspective of a three-generation family (children, parents, and grandparents). There are obviously many other iterations of multigenerational families. Carol Abaya, M.A., who was a journalist and author of The Sandwich Generation magazine, defined three different iterations of the sandwich generation.4 and 5

Traditional Sandwich Generation

This generation is typically in their 40s or 50s and have children and aging parents that depend on them for financial assistance or other care.

Club Sandwich Generation

There are a couple of variations of the club sandwich generation. This generation can be comprised of people in their 50s or 60s who financially support and/or provide other care to their parents, grown children, and grandchildren. There are technically two sandwich generations in that example with it being a four-generation family. That grown children generation could also face the burden of caring for their children, parents, and grandparents.

Open-Faced Sandwich Generation

Lastly, there’s the open-faced sandwich generation. This generation consists of anyone involved in elderly care.

Getting All Generations on the Same Page

Having a financial plan that’s been stress tested for the scenarios we’ve mentioned and being a disciplined saver are two actions that you can personally take if you’re a member of the sandwich generation. But again, you are just one part of the sandwich. You need to understand the roles of the other parts of the sandwich (your family). Having conversations about money with your family might be uncomfortable but think about the clarity those conversations can potentially bring.

For example, let’s say that you’re in your 40s and have a parent who is in their 70s. Your parent had been healthy until having a stroke, which has left them incapable of making their own decisions (including wealth management decisions). Did you previously talk to your parent about what their wishes are if they ended up in a situation like that? Did they financially prepare for the possibility of that scenario so they can afford a potential stay in a long-term care facility?

If the answer to those questions is no, the financial and emotional stress that you may potentially face could have a significant impact on your financial future. This is one of many instances of why it’s important to have an estate plan that details your wishes for medical care and how you want your assets to pass to your beneficiaries if you die or become incapacitated.

Family Meetings

Having conversations about impending death aren’t comfortable either, but hopefully this article has helped you understand why they’re important as well. At Modern Wealth, we encourage our clients to consider having annual family meetings to review each family member’s estate plan. Should you have a living trust or is a will-based estate plan enough? Keep in mind that setting up a living trust can help you avoid your assets from going through probate. A living trust also provides private asset transfer to your beneficiaries.

Do You Have Questions About Financial Planning for the Sandwich Generation?

If this article about financial planning for the sandwich generation has you asking yourself a lot of questions, start a conversation with our team below.

SEE OUR SCHEDULE

Building personalized financial plans that can potentially help mitigate financial stress is something that we’re passionate about at Modern Wealth Management. We’re ready to help you build a plan that’s tailored to your financial and life goals. There can be a lot of moving parts to address for someone’s plan if they’re a member of the sandwich generation. Let’s start planning today to attempt to bring clarity to you and your family’s financial situation.


Financial Planning for the Sandwich Generation | Watch Guide

  • 00:00 – What Is the Sandwich Generation?
  • 04:30 – Growing Over 60 Demographic
  • 08:38 – Temporary Retirement to Care for Loved Ones
  • 13:00 – Planning for the Sandwich Generation
  • 17:46 – Health and Wealth

Resources Mentioned in This Article

Downloads

Other Sources

[1] https://www.merriam-webster.com/dictionary/sandwich%20generation

[2] https://www.who.int/news-room/fact-sheets/detail/ageing-and-health

[3] https://www.pewresearch.org/short-reads/2022/04/08/more-than-half-of-americans-in-their-40s-are-sandwiched-between-an-aging-parent-and-their-own-children/

[4] https://www.louissuburbanchapel.com/carol-abaya/

[5] https://www.seniorliving.org/caregiving/sandwich-generation/


Investment advisory services offered through Modern Wealth Management, Inc., a Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management a Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.