Sandwich Generation

Sal Pitti |
Categories
Long Term Care
Retirement
Estate Planning
Family

The "Sandwich Generation" refers to adults who are simultaneously caring for aging parents while supporting their own children—often balancing career responsibilities, long-term financial planning, and immediate family needs. This unique financial situation presents challenges in budgeting, retirement savings, long-term care planning, and estate management. Understanding these complexities is key to securing financial stability and planning for future wealth transfers.

A Typical Scenario

Sarah and James, both in their early 50s, are professionals juggling the demands of their careers while caring for James' elderly mother and supporting their two college-aged children. Their financial responsibilities include:

  • Covering household expenses, mortgage payments, and their children’s tuition.
  • Assisting with long-term care costs for James' mother, who has early-stage dementia.
  • Planning for their own retirement while managing rising healthcare expenses.
  • Preparing for an eventual inheritance that may include real estate and investment accounts.

Financial Challenges

  1. Long-Term Care for Aging Parents
    • James’ mother requires in-home care, which costs approximately $5,000 per month.
    • They must decide between continuing in-home care, moving her to an assisted living facility, or utilizing Medicaid planning strategies.
    • Long-term care insurance was not purchased early, increasing financial strain.
  2. Supporting Children While Saving for Retirement
    • Their children rely on them for tuition and living expenses.
    • They are concerned about depleting retirement accounts to fund education.
    • Balancing present financial obligations with long-term retirement savings is a growing concern.
  3. Managing an Inheritance
    • Sarah’s parents have significant assets, including a home and investment portfolio.
    • Estate planning documents are outdated, creating potential tax inefficiencies.
    • They must plan for a smooth transfer of assets while avoiding excessive estate taxes.

Financial Planning Strategies

1. Prioritizing Retirement Savings

  • Contributing the maximum allowable amount to 401(k) and IRA accounts.
  • Considering a Roth conversion while their tax bracket remains moderate.
  • Exploring annuities and other income-generating investments for future stability.

2. Long-Term Care Planning

  • Reviewing Medicaid eligibility and planning strategies.
  • Exploring hybrid long-term care insurance options to cover potential expenses for James’ mother and for themselves down the road.
  • Establishing a financial and healthcare power of attorney for aging parents.

3. Estate and Inheritance Planning

  • Meeting with a financial planner and estate planning attorney to ensure a tax-efficient transfer of wealth.
  • Establishing or updating trusts to protect inherited assets.
  • Discussing inheritance intentions with family members to avoid conflicts.

4. Financial Independence for Children

  • Encouraging financial literacy and independence for their children.
  • Exploring student loan options and financial aid instead of depleting retirement savings.
  • Setting up 529 college savings plans for potential grandchildren.

Conclusion

The Sandwich Generation faces a unique financial burden, requiring careful planning to manage current obligations while securing a stable future. With proactive financial strategies—including estate planning, retirement optimization, and long-term care considerations—families can navigate these responsibilities without compromising their financial well-being. Seeking professional guidance can help create a structured plan that balances all these priorities effectively.






Disclosures: 

This case study is provided for illustrative purposes only to provide an example of the firm’s process and methodology. The results portrayed in this case study are not representative of all client situations or experiences. An individual’s experience may vary based on his or her individual circumstances and there can be no assurance that the firm will be able to achieve similar results in comparable situations. No portion of this case study is to be interpreted as a testimonial or endorsement of the firm’s investment advisory services. The information contained herein should not be construed as personalized investment advice.

No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of The Pitti Group strategies are disclosed in the publicly available Form ADV Part 2A.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

This information is general in nature and should not be considered tax advice.  Investors should consult with a qualified tax consultant as to their particular situation.

The Pitti Group Wealth Management, LLC (“The Pitti Group”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where The Pitti Group and its representatives are properly licensed or exempt from licensure.