Squished! What to Do When Financially Supporting Two Generations

Many middle-aged Americans are beginning to find themselves in a tight spot, financially “sandwiched” between caring for older and younger generations. While juggling their own financial needs and obligations, these pre-retirees are responsible for supporting adult children grounded by a tough economy and aging parents requiring care and assistance.

Certified Financial Planner Board of Standards (CFP Board) Consumer Advocate Eleanor Blayney, CFP® shares ways Americans can prepare for and navigate supporting children and parents while maintaining their own financial goals in the latest installment of CFP Board’s “Let’s Talk Planning” blog and its “Financial Planning is for Everyone” series.

“Many Americans find themselves having to keep multiple generations afloat, often at the expense of their own long-term security,” says Blayney. “The question for many middle-aged Americans becomes:  how can I say ‘yes’ to my own financial needs and goals, when it is impossible to say ‘no’ to needy family members?”  

Blayney shares best practices to ensure that Americans in the “accumulation years” – the two decades before retirement – can help their family without hurting themselves financially:

• Define expectations and set boundaries.  If a young adult can’t find a job and turns to the Bank of Mom and Dad, or checks into the Mom and Dad Hotel, it’s important to define some terms. Similarly, the type and amount of care for elderly adults should be clearly articulated and put in writing, especially for other siblings or family members. Make sure that aging parents have documents in place specifying wishes for advanced and end-of-life care, as well as designating power-of-attorney for medical care and financial matters. 

• Do not compromise your capacity to earn a living.  Sometimes working while taking care of others becomes just too much, and it seems necessary or easier to quit.  Avoid this if at all possible, as retirement and Social Security benefits will be permanently reduced, and re-entry into the workforce at a comparable level can be extremely difficult. 

• Learn what assistance is available from the government, community, and other resources.  In some cases, you may be eligible for payment for taking care of an aging relative on Medicaid.  Call your local Medicaid office and see if your state offers reimbursement to caretakers under the Cash & Counseling program. 

• Talk to a CFP® professional.  Financial and physical caretaking has all sorts of ramifications, including in terms of taxes, cash flow, insurance coverage, and asset management.  Identifying and managing all these issues are what a CFP® professional does best. 

“It’s one thing to be sandwiched between the needs of generations one up and one down.  It’s quite another to completely lose yourself and your own financial goals,” says Blayney. “Reaching out to the people and organizations that can help you and taking some financially-wise steps – such as meeting with a CFP® professional – can transform the job of supporting family from a burden to an obligation of love and pride.”

ABOUT LET’S TALK PLANNING

“Let’s Talk Planning” is a blog by CFP Board Consumer Advocate Eleanor Blayney, CFP®, with posts each week with practical financial planning tips for consumers, as well as insights into the latest developments at CFP Board.  In addition to offering counsel on timely and evergreen financial planning topics, once a month Blayney will remind readers that “financial planning is for everyone,” with tips for consumers of all ages and life stages.