‘Sandwich generation’ feeling the bite of saving for retirement
Nearly one out of every two Americans between 40 and 59 are using retirement savings to support their extended family and adult children, which is why plenty of preparation is key for this group, says a new survey.
A new survey shines a spotlight on the distinct challenges faced by members of the Sandwich Generation, who find themselves financially supporting both their children and older extended family members – and seeing their retirement savings suffer in the process.
Athene, a retirement services and annuity provider, surveyed Americans ages 40 to 59 who financially support and have an adult child or children over 18 and parents or extended family members living in the home. Forty-seven percent of respondents in the survey said they were putting off retirement to provide financial support to aging family members of adult children.
Amanda Carstens Steward, senior vice president at Athene, said it was particularly alarming that 46% of those caregivers said they were using retirement assets to support their family members. Unsurprisingly, 44% of respondents are worried about not having enough assets to retire, and 56% are worried about their standard of living in retirement.
“Financial professionals can play a key role in helping clients in the Sandwich Generation navigate these financial minefields,” Steward said. “For these clients who are feeling financially squeezed, financial professionals can help them stay focused on their own financial goals, especially their retirement savings.”
One way they can provide that support is reminding clients in the Sandwich Generation of the importance of consistently contributing even a small amount to their retirement savings and of maintaining a diversified portfolio to help protect them from market losses. They also should ensure their clients take advantage of employer matching plan contributions.
“By having a seat at the table, financial professionals can bring more than financial acumen to the table,” Steward said. “The trust that develops naturally in financial relationships can help bring all-important peace of mind and a sense of security to Sandwich Generation clients who may be emotionally as well as financially strapped.”
Steward said financial professionals have many opportunities to help facilitate conversations that center on family topics such as estate planning, elder care, college planning and cash management. Those conversations serve to build trust, gain a clear view of a family’s finances “and where they might be getting pinched,” whether it’s parents or young adults needing support.
“Open dialogues with families who are part of the Sandwich Generation can help determine the best financial plan to serve the overall family’s needs,” Steward said. “In some cases, that may mean longer support of adult children, and in others it may mean asking the adult children to be more financially independent to ensure their parents won’t outlive their retirement savings.”
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In addition, Steward said financial professionals should work with Sandwich Generation clients to avoid losing focus on their financial goals because of their responsibilities to others, including “ensuring they’re continuing to plan for retirement and have a safeguard against the unexpected.”
Athene’s research shows that 76% of the Sandwich Generation financially support their adult child or children, such as by helping pay for daily expenses, housing, insurance, education and debt reduction. Because of the support that Sandwich Generation parents often must provide to their young adult children, financial professionals should discuss options that clients have to help their young adult children in their journey to financial independence, Steward said.
In addition, Steward said professionals can work with young adults – potential future members of the Sandwich Generation – to help them understand the need to strive to set aside savings and contribute to a retirement plan from the outset.
“When young adults get their first ‘real’ paycheck, financial professionals can help them understand the power of compound interest as well as the huge benefit of an employer match to their retirement account,” Steward said. “It’s important that working young adults know how much of a difference saving for retirement sooner rather than later can make for their future financial independence.”