Advising the “Sandwich Generation” Client

The Thirty-Something crowd of the 80’s is rapidly becoming the Sandwich Generation. We hear the plight of these clients day in and day out. This unfortunate sector of the population is responsible for three generations: First, aging parents require financial and emotional assistance. Children approaching college require financial and emotional support. And the generation stuck in the middle has to juggle all of these demands and their own financial and emotional needs. Sound familiar?

To top it off, these clients are also burdened with trying to squeeze every penny out of their income in order to adequately save for their own retirement security. In today’s difficult economic climate, this can be a daunting task for even the most aggressive savers. However, it’s important to let Sandwich Generation clients know that they are not alone.

Advisors, analysts and economic gurus have all taken notice of this trend. There is plenty of advice available to clients in this situation. Heavy hitters like MetLife, AARP, Merrill Lynch and Charles Schwab & Co., have all provided some very insightful and useful information we can share with our clients.

The surprising statistics

Here are just a handful of eye-opening numbers from some of the recent sandwich generation studies:

• According to Merrill Lynch Affluent Insights Quarterly, 31 percent of baby boomers ages 51-64 are currently providing some form of support for both their children and parents. More than 45 percent of these people have had to make lifestyle sacrifices to support the needs of their families, and 26 percent are saving less for retirement. Another 19 percent have invited their adult-age children or parents to live with them to cut down on expenses.
• Half of the Middle Boomers (the 28 million Americans ages 52 to 58) still have children living at home. And 43 percent of them still have at least one parent alive, according to MetLife’s Mature Market Institute.  Almost three in four Middle Boomers have been providing financial assistance and support to their children and grandchildren, which adds up to average of about $38,000 over the past five years. About 14 percent of Middle Boomers are providing care to older parents.
• 4 in 10 sandwich generation parents continue to provide at least some financial support to their young adult children, according to a Charles Schwab & Co. survey.

Because the Sandwich Generation parents are often financially stretched to the breaking point, many of them have little left to put towards retirement savings. The long term implications of this could be devastating.

Easing the financial strain

What are some things we can do for our Sandwich Generation clients to help ease this incredible financial pressure? For those clients caring for elderly parents, encourage them to do some soul-searching. In order to break the cycle, they must carefully and objectively analyze their financial obligations. Work with your clients to identify and prioritize financial goals. It is imperative that a proper plan be put in place before your client’s situation escalates out of control.

Don’t Neglect Retirement

Clients who may be shouldering all of the financial responsibilities of parents may need to scale back and re-allocate some of those funds into much needed retirement savings. By boosting their own retirement accounts, they can ensure that they will not burden their own children with the same difficult situation in the future.

Teach Your Children

Sandwich Generation clients also face the dilemma of having to make tough choices with their own children. If your clients are supporting adult children, encourage them to teach their sons and daughters money skills and proper budgeting. Although many of your clients’ adult children are likely overwhelmed with college debt, it’s important to advise your clients that their children must take responsibility for these debts.

Provide Resources

Offer your clients some financial tools, guides and resources that they can share with their children. Inform them of various avenues available to their families to help them pay down any outstanding debt. And remind them that they must not sacrifice their own retirement at the expense of their adult children.

Help Clients Be Strong

If your clients have unemployed children at home, push their hand to tough love. As much as mom might want to bake cookies for little Johnny every night after she comes home from work, she still has to take care of Nana, report to her boss, make dinner, pay off Johnny’s debt, and perhaps even take care of her grandbaby. Being a loving parent does not always mean caving. Remind your clients of this and help them understand the value of fiscal responsibility at any age.

The Sandwich Generation is squeezed indeed. If you are working with a client in this situation, remember that you are their lifeline. They often times cannot see the forest for the trees, and it is your job to clear the way for a safe and stress-free retirement for them.