Building wealth, maintaining health: How the sandwich generation makes it work

Navigating sandwich generation responsibilities

Around 2008, Doug Nordman of Oahu, Hawaii, had a moment that was typical for many Americans with aging parents and children still at home. His father, who lives in Denver, was starting to show signs of Alzheimer’s, leading Nordman to begin considering the eventual need for full-time care. At the same time, he and his wife wanted to make sure they had enough saved to pay for daughter Carol’s college education.

“There are certain things in life most would agree you must do,” says Kjersten Lazar, a Certified Financial Planner™ with Raymond James & Associates in Somers, New York. “You must take care of your parents and you must help your children stand on their own, and sometimes that requires large monetary contributions.” And then there is your own retirement that needs funding.

Lucky for Nordman, who retired from the U.S. Navy after 20 years of service, his nest egg was fully funded. In addition, he and wife, Marge, a Navy meteorologist and oceanographer, had started saving for Carol’s college when their daughter was born in 1992, and they were also able to begin putting money aside to help care for his father.

Even so, in 2011, when Nordman had to move his father to a full-care facility in Denver, the family was suddenly “going through money like water,” he recalls.

“We see this coming up a lot, these competing goals,” says Laura Steckler, a Certified Financial Planner™ at Steckler Wealth Management Group of Raymond James, in Coral Gables, Florida. “In many instances, even though the clients are in their prime retirement savings years, the kids and parents come first.”

“In the past few years, they’ve been spending several thousand dollars a month on the parents’ 24/7 home health care aides, while also visiting at least three times a week to manage care,” she explains.

As small business owners, they have a small business retirement plan, but they haven’t taken advantage of additional tax deductions and retirement savings apart from employee contributions, given their limited cash flow. Because they are small business owners without employer matching or other tricks to build their retirement savings, they have only been saving the minimum amount necessary for retirement to maximize their tax deductions annually.

Meanwhile, just as the couple adjusted to the significant added costs of caregiving, their daughter announced she was getting married. Overjoyed, they decided they wanted to give her the wedding of her dreams.

Steckler proposed they consider a more affordable wedding budget than they initially planned, but the client wouldn’t hear of it. “So I suggested they create a separate account for short-term savings,” she explains. “We wouldn’t invest this money, and they wouldn’t comingle the money with regular accounts that they use to pay the bills. That’s what they did, and we were able to help them create discipline for a short-term goal.”

Getting the right help

“We ask our clients what they would regret more: doing it or not doing it,” says financial advisor Lazar, of helping her clients balance financial needs. “A lot of financial planning is helping clients react to the emotional power of money and the importance of their choices, guiding them to the answers they’re most comfortable with.”

Most families with sandwich generation financial obligations could benefit from meeting with a financial advisor to create a game plan.

There’s good reason for this:

• 71 percent of Americans have not saved enough for retirement
• The average annual cost of nursing home care is $84,000
• Fewer than 20 percent of those needing nursing home care have enough assets to cover more than three years of that care
• Pew Research says that nearly 25 percent of caregivers have had to take a leave from work to care for a seriously ill family member

However, McAleer asserts that a financial professional’s role goes beyond what some may see as traditional investment advice.

“We’re forming partnerships with companies in the areas of concierge health services, care management, estate planning and elder fraud, for example, and helping advisors establish relationships with similar resources in their communities,” he explains. “It’s about finding the right solutions to meet a variety of needs — whether emotional, logistical, legal or financial — and then connecting the dots.”

Nordman, the Hawaii man caring for his elderly father from afar, found such a partner on his own, but reiterates the value of having experienced help.

“One thing we’ve done over the years is work with a geriatric care manager to help navigate everything from care facilities to veterans’ benefits,” McAleer explains. For example, even though his father served in the Army Reserve, he is not considered a veteran and is therefore ineligible for benefits — something the geriatric care manager helped him research.

Finding balance

When talking with clients, Lazar often reminds them that planning for retirement isn’t something static. “It changes over time, based on life circumstances and financial resources.”

For Nordman, who saved aggressively during his 20 years of active duty and had his financial plan in place, there was no need to panic when the need to support his father arose.

And for Laura Steckler’s clients, the eldercare they are providing has been eye-opening. So much so, that while they haven’t increased their retirement savings, and they’re still moving ahead with their daughter’s dream wedding, they did decide to purchase long-term care insurance for themselves.

“They recognized the financial and emotional impact of their parents not having the assets to take care of themselves in old age, and it was important to them not to put their daughter in that same position,” says Steckler.