Juggling responsibilities: Financial planning for the Sandwich Generation

Key takeaways:

• The Sandwich Generation is a term for individuals, typically in their 40s or 50s, who’re supporting both aging parents and dependent children. 
• This dual role can strain finances and is a common stressor among this demographic. 
• Financial planning for the Sandwich Generation will need to consider aging parents as well as dependent children. 

01/17/2025 — The Sandwich Generation is navigating the complex financial landscape of supporting aging parents, dependent children, and themselves. This is in part because people are living longer, and young adults are struggling to be financially independent. Your clients that fall into this category, mostly Generation X who’re currently in their 40s and 50s, face unique challenges that require strategic financial planning. 

What is the Sandwich Generation?

The Sandwich Generation isn’t a true generation like the Greatest Generation or the Baby Boomers, but a topical way of describing people who find themselves squeezed between two financial responsibilities: caring for aging parents while still supporting children, either school-aged or young adults. According to the Pew Research Center, more than half of Americans in their 40s (54%) have a living parent aged 65 or older and are either raising a child younger than 18 or have an adult child they helped financially in the past year.¹ This dual role not only strains finances but can also affect emotional and physical well-being. As financial professionals, recognizing these pressures can be the first step in offering meaningful support.

Considerations when advising the Sandwich Generation

1. Focus on budgeting with family in mind

Budgeting can help clients to track their income and expenses to help identify areas where they can cut back or reallocate funds to accommodate additional responsibilities. Financial planning for the Sandwich Generation will include consideration for potential medical or long-term care costs for parents and education, health care, or other living expenses for children.

2. Help them keep their retirement accounts a priority

The Sandwich Generation may feel the need to sacrifice their retirement savings goals to meet immediate family needs, but this can be detrimental in the long run. You can help clients understand the importance of not neglecting retirement planning by continuing contributing to their retirement accounts and exploring options like catch-up contributions if they’re over 50. It can be helpful to remind them that a secure retirement plan provides long-term security not only for themselves, but also reduces potential future burdens on their children.

3. Encourage open communication with both aging parents and dependent children

Facilitating open conversations about finances within the family can prevent misunderstandings and ensure everyone is on the same page, so you can encourage your clients to discuss financial matters with both their parents and children. Sandwich Generation clients will especially want to discuss long-term care options with their parents.

Tips for multigenerational financial planning

Developing a multigenerational financial strategy is important for the Sandwich Generation. Here’s how you can guide your clients:

• Prioritize needs: Help clients prioritize their financial goals. This might mean focusing on paying down debt, saving for their children's education, or setting up a fund for parental care. Each family’s priorities will differ, and you can help them plan more effectively when considering what’s most important to them. 
• Protect income and assets: You know the importance of life insurance and long-term care (LTC) insurance. Make sure clients are covered if something were to happen to them that would leave them unable to care for their family. 
• Leverage tax advantages: Inform clients about tax-saving opportunities, such as claiming dependents or utilizing credits for elder care expenses like the child and dependent care credit. Your clients could utilize this tax credit to pay for the care of eligible children and other dependents (qualifying persons). The credit is calculated based on income and a percentage of expenses that are incurred for the care of qualifying persons to enable you to go to work, look for work, or attend school.²
• Have “The Talk” about estate planning: It’s a conversation many avoid, but everyone needs. Whether it’s drafting a will, setting up trusts, or establishing power of attorney, having these elements in place can prevent future financial disputes and ensure a smoother transition of responsibilities.

Your role as a financial professional

Knowing that a majority of the Sandwich Generation is either “very stressed” or “somewhat stressed,” about being able to afford family finances over the next 10 years, just being able to empathize and recognize this struggle can go a long way to build relationships with those clients.³ By understanding the unique pressures of these clients sandwiched between two competing responsibilities, you can offer solutions that are not only practical but also empathetic as you consider not only your clients wants and needs, but their entire family unit.