Keeping the sandwich generation on track for retirement

Wealth management consultant Laura Varas had to act quickly when she faced a family emergency while caring for her ailing aunt in 2018.

The nursing home where her aunt lived suddenly decided to declare her mentally incompetent, effectively stripping Varas of her caregiving and power-of-attorney duties. The facility argued that Varas was part of the so-called “sandwich generation” — a slice of middle-aged Americans responsible for bringing up their own children while caring for aging parents — and was too busy to provide the necessary care.

“I went into estate planning crisis mode,” she said.

Nursing home operators have been accused of benefiting financially by seeking to become legal guardians of their patients, especially those with large estates. Standing in the hallway on the phone with a team of lawyers, Varas made the decision to remove her aunt, who was suffering from dementia, at the first chance she could get.

“We escaped the next day,” she said, “and did it during lunch, when no one was watching.”

The near disaster demonstrates the potential estate planning needs that many clients in the sandwich generation deal with as they care for family members, such as long-term care insurance, medical expenses and housing costs.

It also shines a light on the real-life situations associated with caregiving that can often be much more challenging to overcome. Varas routinely spends up to 15 hours a week on the phone with various insurance providers, lawyers, doctors and money managers.

“It affects your ability to work, because it’s so emotionally draining,” she said. “If I could get back the time I was on hold on the phone with some of these companies, I could take a three-week vacation.”


For these mostly Gen-X clients, it’s not only about caring for parents, but planning for their children, too. For the 12% of U.S. adults who are part of this cohort, there are increasing concerns about the high cost of child care, which has risen 41% for center-based options in some states during the pandemic, according to a study by LendingTree.

Research from the wealth management consulting firm Hearts & Wallets, which Varas founded in 2009, found the number of Gen Xers who are now very concerned about costs of caregiving hit 24% in 2020, up six percentage points from 2018.

The study, released in January, conveyed just how large the need for managing the finances of aging loved ones is in the U.S., and showed how issues are compounded for wealthier households that have additional assets and more complex estate planning problems.

“These burdens bleed into their own finances and the consumers have increased anxiety about their own financial security,” Varas said about the findings.

With prices on the rise, sandwiched clients are now worried about saving for college and the health of aging relatives, leaving little time — or assets — to plan for retirements of their own.

“There’s never going to be financial aid for retirement.”

Marguerita Cheng, chief executive, Blue Ocean Global Wealth

The good news is that wealth managers can step in and provide much needed assistance, said Marguerita Cheng, chief executive of Blue Ocean Global Wealth in Gaithersburg, Maryland.

“It’s like a life vest, you have to take care of yourself first,” Cheng said about the necessity to plan for retirement before setting aside money for family members. “You can’t pour from an empty cup.”


A good place to start, she said, is a plan to pay for college. 529 plans are popular options, and with more than $438 billion in assets under management across approximately 15 million accounts nationwide last year, there were 92 savings plans and 12 prepaid plans available, according to research from AKF Consulting.

It’s also important to remember that while children have avenues to help pay for higher education, like choosing a less expensive in-state school or applying for need-based or merit-based scholarships, near-retirees have significantly fewer options.

“There’s never going to be financial aid for retirement,” Cheng said.

Despite rising college tuition and ballooning student debt, only 36% of Americans actually know a 529 plan is an education savings tool, a one percentage point decline from 2012, according to a 2021 study by Edward Jones. The study also found that only 20% of parents have saved or are planning to use a plan.

To help, Morningstar publishes annual rankings that can be useful for advisers and their clients. The Illinois Bright Start Direct-Sold College Savings, Michigan Education Savings Program and Utah my529 plans got gold ratings last year in the research, and all of the top-ranked plans were direct-sold, while five of the seven at the bottom were adviser-sold.

College savings products aren’t the only investments available. Many employers now offer dependent care flexible spending accounts that allow clients to make pretax contributions to pay for qualified child care expenses, which include day care, preschool and summer day camps. These FSAs aren’t subject to federal or state income taxes, nor are contributions subject to withholdings for Social Security and Medicare, according to Kevin Oleszewski, a senior wealth planner at The Carson Group.

Oleszewski also recommends looking into child and dependent care tax credits that help pay for care for children and dependents. Those credits are based on income and how much clients spend. The American Rescue Plan Act increased the expense cap to $4,000 for one child or dependent, and $8,000 for two or more children or dependents. The tax credit can recoup up to 50% of a taxpayer’s expenditures.

“It’s dollar for dollar, so that’s real money going back into your client’s pocket,” he said. “It’s an underutilized strategy.”

While there are options for helping children get to college, like student loans and scholarships, there are sometimes fewer choices for the elderly. A record 42 million Americans are serving as caregivers for an aging parent or loved one, and among the 54 million Americans 65 or older, 70% will require long-term care services at some point, according to the consultancy Seniorly.

For Tess Zigo, a CPA affiliated with LPL Financial in Palm Harbor, Florida, step one is setting up the plan. Advisers should ask the age at which clients want to retire, but also look at life expectancy calculations based on family history to determine how long clients’ assets will need to last. Once retirement is taken care of, clients can move on to other needs, like ensuring parents will have the health care and housing they require.

“The reality is, a lot of clients don’t have too much money left over,” Zigo said.

Those client conversations can be difficult, especially those related to the declining health of loved ones. But it can be even more trying when clients have to bring up estate planning topics with their aging parents — discussions that are often ignored entirely.

“Part of my role is to ask the uncomfortable questions,” said Patti Black, a partner at Bridgeworth Wealth Management in Birmingham, Alabama.

She focuses clients on long-term care insurance and other financial products, but also on more practical expenses like funeral planning and transportation costs when elderly parents have to give up their driver’s licenses.

“I remember the pain so vividly sitting in the director’s office and being peppered with questions,” she said about her experience planning her mother’s funeral in 2018. “It’s like throwing a really expensive party that no one wanted to attend.”

Black recommends handling those difficult conversations while family members are still alive, which helps families think through the expenses, but more importantly can spare them from making difficult decisions while grieving.

“It’s like most anything else in life — the earlier you talk about it, the more options there are,” she said.


Be mindful of unforeseen expenses as well, said Cheng, who cared for her father during his battle with Parkinson’s disease. Medical equipment and home improvements that make the house more accessible for seniors are top of the list, she said. Senior-proofing households can help elderly family members stay safe and age in place, but those upgrades, like grab bars, sit-in showers and chair lifts, will also add additional expense.

Cheng recommends reading the riders of any long-term care policies that are in place very carefully. In her case, she was able to access $10,000 for improvements. Still, according to a recent AARP study, three-quarters of family caregivers reported spending an average of $7,242 annually on out-of-pocket costs related to caregiving.

“Financial planners can really provide a lot of support to clients during this period,” Cheng said.

Hearts & Wallets CEO Varas said financial planners can also provide enormous value by understanding the entire investment portfolio of the aging family member to ensure the products are in the best interest of clients. One provider sold proprietary products to her father and recommended he sell out of highly appreciated stock positions held in a trust account, she said.

“I cannot overstate the magnitude of the damage this advice has had on my family,” she said.

While caring for her loved ones is challenging, Varas still believes it is well worth the struggles.

“We’re working really hard to keep everyone alive and happy,” she said about her aunt, whom she rescued from a nursing home in 2018. “My aunt eats all the time, and although she doesn’t talk anymore, she gets great joy from watching birds.”

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