Advisors help out when sandwich generation gets squeezed

About seven years ago certified financial planner Avani Ramnani watched as two clients, a married couple, moved the wife's elderly mother into their home for an anticipated short-term situation.

Today the mother is 94 and still living with the couple. Additionally, their adult son moved home several years ago when he struggled to land a job after college.

Welcome to life in the sandwich generation, generally defined as Americans in their 40s and 50s who are supporting aging parents as well as their own children.

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"My ... advice to anyone in that situation is yes, you have to meet the needs of your parents and your children, but do not neglect yourself," said Ramnani, director of financial planning and investment management for Francis Financial.

According to 2013 data from the Pew Research Center, nearly half of adults in the sandwich generation have a parent age 65 or older and are either raising a young child or financially supporting an adult child. About 15 percent of "sandwichers" are providing financial support to both an aging parent and a child.

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"This definitely has become a bigger issue," said Eleanor Blayney, a certified financial planner and consumer advocate for the Certified Financial Planners Board of Standards.

Part of the reason, she explained, is that Americans are living longer. Another reason, as pointed out by Pew data, is that young adults are living at home longer due to higher rates of unemployment and a drop in average weekly earnings.

The financial strain this can put on sandwichers, who already juggle paying for their own living expenses and saving enough for retirement, is clear.

"They are getting squeezed on both sides," Blayney said. "But it's heavier on the [parent] side, as far as needs go."

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Social Security comprises the bulk of income for some elderly folks. Government data show that 22 percent of married couples and about 47 percent of unmarried people rely on Social Security for 90 percent or more of their income.

Considering that the average monthly benefit for retired workers is $1,294—but living expenses and medical costs easily can exceed that—children often shoulder some form of care to lessen the financial impact.

But even if the elderly parent is financially "set," providing care can turn a sandwicher's world upside down—financially and emotionally.

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For instance, in the case of Ramnani's clients, now in their 60s, the elderly mother has the financial resources to pay for many of her health-care needs. However, the husband, who had taken time off from work to help his wife care for her mother, eventually just retired—earlier than he would have otherwise.

"It's turned out that the mother is blessed with a long life, so they are using her resources very wisely, but they do a lot of the heavy lifting," Ramnani said.

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She added that although the couple had been dedicated to saving for their own retirement and are financially fit, her firm reworked their financial plan and investment portfolio to reflect their new situation.

Financial advisors say that even when elderly parents are financially sound and well cared for in a retirement facility, children often end up taking over their finances.


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"Some elderly people come to a point where they don't want to deal with that anymore or they can't," Ramnani said. "So the children just have to deal with the stress of making sure bills are paid, what the investment accounts are doing—things like that."

Andrea Blackwelder, a certified financial planner and owner of Wisdom Wealth Strategies, says one problem she encounters is a lack of estate planning, including such aspects as updated wills, assigning power of attorney and a living will.

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"A lot of times it comes down to preparation," Blackwelder said. "The [children] have to put together documents in case something does happen to the parent."

She pointed out that even if a trust is established as part of estate planning, sometimes the person's assets have not been retitled in the trust's name.

"People go through the process of drafting a trust, but nothing, including investments, has been put in the name of the trust," she said. She recommends a team approach: making sure the person's accountant, attorney and financial planner are all involved in synchronizing an estate plan.

"Sometimes it's just getting a Roth IRA opened for them. Just getting them started with saving [for retirement] is so important." -Andrea Blackwelder, owner of Wisdom Wealth Strategies

Squeezing sandwichers from the other side are their children. Just the cost of raising a child from birth through age 18 is estimated to now total roughly $240,000 for a middle-income couple, according to the U.S. Department of Agriculture.

That doesn't even count potential college expenses. Recent data from the College Board show that the average yearly cost for a public four-year in-state college for tuition, fees, room and board runs just shy of $18,400. A private college's cost for those same expenses? About $40,000 per year.

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Blackwelder offers to review the financial situation of her sandwicher clients' parents at no cost. She does the same for her clients' grown children.

"Sometimes it's just getting a Roth IRA opened for them," Blackwelder said. "Just getting them started with saving [for retirement] is so important."

The bottom line for sandwichers, said Ramnani, tracks the same advice airline passengers receive: "Put on your own oxygen mask first before you help somebody else with theirs."

By Sarah O'Brien, special to CNBC.com