The sandwich generation, which is adults in their late 30s to mid-50s, finds itself financially supporting children and parents at the same time. While this is the age to also seriously be planning for retirement, many in this group struggle to have enough money to go around.
According to Michael Frayman, senior vice president of investment at the Davis Frayman Financial Group of Raymond James in Beachwood, and Luann Snyder, senior adviser and trust officer at Park National Bank in Lancaster, which has offices throughout Central Ohio, the sandwich generation should remember to pay themselves first.
“We all have various financial obligations, but budgeting must include saving for short-term unexpected expenses and investing for long term goals,” Frayman said. “There are many tools available to those in the sandwich generation for retirement planning. Those participating in retirement plans through work often have access to planning calculators through their plan provider’s website.”
Many financial advisers will use the idea of “paying yourself first.” Synder said there is a reason why it’s said so often.
“(The sandwich generation) are working to earn their paycheck, so they must make sure they are saving some for themselves and their retirement,” she explained. “If they do not plan and save for themselves, then someone – usually their children – will have to pay to take care of them later on life.”
When planning, Synder said there are a few ways the sandwich generation can support their retirement goals. This includes contributing to their retirement fund regularly, like a 401K or an IRA. If they haven’t started this on their own, she suggested looking into their employer’s retirement program.
“Ideally, they should be saving around 15% of their income for retirement on an annual basis,” she said. “If that is hard to accommodate at first, start with a lower percentage and work up to it. This can help with budgeting to ensure you don’t run out of money between paychecks. If they have been saving 15% throughout their career, their total retirement savings could be close to three times their annual compensation at age 45, and five times that at age 55.”
But Frayman said the sandwich generation should also work to prioritize their current expenses to make saving for the future hurt a little less.
“One key factor that must be considered when prioritizing needs is determining the difference between ‘needs,’ ‘wants’ and ‘wishes,” he stated. “We have to understand the timeliness of each need, as well as the financial considerations associated with each need. These must both be considered when choosing what to place at the top of the list.”
Frayman explained though the sandwich generation juggles these roles every day, they still struggle to find meaningful solutions to their financial woes. That is where financial professionals come in, giving advice on where to make those changes in current expenses.
“In addition to the training that professionals acquire over their careers, we’ve seen this before,” he said. “While individuals are facing this for the first time, professionals have seen these challenges first hand, with our clients regularly. Professionals also have access to many tools and resources that help us to assess each individual’s financial situation and present potential solutions.”
People can also get emotional when it comes to making financial decisions with their own money, especially when it comes to choosing what gets paid first. A professional can look at someone’s available funds and be unbiased in their recommendations, Synder said.
“This is especially important for the sandwich generation because they are being pulled in many directions,” she said. “An adviser can be looking out for the client, while the client is often looking out for everyone else in their family. Advisers can also help you keep on track, help ensure you’ve invested appropriately and answer questions when things change, because things always seem to over time.”