A few days ago, CBS Evening News ran an article titled “Caregivers Rise to the Challenge” which featured some families that were struggling to keep up with taking care of their aged parents (in terms of time and money). Here is an excerpt from the article:
Winchell’s family may be America’s new norm. An estimated 34 million Americans care for loved ones age 50 and over. A just-released healthcare study of a thousand caregivers finds half of them are spending more than 10 percent of their income on it. One in three used some of their savings to cover costs. Just like the Winchells.
When asked if they had any savings put away for their own retirement, Stacy Winchell said, “No and I don’t foresee that at this point in time that there will be any retirement.”
…. But without her own financial cushion, it might be her own children who have to be there for her, when the time comes.
People who are struggling to maintain their own financial well being, in addition to looking after their parents and their kids, are what I call the “sandwiched generation”.
Notice the sort-of-treadmill effect in the above example? Stacy doesn’t have anything saved for her retirement - which effectively means that her children will probably have to spend their savings towards her post-retirement well being - which very likely means that they will probably have less for themselves in future. It’s an interesting cycle (played out all too well in most developing countries) - one which will not come to an end unless one of the generations takes the additional pains of providing for their parents as well as their kids.
A few months ago, Jonathan @ My Money Blog voiced concerns along these lines - which effectively summarized the classic dilemma that the sandwiched generation faces:
But what if they do run into issues, for whatever reason? I know that Iâ€™d step in to help for sure. For one, I know that my parents regularly give my grandparents money. I donâ€™t know how much or how often, it could be just spending money, but I know they do send something. I guess this is what some people call the â€œsandwichâ€ problem. Young families have their own retirement worries on one side, their kidâ€™s education in the middle, and their parentsâ€™ needs on the other side.
Do you worry about your parentsâ€™ retirement plans? Should a child ask their parents about such details or get involved? How does one incorporate this into their own financial plan?
Check out the comments below Jonathan’s post to get a feel of how some people are addressing the issue.
I guess we would all ask these questions to ourselves at some point of time - whether our parents are in a good financial position or not. With what intensity you ponder over these question probably depends on your culture, temperament, and your personal relations with your parents, but most of you will think about this for sure.
I am probably among the fortunate young (in a relative sense) people who may not have to worry too much about the post-retirement financial concerns of their parents. My dad and mom voluntarily retired when they were 49 and 46 years old, respectively. They planned their finances very well (although we barely made “middle-class” in the kind of society we lived in) and are probably set for the rest of their lives.
Although, it’s reassuring to know that my parents are taking good care of their money, I am still keeping some part of my income earmarked for them - in case of unanticipated health care issues in future. Plus, we (me and my wife) are slowly acknowledging (and preparing for) the fact that, in future, our careers and/or lifestyle decisions may be affected by our willingness to be caregivers for our parents - if and when the need arises. This is, of course, in addition to working towards our own financial well being - so that our children won’t have to worry about our financial stability after we retire.
As for health issues, there isn’t much we can do right now - except to make sure that we maintain a reasonably healthy lifestyle and to that our health care costs are not our children’s burden. As for our children (when we have them), we are not yet sure how much financial help they would need - for now, saving for their education is our only concern. It all boils down to saying that when we save about 25% of our income, part of those savings are earmarked for kids and parents.
Another thought to take home from this discussion is to acknowledge that your financial and physical health not only affects you, but also a generation before you and a couple of generations after you. If you get into trouble (in terms of health or money), whether out of sheer obligation or out of willingness, people who care about you are generally bound to come to your aid (unless you have been a total ass all your life) - and although they may not admit it, it will cause them and their family some discomfort. As such, it is up to you to make sure that they don’t suffer because you didn’t plan your finances well when you had a chance, or because you never cared about your health.
Do you belong to the sandwiched generation? How are you dealing with it?