Young to middle-aged adults across the United States are increasingly finding themselves caring for both their children and aging parents simultaneously, a demographic trend known as the sandwich generation. According to the Pew Research Center, almost half of adults aged 40 to 59 fall into this growing category, which primarily consists of Gen Xers and an increasing number of millennials. This dual caregiving responsibility is creating substantial financial and emotional challenges for millions of families.
The sandwich generation faces a unique set of financial pressures that extend far beyond time management. These caregivers must balance their children’s educational expenses, their own retirement savings, and often cover healthcare, memory care, or daily living costs for their elderly parents.
Financial Impact on Sandwich Generation Caregivers
The economic burden of dual caregiving is substantial and measurable. According to an AARP report, caregivers spend an average of 26% of their personal income on caregiving expenses. Additionally, one in three caregivers dip into their personal savings to cover these costs, potentially jeopardizing their own financial security.
Matt Gromada, head of family banking at Chase Bank, explained that dual caregiving often resembles a delicate juggling act. He noted that sandwich generation caregivers frequently prioritize their family’s immediate needs over their own well-being and future security, particularly when financial discussions with aging parents haven’t occurred while they’re in good health.
The lack of advance planning can result in unclear obligations and unexpected expenses. For context, Jay Zigmont, CFP and founder of Childfree Trust, pointed out that a year in a skilled nursing facility costs $125,000 on average, which can quickly deplete savings.
Essential Financial Planning Strategies
Financial experts emphasize that proactive planning can make a significant difference for those in the sandwich generation. Having proper documentation in place and maintaining a clear picture of family finances helps create realistic budgets that account for evolving financial responsibilities over time.
This documentation includes managing bills, investments, pensions, Social Security benefits, and insurance plans. According to Gromada, locating and organizing financial and legal documents such as healthcare power of attorney or long-term care insurance policies can help prevent added stress during a health crisis.
Communication and Boundary Setting
Open conversations with aging parents and adult siblings are crucial for distributing caregiving responsibilities equitably. However, establishing clear boundaries is equally important for maintaining financial stability. Zigmont shared that setting limits on how assistance is provided can prevent financial overextension while still offering meaningful support.
Meanwhile, experts recommend viewing retirement savings as a priority that shouldn’t be compromised. The principle is similar to putting on your own oxygen mask first during an emergency. In contrast to college expenses, which can be financed through loans, lost years of retirement contributions are rarely recoverable.
Tax Strategies and Workplace Benefits
The right tax strategy can meaningfully offset caregiving costs for sandwich generation families. Tax-advantaged options include dependent care flexible spending accounts (FSAs), the Child and Dependent Care Credit for those paying for care while working, claiming parents as dependents when providing more than half their support, and utilizing 529 education savings plans.
Additionally, many employers now offer resources specifically designed to support caregiving employees. These benefits may include paid family leave, childcare assistance programs, legal and financial planning services, and education reimbursement programs that can reduce out-of-pocket expenses.
Financial advisors recommend that sandwich generation caregivers maintain an emergency fund of at least three to six months’ worth of living expenses. As caregiving responsibilities continue to evolve with demographic shifts and longer life expectancies, the importance of comprehensive financial planning for this group will likely intensify in coming years.
