The Sandwich Generation Dilemma: How to Save for Retirement While Caretaking
Jennifer’s alarm goes off at 5:30 a.m. She makes breakfast for her two teenage kids, checks in on her 82-year-old mother, reviews her mother’s medication schedule, packs lunches, drives the kids to school, and then commutes to her 9 to 5. After work, it’s soccer practice pickup, helping her mother to a doctor’s appointment, getting dinner and planning for the next day with her spouse. By 10 p.m., she’s both physically and mentally drained.
What Jennifer doesn’t have time for is examining her 401(k) statement that arrived last week. She hasn’t opened it. She knows what it says anyway. The balance has barely moved in three years,
Splitting her time and savings between long-term care and college tuition planning, Jennifer hasn’t been able to focus on her retirement planning. She’s 48 years old, and retirement feels like a luxury she can’t afford to think about.
Jennifer is part of the sandwich generation: adults caring for both aging parents, grandparents and their own children—often while trying to maintain careers and plan for their own futures.
The Reality of the Sandwich Generation
Reports show that around 23% of American adults fall into the sandwich generation category.
This type of household dynamic can often lead to financial strain and burnout. A recent study by Allianz Life found that among the sandwich generation, 75% said it was hard for them to juggle their financial needs and goals, and more than half said they reduced or stopped contributing to their retirement savings accounts.
“The sandwich generation are often financially exhausted. Their stretched thin while holding onto guilt about not doing enough for everyone,” says Joanne Farace, Senior Vice President at David Lerner Associates.
“The reality is you can’t pour from an empty cup. If you don’t protect your own retirement, you’ll become the burden you’re trying not to be. Making space in your plan for your retirement is not selfish. It’s essential.”
Stuck in the Middle: Missed Career Opportunities
For the sandwich generation, large direct expenses are just part of the financial squeeze. The bigger financial hit often comes from lost career opportunities and reduced earnings.
Many caregivers reduce work hours, take unpaid leave, turn down promotions, or leave the workforce entirely. While these decisions have valid reasoning behind them, they also can put you at a disadvantage for keeping up with retirement savings.
For instance, many companies have 401(k) matching as part of their benefits offered. Some still offer pensions and other retirement packages. These benefits are often contingent on full-time employment, years worked, and position at the company.
Social security is also an important consideration. Because benefits are calculated based on your highest 35 years of earnings, time away from the workforce or reduced income during key earning years can lower your future benefit. While you may still qualify for benefits through a spouse, those payments can be limited depending on when you claim and your overall work history.
Strategies for Protecting Your Retirement
The situation isn’t hopeless. You can care for your family and still prepare for retirement. It requires being strategic, setting boundaries, and making your financial security a priority even when it feels less urgent.
Prioritizing Your Needs
The airplane safety instruction applies here: secure your own oxygen mask before helping others.
This means continuing to contribute to your retirement accounts even if you can’t contribute as much as you’d like. Something is always better than nothing.
For those who work, if your company matches 401(k) contributions, contribute at least enough to get the full match. That’s free money you’re leaving on the table otherwise. If you can’t afford the full match, contribute what you can and increase it by even 1% whenever you get a raise.
For stay-at-home parents or caregivers, there are still ways to keep retirement on track. Have an open conversation with your partner about retirement savings. Consider contributing to a Spousal IRA. This allows you to save for retirement even if you don’t have earned income. It’s also a good time to educate yourself on retirement options so you’re prepared to ramp up contributions when your situation changes.
Have the Money Talk with Your Parents
Many adult children avoid discussing their parents’ finances until a crisis forces the conversation. By then, options are limited and emotions are heightened.
Have an honest discussion with your parents about:
- What savings and assets they have
- Their monthly income sources (Social Security, pensions, retirement accounts)
- Their expenses and whether they’re sustainable
- Any long-term care insurance they might have
- Their wishes for care if they become unable to live independently
This isn’t about taking control of their finances. It’s about understanding the full picture so you can plan realistically for your own future. This can make it easier to set financial boundaries and ease tension surrounding who pays for what.
What Are the Costs and What Is Covered?
Not all caregiving requires massive out-of-pocket expenses. Understand what’s covered:
Medicare covers most medical care for people aged 65 and older, but doesn’t cover long-term care, most dental, vision, or hearing care, or long-term nursing home care beyond short rehab stays.
Medicaid covers long-term care for people who meet income and asset requirements. Requirements vary by state but generally involve having very limited assets and income.
Long-term care insurance, if your parents have it, might cover in-home care, assisted living, or nursing home costs depending on the policy.
Knowing what’s covered helps you anticipate costs and plan accordingly.
Consider All Your Options for Parent Care
Family caregiving isn’t the only option, and sometimes it’s not the best option either for you or for your parent.
Options to explore:
- Home health aides through Medicare or Medicaid
- Adult day care programs
- Assisted living facilities
- Nursing homes
- Subsidized senior housing
- Moving your parent closer to you (or you closer to them) to reduce travel time
What will work best for you might not work best for everyone. Some parents will need more hands-on care depending on health conditions and more financial help based on past savings.
For each option, look at costs, benefits and conditions for eligibility. A professional home health aide can be expensive but gives you back time and effort. Adult day care can cost less and provides social interaction for your parent.
Compare the cost of paying for care versus the income you’d lose by reducing work hours or leaving your job. Sometimes paying for care is actually cheaper than doing it yourself when you factor in lost wages and retirement contributions.
Real Talk: Doing the Best You Can
Being in the sandwich generation can be exhausting and expensive. You’re often stuck in survival mode trying to keep your household running smoothly. With that in mind, you still deserve to have a sound retirement plan.
You can care for your family and care for your future. It requires making some difficult conversations, setting boundaries, asking for help, and making room for your needs.
Taking care of yourself financially isn’t selfish. It’s responsible. Make your retirement a priority even when it feels impossible. Future you will be grateful.
Material contained in this article is provided for information purposes only. It is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. These materials are provided for general information and educational purposes, based on publicly available information from sources believed to be reliable. We cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
The subject of this article is fictitious and created for illustrative purposes only. It is based on events of a similar nature and should not be interpreted as a direct depiction of any specific individual, organization, or incident. Any resemblance to actual persons, living or deceased, or actual events is purely coincidental.