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Estate Planning & the Sandwich Generation: Why Millennials Should Be Preparing Now

In this guide, we break down what the "Sandwich Generation" is and how it affects Millennials and estate planning.

Economists and sociologists alike are buzzing about the “Sandwich Generation.” This term was coined a few years ago, and describes those who are providing care for multiple generations of loved ones. With baby boomers rapidly going over the retirement age, a new generation of Americans are increasingly finding themselves in the sandwich fold: millennials. What are the potential financial impacts they might face, and what can they do about it to prepare? Here’s a hint: an Estate Plan. Keep reading to find out:

What is the Sandwich Generation?

The term “Sandwich Generation” describes the current group of Americans who are providing care for their aging parents while simultaneously taking care of their own children. Aging parents may have an illness, need assistance performing everyday tasks, or require financial support. Children may also require some combination of financial, emotional, and physical support. Caregivers are thus “sandwiched” between these obligations. The term has become so commonly used that Merriam-Webster added it to the dictionary in 2006.

Understanding the 3 Sandwich Generation Types

According to SeniorLiving.org, most adults who fall into the Sandwich Generation are in their 40s and 50s. However, the dynamics of the sandwich generation is quickly changing. For example, USA Today cited that Millennials now make up 39 percent of this generation. 

Elder care expert Carol Abaya further divides the Sandwich Generation into three roles to help explain these dynamics:

  • The Traditional Sandwich Generation: This group typically describes Gen X adults who are in the 40s or 50s. They are sandwiched between their parents and their children, both of whom require financial, emotional, and sometimes physical support. Gen Xers typically have adult children who require support of some kind. Many returned home during the COVID-19 pandemic.

  • The Club Sandwich Generation: This group describes adults who provide support for three generations of loved ones. This could be older adults (40s and 50s) sandwiched between their aging parents, adult children, and grandchildren. This could also be younger adults (30s and 40s) who are wedged between their young children, parents, and grandparents.

  • The Open Faced Sandwich Generation: This term describes anyone who is involved in non-professional forms of elder care. At least 25 percent of individuals fall into this category at some time in their lives.

Important Sandwich Generation Statistics

In the following sections, we’ll discuss the pressing issues that the Sandwich Generation faces, along with an exploration of how these issues will increasingly affect millennials. Before we get to that, let’s build a better profile of a typical member of the Sandwich Generation. These statistics were published by the Pew Research Center in their study of the rising financial burdens for sandwiched adults in the U.S.:

  • 1 in 8 Americans is raising a child and caring for an aging parent.

  • The typical Sandwich Generation caregiver is a married, employed female in her mid-40s who cares for her family and an elderly parent.

  • 10,000 baby boomers turn the retirement age of 65 every day.

  • More than 70 percent of the Baby Boom Generation has at least one living parent.

  • 29 percent of young adults (the Boomerang Generation) live with their parents.

Issues Impacting the Sandwich Generation

If you feel like taking care of two or more generations of loved ones sounds stressful, you’re not alone. A number of research studies have analyzed the impacts on individuals belonging to the Sandwich Generation, and the results are worrisome.

According to the Pew Research study, adults were spending $10,000 annually on their parents and children combined. A BBC article revealed that the financial strain worsened during the COVID-19 pandemic. 52 percent of 18- to 29- year old Americans were living with their parents, which is the highest percentage since the Great Depression. 

Caregiving expenses increased by at least $1,000 per month, meaning that the annual cost of care more than doubled. InCharge.org reports that adults between 45 and 54 have the nation’s highest average credit card debt, and attribute caregiving costs as a substantial factor. 

Planning for retirement is another major financial concern for most Sandwich Generation members. Because they are under so much financial burden, many are finding it difficult to plan for retirement. Sandwich Generation adults report feeling “squeezed” financially at best, with many feeling very uncertain for their financial future. 

Aside from financial strain, the Sandwich Generation is collectively experiencing tolls on their mental health and well-being. “It’s pretty brutal,” quoted the New York Times in an article describing the toll on the Sandwich Generation. 

Individuals seldom have time for self-care when they are juggling the duties of taking care of two generations in their family. Seniorliving.org talks about caregivers experiencing a variety of issues such as stress, burnout, depression, feelings of guilt and isolation. This can lead to long-term health issues such as obesity, mental illness, and weakened immune systems.

How will this Affect Millennials?

The 2020 U.S. Census revealed that baby boomers are currently between the ages of 57 and 75, but all will be over the age of 65 by 2030. Investopedia cites that older adults will outnumber individuals under the age of 18 by 2034 for the first time in U.S. history.

So, what do all these numbers mean? 

The numbers indicate that Americans will undergo an historic population shift within the next decade. Elder generations will significantly outweigh younger generations, and will be looking to them for financial, physical, and emotional support.

Millennials already represent over one-third of the Sandwich Generation. Not only will this proportion increase significantly, the proportion of millennials falling into the ‘Club Sandwich” Generation is set to increase as well.

Most millennials are already burdened with economic stressors, and generally worse off than older adults. Many are dealing with indebtedness, job insecurity, and high housing costs. These effects have been amplified due to COVID-19 — hitting important milestones such as buying a house or starting a family is harder than ever. The current generation of caregivers who on average are better off than millennials are using words such as “brutal” and “squeezed.” Adding the burden of caregiving to millennial plates could frankly become catastrophic.

This begs the question: what can millennials do now to protect themselves and their loved ones?

Estate Planning to Reduce the Squeeze

Every millennial with family members should be looking to the horizon to understand the issues they might face. Some are already caring for small children while also supporting a parent or grandparent. This scenario will become much more commonplace in the coming years.

One can only hope that the government will step in and introduce policies to help reduce the burden on Americans. For example, this could come in the form of tax credits for elder and child care, reducing the burden on financial indebtedness, or affordable policies for medications and health care.

However, it’s important to create an action plan in the case that government policies don’t provide enough support, which seems to be the case for most families. Aside from forming good lifestyle habits to fortify and protect oneself from health and wellbeing impacts, the main goal is in making preparations to reduce future financial burden. 

Estate planning is the process through which you can best protect yourself and your loved ones, and it’s becoming increasingly critical for millennials to prepare right away. Millennials should also be having conversations with family members to make sure they are establishing and updating their Estate Plans as well.

Here are some estate planning tips to help protect yourself from the long-term effects of providing care for others:

  • Plan ahead for Long-term Care: Calling long-term care expensive is an understatement. In most cases, it can creep up into six figures and often isn’t covered by medicare or health insurance. Protect yourself now by working with your parents to fund their long term needs, such as long-term care insurance and other investments.

  • Make cash gifts: If you plan to support your parents or grandparents financially, a strategic way to do so is through the use of gifts. By making cash gifts to those you support, you can benefit from gift and estate tax exclusions.

  • Contribute to a Retirement Account: You should also be thinking about your own retirement as early in your life as possible. Set up a tax-advantaged retirement account and build up a nest egg so that you can be financially independent when you retire one day. That way, your own children or grandchildren won’t face the same financial burden that you currently face.

  • Set up Family Trusts: There are a variety of strategies in which setting up a Trust can be advantageous. For starters, you could design your Trust to benefit both your parents and your children if you were to predecease them. Learn more about the benefits of setting up a Trust here.

  • Consider Buying your Parents’ Home: If you’re in the position to buy a home, consider offering to buy your parents’ home. This might seem like a wild idea, but hear us out. By buying your parents’ home and leasing it back to them, you’ll give them equity so that they can support themselves financially without having to move out. This arrangement will help you build equity in the long-run and take advantage of valuable tax deductions.

  • Set up a Financial & Medical Power of Attorney: It’s also important to leverage your Estate Plan to make financial and medical arrangements. Work with your parents to appoint you as their financial and medical Power of Attorney. This will give you the legal authority to make the necessary arrangements and decisions on their behalf without delay. It’s also helpful in case you need to handle affairs for an adult child.

  • Obtain a HIPAA Authorization: Last but not least, have your parents submit a HIPAA authorization. This will allow your parents’ medical team to provide you with sensitive medical information that would otherwise be kept confidential. As their medical POA, you’ll need this information in order to make decisions.

  • Set up a Tuition or Childcare Fund: Even if you don’t currently have any children, it doesn’t hurt to start tucking money away into a tuition or childcare fund early on in your adulthood. Many new families are absolutely shocked by the sticker price on taking care of young children, such as food, supplies, and clothing. The cost of childcare can be as much as your rent check in some areas. This creates a burden and conundrum for many new parents, especially when grandma or grandpa cannot be a source of support when requiring care themselves. If you do not want children, decide not to have children, or cannot have children, these funds can absolutely be put towards other goals such as a down payment on a house.

Note that these aren’t the only strategies to bolster yourself through an Estate Plan. The world of estate planning is robust, and there are a vast number of strategies you can implement to protect yourself and your family per your unique circumstances. Our team of experts at Trust & Will can help you every step of the way to make sure you feel confident stepping into caregiving duties.

Estate Planning is the Key to Protecting the Sandwich Generation

Eleanor Roosevelt once said, “learn from the mistakes of others.” By no means is the current Sandwich Generation making mistakes intentionally. However, all too often we’re witnessing cases in which caregivers are unprepared for the challenges thrown at them. 

None of us really saw the hardships of today coming — a bulging population of elders needing care, and a younger population returning home to shelter with their parents due to economic crises and pandemics. The pandemic itself has also produced a new layer of adults requiring medical care. Even caregivers who were financially well-off at one point are likely feeling a significant financial squeeze. 

What we can learn from today’s sandwich generation is that early preparation is key. By starting your Estate Plan as soon as possible, you’ll be able to plant the seeds that you can sow when you most need them.

Feeling ready to start the conversation on establishing your Estate Plan? Learn more today!