Welcome to the Sandwich Generation

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Why your retirement savings might not be enough

We’ll start with the positive: Americans approaching retirement today can look forward to longer, healthier lives than previous generations. That’s obviously great news if you’re the child of baby boomers who gets to enjoy more time with your parents, but there’s a downside, too. All those extra golden years are expensive, and few baby boomers are financially prepared for potentially 30 or more years of retirement.

The numbers are alarming: just 23% of baby boomers think their savings will last throughout retirement, according to a 2017 study from the Insured Retirement Institute. A Stanford Center on Longevity study found that in 2014, 30% of boomers had no retirement savings whatsoever. Among those who did have savings, the median amount was just $200,000. That might sound like a lot, but it’s well short of the $285,000 in health care costs the average retired couple will face, and works out to just $6,667 a year over 30 years, even with no health care expenses at all.

The combination of baby boomers’ long lives and lack of savings means America is facing a potential crisis in the coming years. According to Stanford research scientist Jialu Streeter, making up the difference will fall primarily on retirees’ families, and their children in particular. “Boomers who run out of funds towards the end of life will either fall back on children, who by then will be in their 50s and 60s, or the social safety network,” Streeter said in a recent CNBC article.

Considering Social Security’s looming shortfall, relying on the social safety network is a risky proposition. That leaves retirees’ grown children as the primary source of financial support when savings run dry. And for most millennials and gen Xers, trying to simultaneously save both for your kids’ education and your own retirement is daunting enough. Add financial obligations to your parents and in-laws into the mix too, and things get even trickier.

If you’re being squeezed by the need to support both the older and younger generation at once, you’re part of the “sandwich generation.” If you’re the meat in a financial sandwich—or might be someday—crossing your fingers and hoping for the best isn’t an option. The biggest problem is timing: if your parent runs out of savings at 80 or 90, you’ll likely be nearing retirement age yourself, if you aren’t retired already. Most financial goals can be accomplished with planning and time, but once the paychecks stop, your options are severely limited.

Unfortunately, few members of the sandwich generation are preparing for the future. A recent PNC survey found that only 16% have a formal financial plan. It’s not that millennials and gen Xers are unaware of the problem: in our own research, 64% of millennials said they expect to financially support their parents or in-laws in old age.

So what’s the disconnect? The biggest obstacle might be a lack of options. There are savings and investment accounts of course, but nothing specifically designed to help adult children support their parents in later life.

A solution in the works

The problem is daunting, but there’s hope on the horizon. There are a small number of new products in development that aim to help families prepare for the looming longevity crisis. One of them, AgeUp, is launching later this year, but you can join the waitlist now to be notified when it’s available.

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