Feb 22, 2024
America’s sandwich generation is financially slammed on both sides by the costs of caring for their own children and their elderly parents — and it’s an expectation that doesn’t look like it’s going away anytime soon.
In fact, 22% of respondents in a WalletHub survey admitted they’re counting on family or friends to support them financially during their retirement years.
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However, relying on your loved ones to support you as you age can lead to problems down the road — such as strained relationships or wreaking havoc on the financial stability of your family.
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Why putting the onus on your loved ones is a problem
There are a few reasons why some folks might expect their friends or family to provide extra cash in their golden years.
Many Americans believe they have the responsibility of caring for their aging parents, according to a 2023 study from Pew Research. More than half of the respondents said adult children have “a great deal or a fair amount of responsibility” to provide financial assistance to an elderly parent in need.
This attitude can also depend on cultural values. Black and Asian Americans were significantly more likely to agree with adult children financially supporting their elderly parents compared to white or Hispanic Americans.
But some Americans might not expect to have enough of a nest egg to retire comfortably on their own in the first place, nevermind supporting an elderly relative.
Nearly half of the respondents in the WalletHub survey said they don’t feel confident they’ll have enough money to retire, with more than a quarter pointing to specific financial decisions they’ve made that could threaten their retirement security.
Some are staying focused on paying off their debts before putting away retirement savings, but it’s possible others could be sacrificing their security in order to support their own adult children.
Still, relying on your adult children — or other family members or friends — to support you financially when you’re older might not be the smartest strategy. They could say no, for starters, or run into monetary difficulties that could compromise their own retirement plans as well.
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Here’s how you can start putting your retirement plan together — and avoid relying on your loved ones for help.
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Talk to a financial adviser or therapist
If you’re not sure how to get started, consider speaking with a professional. More than 1 in 3 Americans don’t have a retirement plan, but over 3 in 10 feel anxious when thinking about retirement, according to WalletHub.
A financial adviser can evaluate your financial situation, offer advice and set you on a roadmap to meet your goals, like having enough savings to retire comfortably or retiring at a certain age.
On the other hand, if you’re experiencing a great deal of anxiety or anguish around just the thought of retirement or your finances, you might want to seek counseling from a financial therapist as well.
Budget and save
If you’re unsure about how much money you’re able to set aside from your paycheck each month, jot down your income and expenses in a notebook or Excel spreadsheet.
You can even create a budget to ensure you’re covering your necessities and savings and keep whatever’s extra aside for fun purchases like dining out and entertainment.
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It can be hard to determine exactly how much you need to retire comfortably, but Fidelity recommended aiming for at least one year’s salary in savings by the age of 30, three times your salary by 40, six times by 50, eight times by 60 and 10 times by 67.
Don’t forget to plan for the long term
While you’re trying to figure out how much you need in your retirement fund, keep in mind that your health needs could look very different as you age.
Instead of putting the caregiving duties on your kids or other family members, be diligent and prepare for potential long-term care costs.
This could include padding your retirement fund for unexpected expenses, looking into long-term care insurance or even getting certain legal documents into place, like a power of attorney.
Invest in a retirement account
It’s also important to pick the right retirement vehicle so that you can grow your funds. If your employer offers a 401(k) with matching contributions, try to max your contributions each year to make the most out of the account.
If not, you could opt for a traditional IRA or a Roth IRA. A traditional IRA, like a 401(k) account, lets you contribute pre-tax dollars, so you’ll need to pay taxes on your withdrawals in retirement.
However, several finance personalities prefer the Roth IRA, in which you pay your taxes upfront, but enjoy your withdrawals tax-free in retirement. You’re more likely to be in a higher tax bracket by the time you hit your golden years, so you could end up paying higher taxes on your retirement savings if you go with a traditional IRA.
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
