Retirement reset: Sandwiched Boomers put plans on hold

It seems the very things that helped define the Baby Boom generation are also working against its efforts to retire. Boomers are free-spirited, independent and active. They married later in life and had children even later.

As a result, they find themselves taking care of their ailing parents at the same time many are still taking care of their children. For many, the strains on their resources are proving to be yet another reason to delay retirement — thus, the name the "sandwich generation."

"People who want to retire have to delay that," says Lanta Evans-Motte, financial adviser at Raymond James in Beltsville, Md. "This is during the time when they are at peak earnings and can put away the most money. But it's also when a lot of them are having to turn around and spend a lot of money and time taking care of their parents, their children and in some cases, their grandchildren."

A new study by the Pew Research Center says a record 57 million Americans (or 18% of the population) live in multigenerational households. While that research did not specifically address how many near-retirees are taking care of both parents and children, it's clear the trend is increasing.

There are already enough pressures on Boomers hoping to retire. The average person has a a retirement savings balance of $81,000, according to Fidelity. And 50% of people in a recent survey don't expect to retire at 65. (Of those, 24% don't expect to retire at 70.) But the new trend is straining resources even more.

"It's so common, having both aging parents and having kids come back into the house, " says Scott Hanson, principal with Hanson McClain Investment Advisors in Sacramento. "Costs go up when that happens, even if they don't think they will."

Katherine Dean, head of wealth planning at Wells Fargo Private Bank, says that potential retirees are being squeezed by two things: Young people who are struggling to get jobs, and parents who are living longer. The latest statistics from a National Endowment for Financial Education survey says 42% of people ages 18 to 29 are getting some kind of financial help from their parents. "Those two things are setting up a perfect storm," she says.

Stories of the sandwich generation started with Boomer parents who, because they had children late in life, still had high school and college-age children at home when the health of their own parents started to deteriorate. That group has expanded greatly. Boomers are finding that even if their parents or children don't live under the same roof, and even if their parents are in good health, they sometimes need financial support.

"Everyone wants to help their children," Dean says. "If they have aging parents, they want to help them, too."

Some tips from family and financial experts for dealing with the financial and psychological pressures.

1. Consider your own emotional and financial health. "You can't let aiding others destroy your own retirement and your own future," Dean says. "You have to make those decisions in concert with your own goals. Beware of the emotional aspects. It can take a toll."

"They have to understand the resources," Evans-Motte says. "Can they really afford to do it? In some cases, they can afford it, but have to cut back on their discretionary spending. In other cases, they can't afford to do it. Then you have to deal with the guilt part."

"We work for the client," says Ron Weiner, CEO of RDM Financial Group in Westport, Conn. "We don't work for the children. We don't work for the parents. Our job is to analyze everything going on and solve the rate of return they need, after taxes and inflation, to achieve all their stated goals."

Make sure all the family members are on board, says Robert Fragasso, of Fragasso Financial Advisors in Pittsburgh. "Often, (taking care of a parent) falls on one of the children."

2. Set ground rules and expectations. "If you have a child moving back in, let's get it in writing," Dean says. "How are you going to contribute to the household? Will you help out with chores? Will you get a job, even if it's at McDonald's or Target? Will you pay rent?

"What I've found is children really appreciate it because they are going through something difficult," Dean says. "Setting boundaries and giving guidelines is great for both parties. It's just difficult to do."

Amy Goyer, AARP family and caregiving expert, says it's also important to talk through the use of space. "The younger generation wants their privacy and wants to come and go as the please. The older generation feels the same, and the parents are in the middle. Space in one of the problems that cause most conflicts."

3. Talk about finances: "The talk about expenses and finances is often a sticky subject," Goyer says. "With any family, that could be the case. It is often helpful to create a shared household budget and keep individual budgets separate. Be clear about who's paying what: 'I pay the mortgage, you pay for this, I buy food and you five me $100 a month.' "

"A lot of kids don't know what things cost," Dean says. "They've never had a budget. Have them create a budget. If they want this type of apartment or this kind of iPhone, create a budget so they know what they need to shoot for to make that a reality. There is still such a sense of entitlement. They need a little bit of a wake-up call."

4. Update your financial plan. If you already have one, update it to include your new realities.

"They have to continuously update their own retirement calculations," says Jim Stoops, vice president and financial consultant with Charles Schwab in Naperville, Ill. "Plans need to be revised once a year. Everything changes. You have to know where you stand for the next 12 months."

"Get the right kind of financial investment advice," Fragasso says. "Make sure the adviser knows elder care planning."

"We can't tell them you can or you can't,'' Weiner says."It's their money. We can point out that they are on a path to very difficult circumstances."

6. Plan for the unexpected. It's easy to plan for aging parents," Hanson says. "The surprise comes when a child comes back, and often, it's a failed marriage. The kids will come back in with a couple of their children. Those are a little more challenging.

"People need to be retirement-ready," Hanson says. "They never know what will happen. Maybe the kids move back in with young ones. It's important for people to think about all the things that might happen, down to what may derail our plans and plan around them. It's not just how much ... you save in your 401(k)."

"It's a very prevalent, emotional, distressing issue," Weiner says. "The human being seems to have an enormous propensity to make the wrong financial decision in emotional times. We all get frightened. We give up. We all feel children or parents should be our focus and we need to suffer. But by being smart, you can solve a lot of problems."