Individuals ranging from age 35 to 44 - and sometimes older - often fall into a category referred to as the "sandwich generation". This means they are taking care of their children and parents at the same time. "Sandwich generationers" often find it more challenging to balance finances than other individuals, as they struggle to take care of two sets of families, and possibly adult children who have returned home. While there is no cookie-cutter retirement planning solution, there are some basic guidelines that may be helpful to those who fall into this category.

Save for Retirement or Pay for College?
Most parents want their children to graduate from college debt free so that they can start their financial planning with a clean slate. While some individuals may be able to pay for their children's education and still save for retirement, most cannot. The question then becomes, which is the better financial choice? When pondering such a decision, the options available for financing should be taken into consideration. For instance, consider the following:

  • Retirement: With the shift from defined-benefit plans to defined-contribution plans and the uncertain future of Social Security, it is becoming increasingly apparent that the individual taxpayer is largely responsible for financing his or her retirement years. As such, individuals must save as much as possible to increase the possibility of experiencing a financially secure retirement and to make working during retirement optional, rather than mandatory. (For further reading, see The Demise Of The Defined-Benefit Plan.)
  • College Expenses: Options for financing college include grants for those who are eligible, scholarships for those who qualify and loans. While loans do mean that the college student will likely have outstanding debt after graduation, the student will have several options and several years for paying off those loans.

    Children who are opposed to college loans may consider a work-school program, where they work full-time and attend college on a part-time basis. While this could extend the amount of time it takes the child to receive a degree or diploma, the trade-off is being debt-free after graduation. Most employers will even reimburse college students for some or all of the tuition expenses, provided they receive a passing grade for the course.

The key here is that financing is available for college, but not for retirement. Financing companies assume that when a person finishes college, he or she will move on to an income-generating career; when a person enters retirement, there is no income for his or her next stage in life. (Read more on financing education at Don't Forget The Kids: Save For Their Education And Retirement and Invest In Yourself With A College Education.)

Boomerangers Add Expenses
While most children leave their parents' homes to live on their own by age 25 or thereabouts, there are many who do not. Some who do leave, also choose to return for various reasons. These individuals are commonly referred to as the boomerangers. Unfortunately, some boomerangers fall back into the pattern of having their parents pay for their living expenses, which can have a negative impact on the parents' ability to save for retirement.

As such, parents who find themselves living with boomerangers may want to consider formalizing the financial aspects of the relationship. Examples include having the child sign an agreement to pay a certain amount for rent, food and utilities each month. Parents may also want to make it clear that, like tenants, they will be evicted if they do not pay their fair share of the expenses. (To learn more about living with boomerangs, see Boomerangs: Why Some Kids Never Leave The and Teaching Your Child To Be Financially Savvy.)

Consider Long-Term Care Insurance for Aging Parents
The cost of caring for aging parents usually increases as they get older, and most of the expense is attributed to healthcare costs. Further, adult children who are unable to pay the cost for elder care often find it necessary to take care of the parents themselves. Similar to the situation with boomerangers, this can put quite a strain on the caretakers' finances and could prevent them from saving for their retirement. One way of ensuring that the cost of healthcare for aging parents is covered is to purchase long-term care (LTC) insurance. LTC can be used to cover various expenses, including in-home healthcare or healthcare at nursing homes. LTC not only serves to ease the financial burden on the children, but could also negate the need for aging parents to tap into their retirement savings to pay for healthcare. (To continue reading on this subject, see A New Approach To Long-Term Care Insurance.)

Balance Your Savings For Retirement: Necessities and Emergencies
As an individual gets closer to middle age, panic can set in if an assessment of his or her retirement savings program indicates that the program is not on target. The natural reaction is usually to increase the amount being saved in order to get closer to the target saving amount. However, caution must be exercised - saving more than an affordable amount can have a negative impact. When deciding whether to increase the amount being saved in a retirement account, the following should be given careful consideration:

  • Why is the saving goal not on target? If it is because the budgeted amount is not being saved on a regular basis, is that as a result of the amounts being redirected toward unnecessary expenses? If so, an easy fix would be to stick to the budget and eliminate these unnecessary expenses. If the amount is being redirected toward things that the family needs, perhaps the retirement savings goal and the budget are not realistic and need to be revised. (For related reading, see The Beauty Of Budgeting.)
  • Is increasing the retirement savings amount a realistic objective? It may seem like a good idea to add larger amounts to your retirement nest egg. However, if it means that the reduction in disposable income will either result in increasing credit card and other debts incurred for everyday expenses, increasing the retirement saving amount could actually have a negative effect on your bottom line. (For more on this topic, check out Take Control Of Your Credit Cards.)
  • Were withdrawals from the retirement savings accounts used to cover emergencies? If it becomes necessary to withdraw amounts from your retirement account to cover emergencies, then it could mean that the amount being added to your emergency fund is inadequate. Financial experts project that at least three months' worth of net income should be maintained in an emergency fund account to cover unplanned expenses. Similar to retirement savings, amounts added to the emergency fund should be treated as a recurring expense, so that it does not create an unanticipated financial burden on the individual. (To learn more, read Build Yourself An Emergency Fund.)

The re-occurring theme is that realistic budgeting is a key element of a solid savings program. The budget must not only allow for retirement savings and everyday living expenses, but should factor in amounts to be allocated to an emergency fund.

Ask for an Increase in Salary
If you have been with your employer for a while and have established that you are a valuable asset to the firm, it may be time to ask for a raise. Before doing so, be sure to document your contributions to the organization and the ways in which you add value. Also, consider whether the amount you intend to ask for is comparative to the results you have produced for your company. There are quite a few services that provide information on the average salary for certain job types and locations. A copy of such an analysis would go a long way in helping to make your case. Most employers will give fair consideration to a reasonable request for a salary increase.

Conclusion
Saving can be a challenge. One way to overcome that challenge is to treat savings as a recurring expense. In most cases, this is easier to accomplish when there is an increase in disposable income, such as from a salary increase or change in family-status that results in fewer expenses. For others, it may mean cutting back on non-essential spending. Of course, mental health is just as important as financial health; therefore, budgeting does not mean depriving yourself of a treat every now and then.

Related Articles
  1. Mutual Funds & ETFs

    Top 3 PIMCO Funds for Retirement Diversification in 2016

    Explore analyses of the top three PIMCO funds for 2016 and learn how these funds can be used to create a diversified retirement portfolio.
  2. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  3. Retirement

    How Much Should You Have In Your 401(k) To Retire?

    Determining how much money should be in your 401(k) when you retire depends on several variables, many of which are uncertain.
  4. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  5. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  6. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  7. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  8. Investing News

    Zika: Study Says This Device Could Protect You

    New research just uncovered an inexpensive, commercially available device that might help fight off the mosquito that carries the dreaded Zika virus.
  9. Personal Finance

    Zika Virus: Latest Advice on Staying Safe

    Zika has hit the U.S. Here’s a quick review of what’s known about the virus, how it spreads, who’s at highest risk and how to avoid it.
  10. Investing

    3 Small Steps to Maximize Your Investing Goals

    Instead of starting the New Year with ambitious resolutions, why not taking smaller manageable steps that can have a real impact.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  4. What is the maximum I can receive from my Social Security retirement benefit?

    The maximum monthly Social Security benefit payment for a person retiring in 2016 at full retirement age is $2,639. However, ... Read Full Answer >>
  5. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  6. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center