Are you a professional financial advisor? Register for Globe Advisor and then sign up for the new weekly newsletter on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.
Many in the sandwich generation, balancing care for young children and aging parents, saw a mental and physical decline in the older generation through the pandemic.
Beyond the direct risk of COVID-19, limited access to health care, delays in treatment, isolation and loneliness, and the stress caused by financial market turbulence all took a toll.
They got older quicker because of the pandemic, says Maili Wong, senior wealth advisor and senior portfolio manager with the Wong Group at Wellington-Altus Private Wealth Inc. in Vancouver.
“We work with a number of clients in that sandwich generation … and oftentimes we find [they] are really struggling with finding a sense of stability. In their work and personal life, there are a lot of demands on their time.”
“But also, financially, it can be a real juggle for them to save for retirement while also feeling the need or obligation to help their parents and the stress of wanting their children to be successful and have the ability to [access] a good education or buy their first home.”
Financial advisors can play a key role in helping sandwich generation clients create a plan to manage extra costs as their parents age.
One of Ms. Wong’s clients had parents who were struggling with the stairs in the house where they had lived for 30 years. Selling the house and purchasing a single-level condo left a surplus. It’s now invested in a portfolio that generates a steady monthly income to pay the parents’ living expenses and extra health care costs when needed.
“It created some stress relief for our client because now they have a sustainable financial plan in place [and] the parents have more physical safety as well,” she says.
“Meanwhile, they can be more free to think about their own retirement and also how they’re going to support their son in elementary school.”
Ms. Wong points out that observing parents’ struggles can prompt the sandwich generation to better plan for their own future – for example – by setting up powers of attorney for themselves or putting living benefits insurance policies in place while they’re still young and healthy enough to get them.
Advisors also have an opportunity to proactively address sandwich generation issues with younger clients whose parents aren’t yet experiencing age-related challenges. Depending on the situation, it may be worth earmarking some savings specifically to help parents.
“There’s this natural desire to support their parents as gratitude for everything their parents sacrificed along the way,” says Ms. Wong – but long-term sustainability is essential.
Clear communication between and within generations is crucial
Sustainability is a big part of planning for the sandwich generation, says Natasha Knox, certified financial planner and founder of Alaphia Financial Wellness in Vancouver. Sometimes, people are counting on future increases in their incomes or the value of residential properties to enable them to help with parents’ expenses – but that type of “magical thinking” isn’t the basis for a sustainable plan.
An even bigger challenge, she says, is that different generations may have different expectations about how much support children should give their parents, and these expectations may never actually have been articulated to each other.
“There are some attitudes and beliefs that people may have around what they owe their parents … or parents may feel that their adult children may owe them,” she says. “When things go sideways, it tends to be a mismatch of those expectations.”
There can be disagreements within a generation as well, with siblings arguing about the level of support that’s required and what’s fair and reasonable for everyone to chip in.
“It’s not just helping out financially,” Ms. Knox emphasizes. “It’s helping out with time, taking aging parents to appointments, interfacing with financial institutions, making sure their affairs are in order, and if they lose capacity very often [managing the consequences] may fall to one of the children.”
The effort piece has to be sustainable too.
A further complication is that couples aren’t always in agreement about how much support is appropriate to give to one partner’s parents. Sometimes, it helps for the partner who wants to contribute more to make sure any trade-offs only affect individual (not shared) goals.
Because this is such an important conversation to have, Ms. Knox always asks her clients, “How are your parents? How’s their health? Do you have a sense of their financial situation? Is planning for helping them something that we need to be thinking about?”
Assuming there is a need for planning in this area, the next critical step is to give clients a very clear sense of what they can and cannot afford, because overextending to support parents can ultimately become a burden for the next generation.
Ms. Knox says most people in the sandwich generation very much don’t want to put their children in the position of supporting them in retirement – even if they had to step in to help their own parents.
For more from Globe Advisor, visit our homepage.