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A sandwich that’s tough to swallow

June 3, 2013

These days I see more and more couples who have become part of what some are calling the “sandwich generation”: those who are supporting adult children as well as their own elderly parents. In this economy, it’s happening more and more frequently. Needless to say, that kind of double-barreled financial burden can place a strain on even the most prudent couple.

Recently, I shared my experiences on this issue with the Wall Street Journal, outlining some of the common concerns and questions that people who find themselves in these circumstances often have, as well as some solutions that may help resolve a difficult situation. For couples who find themselves in a position like this, one of the most important things to remember is that with creative solutions—and the right planning and preparation—you can help your family members and still secure your finances and enjoy your golden years. In the Wall Street Journal piece, I gave an example of the kind of outside-the-box thinking that is sometimes required for those in the sandwich generation, outlining one creative solution in particular that worked well for a couple who came to me for help.

The client in question had previously purchased a “fixer-upper” house with their 39-year-old son, and was now worried that they wouldn’t be able to afford the needed renovations on the home without jeopardizing their retirement. Complicating matters was the fact that the wife’s 89-year-old father was also living in the home’s attached in-law apartment. What I came up with for them was a strategy that enabled them to finance the renovation and still make a financially secure retirement possible. I suggested that they take the husband’s pension in a $700,000 lump sum, rather than in monthly payments, and to roll it into fixed annuities that would provide about $56,000 in annual retirement income.

Unlike annual pension payments, this strategy would also allow them to pass any remaining annuity funds to their son after their deaths. Together with Social Security, this was enough to finance their retirement, making it possible for them to withdraw funds directly from their IRA to finance the needed home renovation. While this is just one example, it’s a great illustration of how a little creative financial problem solving can help members of the sandwich generation get the most out of their savings—and meet their current needs without putting their retirement at risk.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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