Many people who are a ‘middle child’ feel cheated—they weren’t the firstborn who amazed their parents with every ‘coo’ and weren’t the ‘baby’ given preferential treatment. Instead, they were sandwiched as the cursed middle child who changed younger siblings’ diapers and watched as older siblings got away with breaking the rules.
Regardless of birth order though, one generation is increasingly sandwiched in the middle—caring for aging parents and their own children.
Who Is the Sandwich Generation?
The “Sandwich” generation is approximately 50% of the Baby Boomer population who are caring for both aging parents and children in college. This portion of the Boomer generation sometimes finds it difficult to balance the needs of both ‘dependents’ while trying to save and plan for their own retirement.
According to the Bureau of Labor Statistics (BLS) there are approximately 20 million Americans in this situation. That number is expected to grow—the Census Bureau predicts 70 million people age 65 or older will be over 70 million by 2030.
The Sandwich Generation isn’t being ignored. July is National Sandwich Generation. The National Association of Insurance Commissioners (NAIC) recently announced that Grammy-award winning singer Amy Grant has been named as spokesperson for the Sandwich Generation.
The Costs of Being ‘Sandwiched’
Caring for everyone else isn’t cheap for the Sandwiched and they increasingly need help. The BLS estimates that those ‘Sandwiched’ spend around $10K a year and dedicate about 1,350 hours caring for others on average.
The simple economic principle of opportunity cost demonstrates the financial burden. According to the U.S. Census Bureau, the median annual household income in 2010 was $50,046. Based on a 40 hour work week, this breaks down to about $24 an hour, meaning the real cost of being a Sandwich caregiver likely begins around $42,400 a year. Add in all the other costs associated with college students and the elderly and there’s a small fortune on the shoulders of the Sandwich Generation. Talk about the pressure of being in the middle.
Unfortunately expenses aren’t decreasing—the Department of Labor reported the inflation rate in 2011 was the worst it’s been since 2008, as prices rose an average of 3.1%. So far in 2012, prices have risen 1.7%. Healthcare costs alone have increased over 134% between 2000 and 2011.
Salaries aren’t keeping up either—earlier this month, a survey from the Hay Group, a management consulting firm, reported most U.S. employees will only see about a 3% pay increase. Factor in inflation and that’s barely enough to stay above water.
What the Sandwich Generation Can Do To Prepare
The new spokesperson for this generation, Grant, a mother and aging parent caregiver, will work with the NAIC to encourage the current generation (and later generations) to plan for this stage of life since it can be difficult to plan for the future as they spread themselves thin in multiple ways.
Life and health insurance are a large part of this strategic planning and it’s important to consult with insurers annually to discuss coverage changes and needs.
Whether preparing to be part of the Sandwich Generation in the future or currently in that position, smart insurance choices can help alleviate financial burdens or prepare for the future.
Health Insurance
- Ensure children can get coverage through current health insurance policies until 26 or obtain coverage through individual health insurance options available through schools to offset medical costs.
- If you’re healthy and can afford higher out-of-pocket expenses, look at high-deductible plans, including Health Savings Accounts.
- For those with pre-existing conditions, look at pre-existing condition insurance plans.
- Consider annuities. The caveat here is that you should educate yourself about this long-term financial tool.
Medicaid Insurance
- Ensure your parent applies for Medicare before 65.
- Identify any gaps to see if Medicare Supplement insurance is needed.
- If nursing home care is required, see if their income meets state eligibility Medcaid guidelines. If not, consider long-term care insurance (LTC).
- Consider applying for Medicaid coverage yourself depending on your income and assets to cover some LTC costs.
Long-term care insurance
- Consider LTC insurance, if it can be bought early enough for elderly parents. It can help ease your financial impact if full-time care is needed for your parents.
- The NAIC states 70% of people 65 or older will need LTC. Average costs of nursing homes can cost $80K or more annually, and most stay over a year. There’s a misconception Medicare or regular insurance covers this, but Medicare only covers about 2% and private health insurance covers about 1%.
- LTC should ideally be bought before the age of 60, but many don’t enter nursing homes until 79. Premiums are paid for a considerable amount of time, but could be cheaper than absorbing costs.
- Buy a LTC policy for yourself. This can give you piece of mind and prevent your children from having to absorb costs.
Life Insurance
- Once your child isn’t financially dependent on you, review your life insurance policies to consider decreasing life insurance coverage. If your policy holds cash value, it may be wise to cash it in to help pay for costs, but consider this very carefully.
- Review your parent’s life insurance, and if they don’t have any, consider guaranteed life insurance for final expenses.
- If your parent doesn’t qualify for Medicaid, see if their life insurance policy has riders or accelerated benefit provisions that could help pay for nursing home care.
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