Financial advice for the ‘sandwich generation’

Many members of the Baby Boom generation are trying to balance supporting a parent while also raising a youngster or providing financial help to an adult child, according to the Pew Research Center.

Several factors make it likely that this trend will continue. People are living longer, so there’s a greater chance that our parents will need our help as they age. And, once children reach adulthood, they increasingly face hefty college tuition debt and are turning to their parents for economic assistance. That can put a squeeze on adults in their middle years, often known as the “Sandwich Generation.”

The Maryland Association of CPAs recommends that this group take a number of steps to cope with competing financial demands.

Set up a college fund

In the last decade, tuition and fees rose 54 percent at four-year public universities and 33 percent at four-year private colleges, according to the College Board. Given steadily rising tuition costs, CPAs advise parents to begin setting aside money as early as possible for this significant expense and to investigate tax-advantaged savings options such as 529 plans.

Educate yourself about your parents’ finances

Adult children often are reluctant to question their parents about money, but it’s important to understand our parents’ financial situation so that we are prepared to help them when they need it.

Ideally, you want to determine what they receive in pension and Social Security payments and how much they have in savings. Find out about their fixed expenses, too, such as mortgage or rent and utilities payments. Don’t forget to consider medical expenses, including the cost of health care insurance, medications, and provisions for emergencies.

It may feel awkward to ask your parents about these details, but when you are informed you are in a better position to help. You can use this information to gain a broader sense of how their needs may affect your own financial situation.

Investigate long-term-care insurance

Family finances often are devastated by a lengthy nursing home stay or in-home care costs for a loved one. That’s why it’s important to find out whether your parents have long-term-care insurance that will cover these expenses.

If they are not paying for this insurance themselves, double-check to see if it is part of their former employers’ retirement package. If they’re not covered, explore your options and consider whether this insurance would be a wise choice.

Don’t neglect your own needs

You can’t help others if you’re not on firm financial footing yourself, so remember to continue to set aside money for your own retirement.

Be sure to take advantage of tax-deferred savings options, such as your employer’s 401(k) plan or an individual retirement account, in order to maximize your earnings. By focusing on your retirement, you’ll set the foundation for a secure financial future and ensure that your own children will not have to help you in your later years.

As part of their 360 Degrees of Financial Literacy initiative, CPAs have created a special Web site that addresses financial concerns at every life stage. Go to www.360financialliteracy.org and click on “Sandwich Generation” to learn more about the special issues facing this group. And remember that your local CPA can offer you advice on all the financial challenges facing your family.

Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.

Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.

For CPA referrals in your area, contact the MACPA at (410) 296-6250 or click here.

The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.