The Boomer Conundrum

The financial pressures on Boomers are huge. What they are and how advisors can help them clear a path toward retirement

They’re typically called Baby Boomers – the generation that falls within the ages of 53 and 71 – but lately there’s been a new term used for at least one segment of that population. The Sandwich Generation.

That’s because Boomers are more often the generation that is being “sandwiched” between caring for aging parents while supporting their own children. A Pew Research Center study shows that slightly more than one in every eight Americans between the ages of 40 and 60 are caring for a parent and raising a child simultaneously.

There goes the retirement savings plan.

Yet such financial obligations don’t have to be a major strain on the retirement savings. When helping plan participants understand how to afford child care expenses, parents in poor health, and a retirement of any kind, retirement plan advisors can help plan participants balance a financial plan that includes all three needs.

Make retirement savings the priority. Of all things on the financial must-have list, the only one that cannot wait is retirement savings. College savings can be made up through loans and grants. Adult care expenses can be offset through various Medicare/Medicaid assistance programs as well as the parent’s savings and assets. Retirement savings, however, are much tougher to make up later. Counsel your plan participants on keeping retirement savings plans in place and cutting expenses elsewhere.

The 529 plan. Designed to help parents save for their children’s college education, the 529 account can help participants sock away tax-free dollars. Depending on the state, there may also be a deduction for contributions. Help your plan participants set up a sensible payroll deduction into the plan.

Tax breaks. Child care tax credits, adult day care or caregiver expenses and other deductions can help your participants free up money that can be redirected into their retirement savings accounts. Educate plan participants on what possible deductions may exist for their particular situation.

Flexible spending accounts. Point plan participants toward pre-tax contributions to a flexible spending account. Putting aside pre-tax dollars helps participants pay for children’s care and, depending on the flex plan, the care of the aging parent.

Set goals. When faced with such a barrage of financial pressure, the sandwich generation can have difficulty creating a sensible plan of attack. Retirement plan advisors can help participants establish goals and reach more realistic benchmarks. Also, advisors can help participants adjust goals as necessary, and explore options that can lift some of the financial burden.

Help participants get real. Advise them on what will happen to their retirement savings should they decide to withdraw from their 401(k) instead of taking out a personal loan or federal loan for their children’s education. Or perhaps they should work longer or take part-time work during retirement.

Financial pressures needn’t derail your plan participants’ retirement investing. By laying out the options for your plan participants, they can make more informed choices that help them meet all their financial obligations.

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