3 Money Risks that Scare Gen Xers More than Retirement Costs

Generation Xers, you have probably heard yourselves referred to you as the “Sandwich Generation.” For those of you on the upper end of Gen X’s age range (35 to 55) this means that, not only are you likely to be responsible for caring for your long-living parents. You will also likely provide some financial support to your children. For many Gen X parents, that may be helping with college tuition. 

And there you are in the middle, needing to build a retirement nest egg and prepare for your own future needs, like the possibility of long-term care. What’s more, you have to account for all the other routine expenses facing retirees.

You may not be feeling like the middle of a sandwich as much as you are feeling like the middle of a famous chocolate sandwich cookie. The two rigid outside edges (financial support for both parents and kids) may seem like they are squishing you—and your financial future—in the middle.

In a recent survey, the Insured Retirement Institute found three key money risks that worry Gen Xers. Below are those money concerns, as well as some ideas to help you preserve your financial strength and maybe even “Double Stuf” your retirement resources in the face of them. But first you need to start the conversation.

Gen Xers Slow to Seek Retirement Planning Advice

The Insured Retirement Institute polled 802 Gen X respondents. Perhaps surprisingly, only 20% had ever talked to a financial advisor. Just one-third had tried to calculate how much they needed in savings in order to retire.

Even so, that same report showed about 58% of the Gen Xers are “somewhat or very confident they will have enough cash to cover basic expenses in retirement.” The analysts summed up Gen Xers’ approach to retirement planning with this subtitle to their report: “They’re (mostly) doing it wrong.”

And what are those top three money concerns that worry Gen Xers — even moreso than basic retirement expenses? The costs of long-term care for their parents, the costs of long-term care for themselves, and the high-cost commitment of helping kids pay for college tuition. 

Talking to a retirement or financial professional is the first step toward confirming where you stand and what action you can take to get yourself—and your family—where you all need to be. It’s about putting your best foot forward to ensure everyone has the best chance of achieving their goals.

Start at the Top of Your Family Tree

You have seen the statistics. Older generations are living longer than their ancestors, thanks to advanced healthcare and healthier lifestyle choices. Yet, an eventual decline in health is not a maybe for any of us. It’s a known outcome that can require a varying length of long term care.

Your parents are probably reluctant to be a burden to you, financially or emotionally. So, talking to them about their own long-term care strategies is a good starting point. As you are someone who is developing or refining your own retirement and LTC strategies, it makes sense for you to help them evaluate theirs.

Sure, older Americans may find it hard to discuss money matters with their families. But how much more difficult would it be to correct financial mishaps once they’ve already occurred, rather than when there is still time to avoid them?

Involving a third-party advocate – such as a retirement-knowledgeable financial professional – can help you make headway. 

Getting Parents’ Insurance Needs in Order

If your parents don’t have strategies for healthcare and LTC, what can be done to get them insurance coverage that offers financial protection against these expenses?

Genworth Financial reports that, in 2017, the median annual cost of housing someone in an assisted living facility was $45,000. And the cost of a private room in a nursing home care facility can run up to $97,452 per year.

There are new generations of life insurance that could help you pay for personal care needs. Some life insurance comes with living benefit riders, or benefits that let you accelerate the death benefit toward certain care expenses.

If your parents do have insurance, ask the right questions. Are their policies up-to-date? Do they have enough coverage? What do their policies cover? Will they and/or you be able to afford them in the future? These are critical questions for your and their financial peace of mind.

Now Focus on You

You have the benefit of time. At your age, you can begin implementing retirement income and LTC strategies that grow and strengthen over time. That way when you need them they are there as your safety net, allowing you to avoid relying upon your own children.

Over the years, you save and invest some of your income in tax-advantaged retirement accounts, like a 401(k) or a Roth IRA. When retirement starts to draw near, it’s time to create an air-tight financial plan that generates the income that would make your ideal retirement possible.

Another emerging strategy is an asset based long-term care policy. This is a life insurance policy or an annuity that allows you to use the policy’s death benefit or cash value for LTC costs. If you end up not needing the insurance, your heirs can then receive the policy’s death benefit.

Asset based LTC policies may even offer a Return of Premium option that allows for a full refund of your premium. If it does come with that option and you find that appealing, be sure to investigate all details of what may be involved.

Plan for Your Kids’ College

As one of their top three financial fears, paying for their kids’ college weighs on Gen Xers. And for good reason. According to the College Board, the average cost of tuition and fees for the 2017–2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities.

Many financial advisors encourage parents to take a “put your own oxygen mask on first” approach to considering their financial needs over those of funding a child’s college education. However, parents seem willing to put themselves at risk to meet this basic parental goal.

When seeking solutions to paying for higher-education expenses, parents’ assets and household income play a key role in determining financial aid eligibility. The Free Application for Federal Student Aid (FAFSA) is filled out by current and prospective college students (undergraduate and graduate) to determine their eligibility for student financial aid.

Looking at Potential Strategies for College Funding

For families with greater assets and income, there are strategies to fund college beyond financial aid resources. Cash value life insurance doesn’t count toward your FAFSA asset balance, for example.

Other funding strategies include 529 accounts, tax-advantaged savings accounts for higher-education costs, which invest in mutual funds, and Coverdell education savings accounts, which can be used for K-12 schooling, as well as for higher education.

Seek Out a Financial Professional for All Stages of Life

Your financial future is like a puzzle made up of many parts. Focusing on placing one puzzle piece in the right spot is progress, but it does not make a complete picture. Knowing that you are in the middle of potentially providing financial support to both your parents and your adult children, while facing important financial needs of your own, there are many factors you need to consider.

At SafeMoney.com, you can connect with qualified financial professionals who have advanced knowledge of these strategies above — not to mention other possibilities that can help you enjoy a comfortable, financially confident future.

Use our “Find a Financial Professional” section to connect directly with someone. You have the option to request a personal strategy session to discuss your needs and goals. Should you need a personal referral, call us at 877.476.9723.