4 Ways Gen Xers Can Save for Retirement While Caring for Parents and Kids

Kerra Bolton

First, Gen Xers were part of the “Breakfast Club,” and now they are part of the “Sandwich Generation.” Gen Xers, especially those in their 50s, are financially stretched between taking care of their kids and aging parents.

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Here are four ways Gen Xers can save for retirement while caring for parents and kids.

Create a Caregiving Plan

Women often bear the brunt of caregiving – whether it’s children or aging parents. According to a recent Edward Jones survey, more than half of women in the sandwich generation (56%) said they feel like they don’t have enough savings to support those for whom they are the primary caregiver.

Nearly two-thirds (64%) of the survey’s female respondents said their caregiving duties have negatively affected their ability to save towards their financial goals.

Primary caregivers, regardless of gender, can involve siblings or other family members in caring for aging parents (if possible) to spread the costs and time commitment.

“As a therapist, I talk to parents a lot about this and help them see what is a ‘must’ and a ‘plus’ when spending for caregiving for kids and parents together,” said Tammy Gold, an author, parenting coach, and speaker. “I always advise lessening the ‘money worry now’ and meeting with financial planners to start something that will feel safe and more secure down the road.”

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Pay Yourself First

Make retirement savings a non-negotiable part of your budget, even while managing caregiving expenses.

“The strain of raising and supporting dependents while saving for your retirement is real,” said Lawrence Sprung, CFP, author of “Financial Planning Made Personal“, and founder of Mitlin Financial.

“Try and automate savings for your retirement as much as possible, whether it’s deferring your salary into your company’s retirement plan or a monthly deposit into an IRA.”

Americans over 50 are also eligible for higher contribution limits to retirement accounts. Make sure to use “catch-up” provisions to boost your savings.

Build a Dedicated Savings Fund

Scott Neu, a financial advisor at Reinke Gray Wealth Management, suggested creating a separate savings fund for unexpected caregiving costs and exploring tax deductions, such as the Child and Dependent Care Credit or medical expense deductions.

For example, the IRS allows up to $6,000 for two or more dependents, including children and aging parents who live with you because they can’t care for themselves. In addition, Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) allow you to use pre-tax dollars for caregiving expenses, which can help you lower your tax bill and put more money towards your retirement savings.

“Balancing these financial priorities ensures that both caregiving responsibilities and retirement goals are met effectively,” Neu said.

Invest In Long-Term or Life Insurance

Nevertheless, life happens despite our best intentions. It can be tempting to dip into your retirement savings to address immediate caregiving needs – don’t.

Instead, check out AARP’s long-term care cost calculator and LongTermCare.gov, a U.S. Department of Health and Human Services website, to estimate caregiving costs in your area, said Chad Gammon, a CFP and owner of Custom Fit Financial. The company specializes in helping people close to retirement, like Gen Xers, plan for their financial future.

“You can also talk to an insurance agent about long-term care insurance to get more details or work with a financial planner,” Gammon said. “I would also encourage people to look into government programs like Medicaid or state assistance programs, if possible.”

In addition, state and federal programs often offer respite care or financial aid to caregivers to help mitigate the financial strain.

Finally, consider buying life insurance that offers cash value if you need liquidity for caregiving but also want to grow your retirement funds.

“It offers death benefit protection, and also has the potential to grow cash value,” said Jordan Teel, CEO of Everly, a life insurance company. “You can get tax-advantaged access to this cash value in case of an emergency via loans or withdrawals. Your financial advisor can help explain different cash value life insurance types and how they might best work for your situation.”

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