How the ‘sandwich generation’ affects retirement

Insight into this demographic trend can help CPAs advise clients.
By Maria L. Murphy, CPA

How the ‘sandwich generation’ affects retirement
Image by ayagiz/iStock

More Americans are living in multigenerational households than in years past, leaving CPA financial planners to help clients navigate the financial side of this growing demographic trend.

That's no surprise to Gina Chironis, CPA/PFS, the CEO of California-based Clarity Wealth Management. Chironis recalled recently helping clients who paid the bills of a son in his 30s who lived with them while trying to pursue a professional sports career. The couple put their son's needs ahead of their own.

"I've told them that they are doing this at the expense of their own retirement plan," she said.


The number of Americans living in homes with two or more adult generations, or grandparents caring for grandchildren under age 25, is growing. A record 64 million people, or almost 20% of the U.S. population, were living this way in 2016, according to the Pew Research Center. The percentage of the population living in multigenerational households increased sharply from 12% in 1980, and the trend affects nearly all ages and ethnic and racial groups.

These trends are defined by popular terms such as "the boomerang generation" — young adults who return home to live with parents — and "the sandwich generation" — adults who care for aging parents while supporting their own children.

The reasons are both economic and reflective of the growing racial and ethnic diversity in the U.S. population. The Pew Research Center noted that Asian and Hispanic families are more likely to live in multigenerational households, as are foreign-born Americans.

"The fact that these percentages are still rising, even though the recession is over, and the economy is on a better trend, indicates that this is a durable trend and the facts driving it are not just economic," said D'Vera Cohn, a senior writer and editor at the Pew Research Center.

Different types of multigenerational households have their own unique challenges. CPAs can help their clients prepare for these situations in advance and manage them better over time.

Role for CPA financial planners

There is an increasing need for CPA financial planners willing to help clients in this area. Because families are involved, these decisions are emotional ones. "Clients don't ask for advice and tend to act alone because they don't feel they have a choice," Chironis said.

Steve Allen, CPA/PFS, CGMA, a financial planner at Allen CPAs and Advisors in Lexington, Ky., suggested that CPAs discuss their clients' personal and financial goals and objectives with them. Once they define those goals, the CPA can help explain how changes in the family's living arrangements affect those goals.

CPA financial planners should be prepared to have more emotional conversations with clients in multigenerational households than in other consultations. "There is a lot of behavioral stuff here, more than just number crunching," Allen said. "We want to have personal relationships with our clients so they feel comfortable, and then we can become part of their lives and offer advice and support."

More adult children are living at home

Young adults are among the most likely group to choose to live in a multigenerational household.

"Markers of adulthood, like getting married, finishing education, and buying a home, are being achieved at older ages these days," Cohn said. It is more common for young adults to return home after college if they cannot find jobs or make enough money to afford their own home or apartment. Many adults are not getting married. Others may return home after a divorce.

Student loan debt is often also an issue. By the fall of 2018, outstanding student loan balances exceeded $1.53 trillion, according to the Board of Governors of the Federal Reserve System.

But Allen said it's not just young adults who owe money for student loans. The number of consumers over 60 with outstanding student loan debt quadrupled from 2005 to 2015, with 2.8 million older Americans facing unpaid loans in 2016, according to information compiled by the Federal Reserve Bank of New York and the Consumer Financial Protection Bureau (CFPB). Many of those older debtors are having trouble repaying those loans, with 40% of those over age 65 defaulting on the loans, according to a 2017 CFPB report.

"Many people in arrears on student loans are over the age of 60, due to parents' co-signing their children's student loans," Allen said.

Supporting young adults without financial resources can be expensive, although Chironis said that most of her clients find it emotionally rewarding. Some parents let their children live with them only for a while, while others allow the living arrangement to become long-term or permanent. In some cases, parents may benefit from their children living at home and contributing to household expenses or helping with chores.

Urge clients to consider ground rules

Whether the living arrangements are short-term or long-term, it is advisable to set ground rules, especially about finances.

"Try to empower your clients to treat kids like adults with rights and responsibilities. Respect them and they should respect you," Chironis said. "But children may need to work with parents to develop a plan and a timeline for moving out."

Allen agreed that parents may need to help get their children established, into the workforce, with a financial plan to buy or rent their own place, save money, and pay back debt.

Whatever the financial arrangement is, Allen suggested clients discuss it with their children. "It is much more difficult to wait a year, after everyone is used to the arrangement, and then try to change it," he said.

Discuss risks of broad financial access

Chironis suggested parents avoid adding adult children to their bank accounts. While it may make access to funds easier, there are potential gift tax issues, along with risks of the money being subject to the child's creditors, attached for future alimony or child support claims, or stolen by the child.

Supporting an adult child may come at the expense of the parents' original retirement plans. CPAs can discuss their clients' financial plan assumptions, including cash inflows and outflows and the number of years they plan to work, and revise the plans to reflect new living arrangements.

Describe the financial side of caregiving

Parents may move in with their children, or their children may provide for them to move into assisted living. Either way, there are going to be financial effects for the adult children.

"Matters such as whether the parents have their own resources, pension, or Social Security income, own their own home, and need immediate or long-term physical care should be discussed with parents in advance," Chironis said. This is a very emotional area for clients.

"Rather than having to stop working completely, taking time away from work, or changing daily routines, adult children should not feel guilty about hiring someone to provide daily support or long-term care," she said. "I often advise my clients to hire care management professionals to come to the home to interview the family and advise them of the best way to meet the parent's needs now and in the near term."

Look at scenarios early on

Offering clients advice on the front end, in complex areas such as trusts, estate planning, Social Security claiming strategies, and Medicare or Medicaid issues is important, Allen said.

"Trying to advise about these matters on the back end is like trying to do tax return planning after the year is over," he said, adding that if CPA financial planners are not experienced in any of these areas, they should reach out to their professional network of trusted contacts.

Urge clients to think about limits

Grandparents may be tasked to provide permanent homes or child care for grandchildren. This can be physically and financially challenging, especially for older grandparents and younger grandchildren.

While it may be difficult, Chironis said, "Grandparents might have to say no. They may only be able to provide day care part time rather than full time, and they may have to do research to help their children find good day care for the grandkids outside of the home."

In some cases, grandparents may find themselves having to care for both their children and their grandchildren at the same time if their children have medical, marital, job, or other personal issues.

Be a trusted adviser

"There is not a right or wrong choice in these situations," Allen said. "It is not the adviser's decision to make, but rather we need to help our clients make the best informed decision in their personal situations."

About the author

Maria L. Murphy, CPA, is a freelance writer based in North Carolina.

To comment on this article or to suggest an idea for another article, contact Chris Baysden, the JofA's associate director, at

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