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VIEWPOINT: PRICING A SANDWICH

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Smaller families, longer life expectancy, and late parenthood in life mean that the number of people ‘sandwiched’ is growing, with an estimated 2,4 million Britons juggling their responsibilities for both parents and children. Being married and affluent roughly doubles your chances of being ‘sandwiched’.

The Pew Research Centre (US) estimated that in 2013 nearly half (47%) of adults in their forties and fifties had a parent aged 65 plus while they were either raising a young child or financially supporting a grown child aged 18 or older. Of these, about one in seven middle-aged adults were sandwiched between simultaneously providing financial support to an ageing parent and a child.

I’ve previously written about the costs of raising and educating children, and also how much longer we are all living – at increased medical costs. Now add to this challenge the growing ‘sandwich generation’. Many financial advisors are now starting to incorporate into clients’ plans the responsibility of caring for elderly family members. I believe that these invariably underestimate the real costs.

A frail care or retirement facility may be between R15 000 and R20 000 monthly; medical aid and medical expenses ratchet up with age and may easily require another R5 000  per month (excluding specialist care). Add to this food, lights and water, running costs for a car, telephone, domestic help, and maintenance, possibly amounting to another R5 000 – R10 000 per month. While every individual’s circumstances differ and lifestyle costs vary dramatically, even at a total for both parents of say R30 000 per month, that’s a staggering R360 000 per year after tax. With people living into their late eighties and nineties, multiply that figure by 10, 20 or even 30 years – and the alarm bells start ringing!

Therefore, if you are a ‘sandwicher’ or at risk of becoming one, beware that it may be worth rethinking your financial plans. Surveys show it’s also one of the most stressful decisions we will ever make.

This needs to be incorporated into your investment portfolios, risk profile, investment timelines, and lifestyle decisions. Just as critically, you need to adjust your will and other estate planning vehicles to provide contingency plans for unforeseen events such as redundancy, forced early retirement, disability or death. Without a viable financial plan, the rise of the ‘sandwich generation’ may spell the end of a comfortable middle age – or fulfilling your lifetime ambitions.

Author: Mike Lledo CA(SA) is the CEO at Consolidated Financial Planning

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