Financial planning for one person is difficult enough, but planning for three generations of people can be extremely difficult.
Still, financial experts said this is exactly what the millions of “sandwich generation” Americans who care for children and parents simultaneously need to think about. Otherwise, they risk – as many have already experienced – becoming financially exhausted as well as emotionally and physically exhausted.
Last year, a survey of 1,024 Americans aged 40 to 59 by the retirement services company Athene revealed that nearly 75% of sandwich generation respondents had adjusted their retirement goals to support their adult children and aging relatives. It said they reduced spending, delayed retirement or put money toward their retirement savings, while others planned not to retire at all.
“It’s a very challenging environment — paying for children or adult children and aging parents,” said Miklos Ringbauer, certified public accountant and founder of MiklosCPA Inc. By taking care of people day after day without a plan, “you harm yourself, your future, and your property.”
When should Sandwich Generation Americans plan?
Experts say that as always, the best time to formulate a plan is early, before something like a parent falls seriously ill. Early planning always gives people more tools and more flexibility to protect you and loved ones.
Experts said a major area of focus should be long-term care plans. According to the U.S. Department of Health and Human Services (HHS), about 70% of people over the age of 65 need some form of long-term care. Long-term care includes a wide range of care ranging from assistance with daily tasks to more complex medical care at home, in a facility setting such as a nursing home, or in a community-based setting such as an assisted living facility.
Traditional health insurance and Medicare generally do not cover long-term care, which can be expensive. According to a care cost survey from planning company CareScout, the average cost of five-day-a-week adult daycare was $24,700 annually in 2025, while the average cost of home non-medical caregivers was about $80,080. CareScout said a semi-private nursing home room costs $114,975 annually and a private room costs $129,575.
How can people plan for long-term care?
Wealthy people can afford or buy long-term care insurance, which can be expensive, advisers said. Long-term care insurance premiums can increase over the years, he said, and if the insurance is not used, the money may not be recovered.
Others may consider a hybrid life insurance policy, said Rob Burnett, an investment advisor representative and professional tax preparer at Outlook Financial Center. These fixed-cost policies ensure payments to beneficiaries in the form of a care benefit or death benefit, he said, so if you’re lucky and never need care, there won’t be any money left on the table.
Government programs are also an option, said attorney Joseph Fressard of Simasco Law, a senior legal expert.
“One of the biggest mistakes people make is not taking advantage of the public benefits parents may be eligible for,” she said.
Veterans may qualify for long-term care or people may plan to use Medicaid, Fressard said. Both have income restrictions and other requirements, so families should check them out and start preparing to qualify ahead of time.
Medicaid has a five-year look back period, so families cannot simply give away assets and qualify for Medicaid. Advisors said they needed to plan and legally spend their parents’ excess assets by paying for things like home repairs, accessibility modifications, prepaid burial arrangements and unreimbursed medical expenses.
Families can also create irrevocable trusts to remove assets that count for Medicaid eligibility, but remember, irrevocable trusts are usually irrevocable.
“You can put your parents’ house in an irrevocable trust and then sell it and use the money for long-term care, but the money has to stay in the trust to be used,” Fressard said.
Experts said all of these options can help keep most of your parenting expenses out of your budget so you can focus on you and your kids.
What if life passes and there is no plan?
If a parent is unexpectedly hospitalized, suddenly requiring long-term care and you haven’t planned, don’t panic, the counselors said.
There may be fewer options, but “it’s not too late to plan,” Ringbauer said.
“Stabilize your finances first,” he said. “It’s like putting on your oxygen mask before helping others on the airplane.”
Advisors say the least you can do for yourself is contribute enough to the company’s 401(k) plan and then take care of others.
If there are siblings, talk to them about a plan and discuss what each can contribute to your parenting expenses, Ringbauer said.
One place to look for help is your company’s benefits plan. “Taking a closer look at how workplace benefits can help reduce stress is a solid start,” said Kate Wingate, chief revenue officer of Morgan Stanley At Work. “Benefits like flexible work arrangements, leave policies, dependent care benefits and financial wellness tools can be game changers, and many people don’t even realize these benefits were already available to them.”
If you must pay, try to do it in a tax-efficient way to save money, Ringbauer said.
If a parent needs care and is claimed as a dependent on your tax return, you may be able to use your pre-tax dollars from the Dependent Care Flexible Spending Account to pay for adult day care or a home caregiver as well as care for your child so you can work, he said. For medical expenses, pay with pre-tax money from your health savings account.
Tax credits may also be available to your parent and child, including:
- Child and Dependent Care Credit if your parent lived with you more than half the year and needed a care provider while you worked. Some states also allow you to deduct a percentage of this credit from your state return. It can also be used for your child’s daycare and summer camps.
- Earned Income Tax Credit if you have limited to moderate financial resources.
- Loans for other dependents.
- List deductions for nonreimbursable medical or dental expenses paid out of pocket.
- American Opportunity Tax Credit for eligible college student expenses.
Make sure you keep detailed records of all your financial aid for your taxes.
Reporting by Medora Lee, USA TODAY.