Skip to main content

You Are Your Parents' Retirement Fund – Now What?

The "sandwich generation" is a worldwide phenomenon that impacts the retirement plans of many across the globe. Adviser Jane Mepham outlines steps you can take when you become your parents' retirement plan.

By Jane Mepham

In 1981, social worker Dorothy Miller coined the term the “sandwich generation.” She used it to describe adult children who are taking care of children under age 18, as well as taking care of their parents.

Jane Mepham is the founder & principal advisor at Elgon Financial Advisors, a registered investment advisor in the state of Texas.

Jane Mepham

This phenomenon is not restricted to the U.S. It is a worldwide issue with slight nuances depending on the specific country. In addition to physically taking care of the parents, this generation is also being called upon to fund the parents’ lifestyles, making them the parents’ retirement fund.

This article will cover possible solutions based on the family dynamics and the stage of life the parents are in.

Immigrants and Foreign-Born Families

The U.S. has some of the best schools in the world. In addition, we also have some of the most expensive schools, as illustrated in the 2019 most expensive universities in the world report. Families outside the U.S. who want the best education for their children are willing to spend all their resources, including their retirement money, to send their kids to these colleges.

As one client explained to me, “When my family made the decision to send me to the U.S., they were willing to spend everything they had on me. In return, I knew, I would be taking care of them in their old age.”

If both sides have this common understanding, then it is just a matter of figuring out the budgets, and having the parents’ retirement, as a line item. It will mean being a little more deliberate and creative about some of the choices you make. A lot of this will be informed by your cultural backgrounds, and what is acceptable to all concerned. A couple of ideas/suggestions:

Get your siblings to pitch in. This is common especially in cultures outside the U.S. Some of them may not have the money but can help in other ways.

Instead of maintaining two households, buy a slightly bigger house with a separate in-law’s apartment for your parents. They will be closer to you, they will have some freedom, and if you have to physically take care of them, it will be a lot easier than if they lived in the next state.

Plan to maintain a higher emergency fund. You are planning for two households not one. You might have to make some changes in your lifestyle.

Have your parents help with some of the child-caring duties if they’re able. This could save a lot on childcare expenses. It is also an opportunity to strengthen the family bonds.

Consider starting a small side hustle the parents can help run, keeping in mind their legal status. Be open-minded about the possibilities. If you need to send them money, investigate all the possibilities and find the cheapest, safest way to do this. Incorporate checks and balances to ensure funds are getting to them while staying on the right side of the taxman.

Keep the final goal in mind. You are supporting your parents’ retirement, but you also need to keep saving for yours. Make the most of the situation.

This Was Never Your plan – You have Been Thrust into It.

A lot of adult kids are completely unprepared when they find out their parents have not saved enough for retirement.

There are a whole host of reasons the parents find themselves in this situation, ranging from being too busy raising their kids (you), to not understanding the system, to not having enough to save. Do not make any assumptions but approach the situation with grace and patience.

First, sit back and take a deep breath for a moment.

Communication is going to be key, keeping in mind that your parents are probably stressed about the situation. If you have a financial adviser, this might be a good time to engage them as a neutral third party. You might also consider other resources like your family attorney, the family’s spiritual advisor, etc., to help move the conversation along.

Focus on getting them talking about the current situation to understand exactly where they are. These conversations are not likely to be easy and could take days or weeks. Use yourself as an example but be diplomatic and respectful.

“Hey mom, Charlie and I have been meeting our advisor who is helping us figure out how much Social Security benefit we’ll be able to get when we retire. There is so much we don’t know, is this something you and dad might be interested in looking at with us?”

Hopefully, everybody will have a clear idea of the situation by the time these conversations are over. But keep in mind, this needs to be ongoing.

If Your Parents Have Not Retired

Focus on helping them increase their savings rate while reducing expenses. Assist them in figuring out if there are areas of their lifestyles where they may be willing to trim or adjust. Start small, and focus on simple things like eating out, before you get to the big-ticket items, like downsizing.

If your parents are the overly generous grandparents constantly giving gifts to the grandchildren, there may be an opportunity to trim or redirect. Approach this one with a lot of caution, as it can easily blow up in your face.

With every topic, stay focused on showing them the dollar impact, i.e., the actual change on the bottom line (savings). Focus on how each new dollar saved will make their retirement a little bit more enjoyable.

Consider asking them to work longer, again showing them the impact every 3-6 months of income will make on their savings. At the end of the day, it is their choice, all you can do is guide them.

Help them draw up some basic estate planning documents if they do not have them in place already. It will be key to get the medical directive, power of attorneys, etc., in place. This one applies in all situations regardless of the family dynamics.

If they do not have a long-term care plan or policy in place, and they are able to be covered, this could be the gift that keeps giving. A health condition that requires long-term care can wipe out whatever little savings they have and impact you as well.

If they are insurable, it may be worth getting life insurance on them and covering the premiums. Depending on the type of policy you get, it may not help them with their retirement funding, but it could cushion some of your shortfalls in the future when they are gone if you end up spending some of your funds on them.

If Your Parents Have Retired

The financial burden is likely to fall to you. If you are in a long-term committed relationship or married, it is key to get your partner on board with the plans going forward. The priority is still your retirement plan, but this is now an immediate focus that cannot be ignored.

Identify how much financial support your parents are going to need versus want. Everything you do moving forwards is going to be geared towards helping them meet that funding gap. For some people, this is not an issue, and life goes on. But more likely it will be an issue. The following suggestions may help. This is in addition to having your parents tighten their belts completely and trimming their budget.

At some point, you might have to fund this need out-of-pocket, but you want to minimize how much comes out of your pocket and delay it for as long as possible.

Consider having your parents downsize. They may be reluctant to do this but showing them the numbers and getting a financial planner or other trusted individual involved may help move the conversation along.

If they are not willing or are not in a position to move, consider a reverse mortgage to provide lifetime income. There are pros and cons, but it allows your parents to stay in the home and meet some of their needs.

Have them consider going back to the workplace. They are probably not going to make as much as they made before, but every little bit helps. See this list of the 15 most desirable in-demand jobs for seniors. An alternative is a side hustle or a hobby that can make some money. Kapok, a multicultural aging and caregiver resource site has some ideas.

What government benefits do your parents qualify for? The National Council on Aging has a benefits checkup site based on Zipcode that might yield some gems. A quick search based on my location yielded the following benefits:

- Housing and utilities benefits include Lifeline for monthly discounts on wireless or home telephone service.

- Healthcare benefits in the form of Emergency Response Service.

- Food and nutrition assistance benefit.

- Discount benefits.

There could be other organizations in your location, with other benefits, as well.

Once you have exhausted all the options and there is still a gap to meet, it is time to have the tough/delicate talk with the rest of the family on how much you can all afford. Living costs are going up every year in most of the cities in the country. Your support is likely to be for a lengthy period, not just one or two years.

The support does not have to be in cash. They could move into your converted garage or the spare bedroom. It could be finding them cheaper housing and paying for it directly.

Assume that your life is likely to change, and you may have to make different life choices. Most people would prefer to make some sacrifices rather than have their parents homeless. That might include the type of job you take and where you take those jobs. You might need to take a second job and cut down on vacations for a couple years.

If you choose to go down this path, do it joyfully and focus on the satisfaction it gives you to be able to help your parents. In the end, it will work out okay.

About the author: Jane Mepham

Jane Mepham is the founder & principal advisor at Elgon Financial Advisors. She enjoys simplifying the complexities of the financial system for immigrants and foreign-born individuals. 

Got Questions About Your Taxes, Personal Finances and Investments? Get Answers!

Email Jeffrey Levine, CPA/PFS, chief planning officer at Buckingham Wealth Partners, at:


Off Target: On the Underperformance of Target-Date Funds

What Investors Should Know About Private Equity

Breaking Up is Hard to Do - 3 Tax Tips to Help

Evolving IRA Distribution Rules Complicate Planning

Gen Z Money Tips

When Not to Rollover Your 401(k)

Using Defined Outcome ETFs for Retirement Income

Ask the Hammer

Is it Possible to Convert an RMD into a Roth IRA

What Kinds of Expenses are Covered by an HSA?

What’s Up with the New Social Security Statement?

Ask Bob

How to Fund and Use a Health Savings Account

How Much of My RMD Can I Convert to a Roth IRA?