PLANSPONSOR - February/March 2018 - 59

about their own finances heading into this
year, with 57% reporting that their financial
situation will improve in coming years.
" But even with these upbeat sentiments,
one item seems to be looming, "
warns Brian Madgett, vice president for
New York Life, in Dallas. " Almost half of
respondents also expect they will have to
increase their responsibility for the care of
their own parents in 2018. This survey validates
what our agents see in homes across
the country: More parents find themselves
sandwiched-responsible for their children
and facing a growing responsibility
for their [own] parents. "
Madgett says many of these optimistic
respondents could be overlooking
just how negative an impact the sandwich
effect can have on finances, and so it will
be important for employers to continue
tracking this issue. There is evidence that
being sandwiched results in all sorts of
suboptimal financial outcomes.
Indeed, according to the latest cut
of data provided by Wells Fargo from its
2017 Wells Fargo Retirement Study, those
in the sandwich generation, which the
study defines as " workers ... who care
both for their children and for aging
parents, " are much more likely to cite
rising health care costs as a major hurdle
to retirement savings than those without
these responsibilities (30% vs. 18%).
Sandwich-generation members are also
more likely to cite higher health costs as
a reason they fail to save more for retirement
(71% vs. 56% of non-sandwichgeneration
workers).
As the data from Wells Fargo and
New York Life make clear, the sandwich
generation challenge can very easily
devolve into a vicious and intractable
cycle that plagues multiple generations
of a given family: Parents are naturally
and altruistically driven to sacrifice their
own retirement planning priorities to
boost the current financial well-being
of their young children. These parents
often plan to begin saving for retirement
once the kids grow up and become financially
independent-but when the end is
The sandwich generation challenge
can very easily devolve into a vicious
and intractable cycle that plague
multiple generations of a given family.
in sight, their own parents unexpectedly
call upon them for increased financial
support.
The same altruistic motives thus
lead to additional sacrifices in the retirement
planning effort. And then, when
the original set of parents in the example
reach their own retirement age, they have
been unable to save effectively for retirement-thus
they have to call on their own
children for aid, perpetuating the cycle.
The Solution
Experts agree there is probably not much
an employer can do-or even should
do-when it comes to determining
exactly how much of an employee's
paycheck goes to support children or
parents versus how much will be invested
in the retirement plan or in health insurance
premiums. But what the employer
must do is continually emphasize the
value of setting money aside for retirement
and frame it as a crucial pro-family
decision-not a selfishly motivated act,
concludes Joe Ready, head of Wells Fargo
Institutional Retirement and Trust in
KEY POINTS
* The " sandwich challenge, " supporting both children and parents, does
not only impact Generation X, but Millennials and Baby Boomers, too:
As many as 36% of all U.S. workers and 43% of working women identify
with this challenge.
* Often workers' early career is spent prioritizing expenses for growing
children, and later the focus shifts to supporting aging parents-but in
both cases saving for retirement is ignored.
* Plan sponsors should be aware of this challenge for their population
and can emphasize the value of setting money aside for retirement
and frame it as a family decision-not a selfishly motivated act.
PLANSPONSOR.com February-March 2018 59
Charlotte, North Carolina.
He says the data clearly should
encourage employers to make sure people
understand the importance of saving
early and consistently for retirement,
even as other pressing financial priorities
come and go. Naturally, retirement plans
that take advantage of automation and
smarter choice architecture-and that
provide ongoing education and advice-
will do better at supporting cash-strapped
employees than wholly voluntary plans
lacking in support resources.
" Time is the biggest asset for retirement
savers, " Ready adds. " For the
50-somethings in our survey, every day
it is getting harder to bend the curve
as retirement closes in. This is why it
is important for those who are playing
catch-up to also understand what they
can do to optimize their savings. They
can do this by modeling when they take
Social Security, the age they when will
retire and how much they can afford to
withdraw each month. Improving your
understanding of these factors can have a
meaningful impact. " -John Manganaro
http://www.PLANSPONSOR.com
PLANSPONSOR - February/March 2018

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