The Sandwich Years: Supporting Family While Planning for Your Future

There can come a point in life when your financial responsibilities seem to stretch in two directions. Your adult children might be trying to buy their first home and looking to you for help with a deposit. At the same time, your parents may be getting older and beginning to need more support. Perhaps conversations about home care, residential aged care or managing their finances are starting to arise. Somewhere in the middle are your own plans for retirement.

For many people in their 50s and 60s, the question becomes: How can I help the people I love without compromising the future I’ve spent years building?

There isn’t necessarily a choice between helping your family and protecting your retirement. But before committing financially, it can be worth taking a step back and understanding what you can comfortably afford and how different decisions could affect the bigger picture.

When you’re being pulled in two directions

Consider David and Michelle, a couple in their late 50s. Their daughter is hoping to buy her first home and has asked whether they could help with her deposit. At the same time, Michelle’s mother is finding it increasingly difficult to live independently, and the family is beginning to discuss what additional care might look like.

David and Michelle want to help both generations. But they’re also hoping to retire within the next several years. Their initial question might be: “How much can we give them?”

• If we give our daughter money now, what does that mean for our retirement?
• Should the money be a gift or a loan?
• What about our other kids, how can we be fair to them?
• What happens if circumstances change and we need that money ourselves?
• What might Mum’s care cost, and how could it be funded?
• How much do we need to retain to feel comfortable about our own future?

These questions can help turn an emotional decision into a considered financial one.

Helping your children: gift, loan or something else?

Helping an adult child into the property market can feel straightforward: you have the savings and they need the deposit. But how you provide that assistance can be just as important as how much you provide. For example, support could take the form of:

A gift

A gift can be simple, but it generally means accepting that the money isn’t coming back. It can also have implications beyond the immediate transaction. Depending on your circumstances, gifting may interact with Centrelink means testing, including gifting rules. The structure of family financial assistance can also have legal and estate-planning implications.

A family loan

Rather than giving the money outright, some parents choose to lend it. This may provide greater clarity around whether the money is expected to be repaid, but informal arrangements can create problems later. If a family loan is being considered, questions such as the repayment terms and documentation should be addressed rather than relying solely on a handshake or family understanding.

Co-ownership

Another possibility may be contributing towards a property and taking an ownership interest. However, this introduces a different set of financial, tax and legal considerations. Before entering an arrangement like this, it’s important to understand not only how it works today, but what could happen if someone’s circumstances change.

The important point is that there isn’t one structure that will suit every family.

Before transferring money, think about what you’re trying to achieve, whether you may need access to the money again, and how the decision fits within your broader retirement, estate and financial plans.

When your parents start needing more support

At the other end of the sandwich can be an entirely different set of decisions. A parent might be coping well today, but their circumstances can change quickly. That can leave families trying to make significant financial and care decisions at an already emotional time.

Having conversations earlier can help. Some useful questions to explore with your parents include:

• What support might they need if living independently becomes difficult?
• What income and assets do they have available?
• Do they want to remain at home for as long as possible?
• Who will help manage their financial affairs if they can no longer do so themselves?
• Are their estate-planning and other important arrangements up to date?
• How could different care options affect their finances?

The financial implications of aged care can vary depending on a person’s circumstances, so it’s worth understanding the options before a decision becomes urgent.

Don’t forget the person in the middle: you

When someone you love needs help, the instinct can be to focus on what you can give them today. A better question may be: “What can I comfortably afford to give while still protecting the future I want?”

ASIC’s Moneysmart encourages people approaching retirement to consider the kind of retirement they want and how they will support themselves once they stop working. Read more here: https://moneysmart.gov.au/plan-for-your-retirement

That makes your own retirement plan an important starting point. Before committing a substantial amount to children or parents, consider:

• your expected retirement date
• your anticipated retirement spending
• your superannuation and other investments
• remaining debt
• future healthcare and lifestyle costs
• how much accessible cash you’d like to retain
• what would happen if you retired earlier than expected.

From there, you can start thinking about a sustainable giving budget.

Rather than asking, “How much money do we have available?”, ask “How much can we afford to give away and never need back?” That distinction can change the conversation.

Finding the right balance

The purpose isn’t necessarily to arrive at the largest amount David and Michelle could give. It’s to understand what level of assistance lets them help their family while still feeling comfortable about their own position.

Supporting your children or parents can be one of the most meaningful uses of your wealth. But generosity and good financial planning don’t have to work against one another.

If you’re in your 50s or 60s and finding yourself financially supporting family in both directions, take the opportunity to look at the whole picture before making a major commitment.

Understand what your own future requires. Explore the different ways you could help. Talk openly with your family about expectations. And where legal, tax, Centrelink or aged-care consequences may arise, seek the appropriate specialist advice before putting an arrangement in place.

Because supporting the people you love shouldn’t mean losing sight of the future you’ve worked hard to create.

Feeling caught in the middle?