Financial Well-Being Tip

Financial Planning for the Sandwich Generation

Many people are waiting until later in life to start a family. A new baby can have much bigger financial implications if you’re in your late 30s or 40s.

If you’re starting a family at a later age, you’ve got less time before your retirement. The good news is that you’re likely to be more established in your career with more disposable income.

Insurance for starting a family

Be sure your family is protected from any disruptions to your income, starting with life insurance. Your policy will not be enough.

The right amount of coverage varies from one family to the next, but in general, a life insurance policy should cover several years of your salary, plus enough to pay off all debts (including a mortgage), and cover some child-care expenses (including college).

Find out how much additional life insurance you might need.

A life insurance policy should cover several years of your salary, plus enough to pay off all debts.

Make sure you also have some kind of disability income insurance, along with long-term care insurance for when you get older.

Many jobs offer these policies as a part of their benefits package. The decision to enroll should be automatic.

If you’re self-employed, the stakes are even greater.

Regarding long-term care, it’s possible that your greatest healthcare needs, and expenses, could come before your kids are in the workforce.

Have an estate plan in place

Next, make sure you’ve got a clear estate plan in place. This means a will that stipulates guardians for your children and how your assets are to be distributed if something happens to you.

Because your children may be too young to take over your assets directly, you should consider setting up a trust in their name. Be sure to designate a responsible person—which may be a different person than their guardian—to oversee the trust until they come of age.

If you can’t take care of your kids because of an illness or accident, you’ll need to identify the person who can serve as their guardian.

Save money for retirement

Perhaps the biggest challenge with having children later in life is saving money for two big goals—their college and your retirement—at the same time.

There are no universally applicable guidelines. In general, you should make your retirement savings the number-one priority.  Remember, you can borrow for college, but not for retirement.

Learn more about financial planning for the sandwich generation.

Saving for retirement can be done through your WashU plan, IRA contributions and other investments. Learn more about planning and saving for your retirement.