Stuck between a rock and a hard place BY WONG WEI-SHEN

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Stuck between a rock and a hard place BY WONG WEI-SHEN

Post by Cals on Mon 04 Aug 2014, 02:08

Published: Saturday August 2, 2014 MYT 12:00:00 AM 
Updated: Saturday August 2, 2014 MYT 6:43:51 AM

[size=40]Stuck between a rock and a hard place

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THERE’S a sandwich out there, and no, it is not the kind that is filled with tenderly cooked chicken breast, slices of cheddar cheese, creamy avocados drizzled generously in honey mustard. Nope. It is, rather, the sandwich generation.
A term coined in the 1980s by social worker Dorothy Miller, “sandwich generation” describes a generation that is “sandwiched” between providing for both aging parents and children.
The sandwich generation has existed for many years, and perhaps more so in the Asian culture, where filial piety is seen as a priority, and rightfully so.
However, what has changed since then is the duration of dependence as people are living longer thanks to advancements in medical sciences. According to the Department of Statistics Malaysia, life expectancy has been on the increase.

As quoted in the HSBC Liquid Newsletter investment magazine, in 1960 the average life expectancy was up to 59.4 years. This is in comparison to the life expectancy in 2011, which increased almost 20 years to 74.3 years.
This is one of the ingredients to the sandwich generation some young adults experience.
At the same time, couples are waiting longer to have children, which could leave them in a slightly sticky mess of providing for their growing children as well as taking care of their aging parents.
“It is not exactly an ideal situation, to be caught between providing for yourself as well as for your parents and your children. But according to statistics, people are living longer, while at the same time, the cost of living is increasing,” says MyFP Services Sdn Bhd managing director Robert Foo.
He sees the sandwich generation more as an economics problem, bringing into light current income versus rising inflation rates which equates to rising prices in housing, transportation, food, living expenses and entertainment, among others.
“Essentially there’ll be some part of the population who face this challenge. The question is how to achieve income that is sufficient to maintain a decent lifestyle. The older generation is living longer now, at least until their eighties or nineties. It is also dependent on family size. Many people now have between one and three children, and if those children have well-paying jobs, then that is less of an issue,” says Foo.
Baby Boomers, typically those born within the years 1945 and 1964, fall within this category.
“The escalating costs of food, housing and transportation due to rising inflation have taken a toll on the purse of the Boomers, with a ‘double edged sword’ – providing for parents and children simultaneously,” says licensed financial adviser and syariah financial advisory for Excellentte Consultancy, Jeremy Tan.
Meanwhile, he adds that those in the “Busters” generation, which include those born between 1965 and 1980, may or may not experience the sandwich effect as their parents born during the Boomers generation may have built up sufficient retirement funds to last their life expectancy years.
Busters may find it more difficult to provide for their parents, as the escalating costs of bring up children and the need to build up their own wealth to provide for their children’s education may have taken a toll on their wealth, Tan says.
Valerie, a 29-year old primary school teacher, is married with a young son and lives with her husband and his parents. Her husband is also a school teacher. On certain days, both of them take on additional jobs to earn more money.
“I provide tuition classes twice a week to students around the neighbourhood and even to some of the children at my school. I have the classes at home as it allows me to be close to my in-laws and my son, who needs to be attended to. We don’t have a babysitter.
“Fortunately, during the day when my husband and I are at work, my in-laws are able to take care of our son.”
Valerie says her husband provides swimming lessons on weekends to earn extra money.
“Our salaries aren’t very high. That’s why it’s important to find ways to earn more money to supplement our income,” she says.
However, Foo says it is not so “doom and gloom”. There are still opportunities one can take, which allow for comfortable living as well as provide support for parents in their wintering years.
“It may just be a phase. Ideally, one should not be stuck in it for long periods of time,” he says.
The basic solution, he says, is to earn more. “Either that, or lower your expectations, which is something I don’t encourage. Nowadays, people tend to move around more casually. They go where the money is. This is all an indication that people are trying to get higher income,” he says.
It can be quite a complex situation because many are comfortable where they are, and can be less willing to step out of their comfort zone to save more.
An example is grown children, who have started in the working world, find it harder to buy and finance a property in urban areas due with the income they have. Kevin, a 28-year old working in the banking industry, admits it is hard to finance a property purchase without any help.
“With the amount I earn, it would take quite some time to accumulate ample monies to even have enough for the downpayment. Of course, with property, location is important. And also, I would be more comfortable buying a property close to where I am familiar with, like Petaling Jaya,” he says.
It is important to have a strategy, says Foo. “It is unfortunate that many don’t see a problem until it is too late. The investment question to ask is, can I achieve the lifestyle I want with the income I have?” he says.
Another way to increase income is to start a business, which could lead to much better returns compared with a salaried job. However, it also depends on whether the business is capital intensive or not.
“The key is to plan and know the situation before you hit it so you have many years to prepare. If you are facing this problem, it is not too late. But you have to be realistic and relook at your lifestyle and readjust,” says Foo.
Perhaps luckily for those born in generation X and Y, their parents, the Boomers and, or Busters, have realised the hardships of providing for two generations as well as themselves, and therefore do not want to be dependent on their children during their retirement years.
“Parents are aware of the escalating cost of livings, inflation and the earning capacity of their children as remunerations such as salary and wages has not increased in tandem with escalating cost of living. Steps are taken by parents to ensure they do not need to depend on their children during their retirement years except in the areas and time when they are incapacitated,” says Tan.
For those in their 30s caught in the sandwich generation, HSBC’s Liquid magazine advises to not delay planning and contributing towards retirement funds. “Take into account the increased monthly costs if one or more of your children continue to live with you. You may also want to consider how you would like to support your parents should they be unable to provide for themselves in the future,” it says.
Those in their forties and fifties may want to look at ways to enhance their retirement income with various investment products. They should also face the sandwich generation issue, and talk with their parents openly about how they want to live as they age, the kind of healthcare they want, and more.
“Knowing the answers to these questions may help you avoid a lot of financial uncertainties in the future,” says HSBC.
Meanwhile, if those in their fifties and sixties should look at preserving their assets, and maybe even consider delaying retirement to help support their dependents without using their retirement funds.

“It cannot be said too often that in speculation and investment, success comes only to those who work for it”

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