One in six baby boomers is supporting both adult children and aging parents, dipping into retirement savings or even taking out loans — decisions that could bite back at the sandwich generation later.

While boomers often take heat for straining the Social Security system — and the subsequent toll that could have on younger generations — many of them are "sandwiched" between the financial needs of their own kids and parents, willingly assisting family without considering how their generosity affects their overall retirement goals. 

A study from Ameriprise Financial shows that two-thirds of boomers are helping their adult children pay off college loans or tuition, and more than half are contributing to a car purchase. About one-third is helping pay living costs that include co-signing loans or leases, medical insurance, rent and utilities, and car payments.

Aging parents are on boomers’ dole, too. About 22 percent of boomers are buying groceries for mom or dad, 15 percent are assisting with medical expenses and utility bills, and 10 percent are contributing to rent or mortgage payments and long-term care. 

The Ameriprise report is based on input from 1,001 affluent baby boomers (those with $100,000 or more in investable assets); 300 parents of baby boomers; and 301 children of baby boomers at least 18 years old. 

Money Grows on Family Trees
Half of boomers use their day-to-day spending money to assist adult children. About four in 10 draw from their "regular savings," and one in six even resorts to taking out a loan. About 6 percent admitted to pulling money from their retirement savings to help their adult children. While only 9 percent of boomers believe assisting their parents has hurt their retirement savings, twice as many believe assisting their adult children has slowed their savings progress. 

"The issue may be how they distinguish between their retirement and other savings, said Craig Brimhall, vice president of retirement wealth strategies at Ameriprise. "Many boomers appear to be assuming that if money isn't coming from an IRA or 401(k), it's not going to affect their retirement."

Some older adults are choosing to work longer to shore up their income, recognizing a pension or other savings may not be sufficient to keep up with out-of-pocket health care costs and other expenses. 

But when asked specifically to choose between the needs of their adult children and their own need to save for retirement, boomers began to make the connection. For example, two-thirds said they would contribute to their own retirement savings at the necessary rate versus helping adult children buy a car or pay off credit card debt. 

Balanced Generosity
"It's when people begin to see their financial generosity as something that must be balanced with their overall financial goals that they appear to understand how much it could impact their ability to fund their retirement," Brimhall said. "The reality is that most boomers already are not saving enough and many still haven't calculated what they'll need in retirement."

But far from considering the implications for their own financial futures, or independence of adult children, boomers overwhelmingly would "write the check" again. Nine in 10 said they would support adult children again if given the chance, although they are not certain it improves their relationship. 

Most boomers said their help had no effect on their relationship with their children, while just one in three said it helped, according to the study.

Money is never an easy subject to broach, but there is a greater willingness among families to talk openly about family finances. Adult children of boomers are the most likely to say they talk about money in the family, with nearly half saying they discuss it regularly. Four in 10 boomers, and one in four of their parents, say the same.

Perhaps a growing openness will enable boomers to engage their families in their financial planning process, keeping their retirement goals on track at a time when the need for planning is heightened.