Data & Research August 31, 2023

Why Almost Half the ‘Sandwich Generation’ is Delaying Retirement

Nearly one out of every two Americans between the ages of 40 and 59 are using retirement savings to support their extended family and adult children, according to new research from Athene.

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Almost half (47%) of respondents from what is known as the “Sandwich Generation” indicated that they are delaying their retirement plans to provide financial assistance to their elderly extended family members or grown-up children, with a similar 46% using their retirement savings to cover these costs, according to a new survey from Athene. 

Termed the “Sandwich Generation” due to their responsibilities to older parents (mostly Baby Boomers) at one end and their own children at the other, a significant number of individuals aged 40 to 59 find themselves as caregivers for both older and younger relatives, all while trying to reach their own financial objectives. In a survey of Americans in this age group with children, 76% mentioned financially supporting their adult children, and 63% said they offer financial assistance to their aging parents.

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Among all participants, which included more than 400 adults, 55% reported an annual income of less than $100,000. This group’s primary concern was having insufficient retirement savings, followed by worries about being unable to maintain their desired lifestyle during retirement. Among those earning more than $100,000 annually, 66% shared the same concern about maintaining their post-retirement standard of living. 

“For many who are a part of the Sandwich Generation, they may face a unique challenge of supporting multiple generations while also trying to keep their own goals in mind,” the report stated. “This will require a flexible financial plan and empowering their family members to take part in their own financial futures.”

When the Sandwich Generation considers their own retirement, 66% expect to rely on Social Security as a primary source of income, followed by 401(k) accounts and investments. Nearly one-quarter of respondents have included annuities in their financial portfolios.

Of course, with almost 50% prepared to retire without delay, there are another 50% of participants who indicated their support for family members has not affected their retirement objectives.

In addition to direct financial support, members of the Sandwich Generation often are managing the financial issues of their children and parents, according to the researchers. The study uncovered that many household heads are acting as sources of financial education for their adult children, including help with opening bank accounts, explaining credit and debt concepts, discussing budget management and promoting healthy financial habits. Moreover, the reported also noted that some members of the cohort are assisting their parents in planning for health care costs, estate planning and retirement income management. 

An analysis of the study’s responses revealed significant disparities between how men and women approach financial decisionmaking, seeking professional financial guidance and their overall confidence in being financial providers. The study identified that males are more likely to assume sole decisionmaking roles within the household, collaborate with financial professionals and exhibit higher confidence in their ability to care for adult children and extended family. Women expressed less confidence, with only a small percentage seeking assistance from financial professionals. 

The research conducted by Athene surveyed 409 Americans aged 40 to 59 who financially support adult children aged 18 or older and have parents or extended family members residing with them. The survey took place from February 21 to March 7. 

Compliance August 31, 2023

Former American Airlines Pilot Fires Back in Retirement Plan ESG Suit

The plaintiff doubles down on allegations the airline defaulted him into ESG-related funds.

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A former American Airlines pilot is continuing a push to collect damages from the airline and its benefits committee for allegedly defaulting him and thousands of other participants into underperforming funds that have a focus on environmental, social and governance investing.

Plaintiff Bryan P. Spence’s amended complaint in Spence v. American Airlines Inc., filed on Tuesday in U.S. District Court for the Northern District of Texas, looks to rebut arguments made by American Airlines in a motion to dismiss filed in early August. In his amended filing, Spence sets out to prove that 37% of his retirement savings were invested in BlackRock Inc.’s Target Date 2045 fund, which he alleges uses ESG considerations.

“Defendants have included funds in the Plan that are managed by investment managers that pursue nonfinancial and nonpecuniary ESG policy goals through proxy voting and shareholder activism,” the complaint states. “These investment managers have voted for many of the most egregious examples of ESG policy mandates, on issues such as divesting in oil and gas stocks, banning plastics, and requiring ‘net zero’ emissions, which do not contribute to the company’s profitability or increasing shareholders’ returns.”

In its motion to dismiss the case, American Airlines argued that the ESG-linked funds in question were not available in the core investment menu, but rather through the self-directed brokerage window, meaning participants would have had to go in and individually select them. American Airlines also argued that Spence, in fact, had not been invested in the ESG-related funds.

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Judge Reed O’Connor had previously slated a trial date to begin on June 24, 2024. 

In the amended complaint, Spence alleges there were “four investment menu options” for participants to choose from, including options managed by BlackRock Inc. and State Street Global Advisors, two firms he argues follow ESG-based investing strategies.

The complaint points out that Spence had 37.8% of his retirement savings invested in Target Date 2045, managed by BlackRock. The plaintiff then cites various media citations of BlackRock and its chairman and CEO, Larry Fink, discussing the benefit of ESG investing.

Spence listed the following fund managers in the core investment menu as well, arguing that all follow ESG investment strategies:

  • American Beacon Advisors
  • Artisan Partners
  • Loomis, Sayles & Co.
  • Morgan Stanley Investment Management
  • TCW Group
  • Thompson, Siegel & Walmsley LLC
  • State Street Global Advisors

“Many of these funds are not branded or marketed as ESG funds; however, the actions of their investment advisors and managers give rise to the same ERISA violations as those funds that do market themselves as ESG funds,” the complaint states.

By choosing these funds, Spence argues, the American Airlines committee was not following its fiduciary obligation to participants because it was “selecting and retaining poorly performing and more expensive ESG funds as investment options, and by failing to investigate and monitor the fund managers’ proxy voting and shareholder activism.”

In its request for dismissal, American Airlines argued that Spence’s “inability” to allege that ESG funds were available in the core investment plan lineup, and therefore subject to fiduciary selection and monitoring by the plan committee, was grounds for dismissal of the case.

The attorneys also argued, however, that an assertion in the complaint that plan fiduciaries should not consider investment products from managers who have cast a proxy vote for an ESG-based policy, regardless of performance, is “as wrongheaded as it sounds.”

“Acceptance of Plaintiff’s theory would compel ERISA fiduciaries to ignore actual investment performance and instead screen out investment options ‘based on non-pecuniary factors’ (i.e., the manager’s proxy voting record), potentially harming participants by depriving them of access to some of the best performing, most popular, and highest rated funds on the market,” they wrote.

American Airlines also challenged Spence to provide analysis of the fund performance as compared with other options—something the amended complaint does not do.

Neither attorneys for either side nor representatives for American Airlines replied to a request for comment.

Spence is represented by Hacker Stephens LLP and Sharp Law LLP; American Airlines is represented by attorneys with the law offices of Kelly Hart & Hallman LLP and O’Melveny & Myers LLP. 

The American Airlines retirement plan includes agents, management, and support staff employees; Transport Worker Union employees; flight attendants; and pilots, according to the filing. The plan has more than 100,000 participants and approximately $26 billion in assets, the filing noted.

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