05/31/2012 11:20 am ET Updated Jul 31, 2012

Sandwich Generation Headed for a Crumble

A recent Money Across Generations study further revealed why baby boomers and members of the so-called Sandwich Generation are in deep financial trouble. Get this: According to the study, more than half of baby boomers admit that they have allowed their adult children to move home and live rent free, and many continue to prioritize their families' financial needs over their own. Many people don't realize more than one out of eight Americans aged 40-60 is both raising children and caring for a parent. This generation of people, sandwiched between financially needy parents and children, will be reaching retirement age soon but likely without a nest egg of any significance.

For those facing this financial whipsaw, here are some recommendations, both financial and psychological.

Practice tough love with the kids.

Everyone except Peter Pan has to grow up, so parents of post-college aged children need to push the kiddos out of the nest or start charging rent. Investing the cost savings or rent money, particularly if you have some time before retirement, can help ease the long-term savings burden. And it is clearly a case of tough love as the Money Across Generations' study notes 35 percent of parents don't believe their children have learned financial responsibility. Some kids blame parents as well, so it is not an easy task -- but it needs to be done.

Spread the parental care burden among siblings.

For those with aging parents who also have baby boomer siblings, be sure that each child is shouldering their fair share of the financial load. Oftentimes, the sibling closest geographically ends up paying more for an aging parent's care -- both time and money -- than siblings outside the area or across the country.

Make best of use of any government-supported programs for aging parents.

Government programs are not handouts. On the contrary, this is why you have been paying taxes all of your life. Medicare, Medicaid and many other programs can help ease the financial burden of caring for aging parents.

Think outside the traditional financial planning box.

Most advisors look at an aging baby boomer and offer up simplistic advice: Save more. But we know that boomers have been struck from all sides by the recession, real estate crisis and thinning job market. Old school plaudits just don't make sense. Today's boomer needs to look at all financial options, even those outside the traditional playbook. Some options might work well not only for boomers, but their aging parents as well.

Consider reverse mortgages.

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash, and interestingly, the federal government is in on it. The Home Equity Conversion Mortgage is the Federal Housing Authority's reverse mortgage program, which bills itself as a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements and more. Seniors or boomers with equity in their homes should look at this option as a way to augment retirement.

Research life settlements.

The life insurance settlement industry has been preparing for a climb in life settlement transactions during the next two decades, due in large part to the imminent baby boomer retirement crisis. Many Americans still don't know a life settlement is an option when they no longer need or cannot afford life insurance. The 75 million strong boomer demographic is the most insured generation of all time, yet more than 85 percent of life insurance policies never reach maturity.

Policyholders can sell their life insurance policy for cash, and a life settlement provider continues to pay the purchased policy premiums, collecting the full amount when the policy seller passes away. The value of a life settlement varies depending on the life expectancy of the policyholder at the time of sale, and on the written full value of the policy. A life settlement will always be less than the full value of the policy, but much more than the amount a policyholder would receive if he or she let the policy lapse or surrendered it to the insurance company. Often, a life settlement offers seven to eight times more funds than surrendering the policy.

The seniors and boomers who are intertwined as part of the sandwich generation face many previously unforeseen economic challenges, but options are available for those willing to make sacrifices and think creatively.

Betty White behind the scenes video from photo shoot for The Lifeline