07/21/97 SANDWICH GENERATION: ONE FAMILY TRIES TO EASE THE BITE

SANDWICH GENERATION: ONE FAMILY TRIES TO EASE THE BITE

The nest was empty, and Gail and John O'Neil were settling into a comfortable future. One daughter had been out of college for a couple of years and the other was halfway through. ''I'd call John at work and say: 'Where should we go for dinner?''' recalls Gail, 48, a registered nurse who earns $30,000 a year. John, 57, a technical specialist at Abbott Laboratories, brings home $75,000.
Today, the O'Neils aren't splurging. As planned, 19-year-old Rebecca, a junior at Illinois State, returned to their four-bedroom house in Mundelein, Ill., for the summer. Then 24-year-old Texas Tech grad Jennifer unexpectedly moved back in April while searching for a job. A month later, John's mom, Evelyn, joined them from Florida, because she could no longer care for herself. Suddenly, the O'Neils epitomized the ''sandwich generation,'' people squeezed financially by having to care for both older and younger family members--while also charting their own retirement course.
DRUG BILLS. With three extra mouths to feed, it's been touch-and-go. Evelyn, 86, has periodic health problems--a frail heart that has undergone bypass surgery, failing eyesight, and Sundown dementia, a disorder that leaves her disoriented after dark. The couple paid for Evelyn's move back to Illinois. The former Raytheon supervisor gets $600 in Social Security checks per month and a $150 monthly pension. Much of that pays for her $300 monthly drug bills and for nearby Condell Day Center, a senior facility that she visits daily. (More than half of the $37-per-day bill is footed by the state of Illinois.)
Should Evelyn's health worsen, the O'Neils' long-term financial security would be jeopardized. They can borrow against the $10,000 cash value of their life insurance, or worse, tap into the $120,000 accumulated in retirement savings. John's pension, which he'll receive at 62, is worth $40,000. He hasn't decided whether to take that in a lump sum or an annuity. The O'Neils, who are paying off $120,000 on their $210,000 home, fret about when Grandma needs more tending than the day-care center can provide. Full-time nursing home care would cost up to $4,000 per month. Premiums on long-term care insurance are too expensive for Evelyn, but Gail is investigating a plan for the couple when they reach retirement age.
For now, the O'Neils are coping. They wisely set up mutual funds to pay for college costs. Rebecca's annual room, board, and tuition at Illinois State University is $10,000. They also took the advice of Jack Dunk, a senior financial adviser at American Express, who told them 10 years ago to combine their insurance policies into one to avoid duplicate fees. He also encouraged them to save through Abbott's stock purchase program, which matches the first 2% put aside annually, pretax. John estimates the matching added about $2,500 a year to his savings.
However, with most of their retirement portfolio in Abbott stock, the O'Neils are placing a lot of faith in the continuing success of Abbott, whose stock price has climbed 322% in the past decade. Presently, there's little spare cash. Says Dunk: ''For the sandwich generation, the dollars usually flow out and the future is on hold.'' And for Gail and John O'Neil, dining out is a pleasant memory.
By Lisa Sanders in New York