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Most millennials and working youngsters today have parents who are close to retirement age, many of whom do not have a sufficient nest egg to see them through their golden years. The responsibility for your parents’ care and comfort (as well as their debts) could fall on you if their retirement planning strategy falls short of their actual requirements.
It’s important for you to understand where they stand in terms of social security, pension funds and savings, so you can plan for potential expenses in the future. Whether they live with you, on their own or in a retirement community, you may need to budget and save today so your parents are comfortable and secure tomorrow!
When you’re trying to help your parents with retirement planning, it’s crucial to understand where they stand. This helps you work out real solutions for issues like debt, healthcare and day-to-day expenses, in addition to providing them the financial independence and “space” they desire.
Offering a supplemental income source could not only wound their pride, but also create a mutually harmful dependency. This is a larger risk if the reason for insufficient retirement savings is bad money management or unnecessary expenses.
Start by asking where they have parked their retirement nest egg, if at all. For instance, have they invested in:
1. Insurance
Not just life insurance, but additional coverage for potential medical issues that arise with age. Long term care insurance may be expensive, but a prolonged illness or disability could eat into their savings and your own!
2. Retirement Funds
3. Debt Repayment
If mortgages or outstanding loans are paid off, that’s one less thing to worry about later. If not, it may be time for gentle encouragement, so your parents aren’t saddled with debt when they’re no longer able to work.
Helping Your Parents with Retirement Planning
- Meeting an Advisor
A third-party financial advisor can not only look over your parents’ investment portfolio and rebalance it if required but also minimize any awkwardness they feel discussing finances with you. - Updating Wills and Trusts
Get a lawyer to help your parents with wills, trusts and other estate planning documents. Existing paperwork should be up-to-date, your parents should consider a power of attorney as well. - Maximizing their Savings
Encourage your parents to save as much as possible, making frugal living choices now so they have financial security later. Check their budget for unnecessary expenses that can be trimmed. - Boosting Retirement Income
Delaying retirement by a few years, continuing to work part-time, making smart investments, and exploring business opportunities can all help boost income both before and after they retire. - Preparing Yourself As Well
No matter how well you plan, there’s no way to guarantee that your help won’t be needed somewhere down the line. Plan your own finances and savings, so you can help your parents when they need it.
FAQs
How do I fund my parents retirement?
In order to avoid taking excessive withdrawals from your retirement savings and investments, it can be helpful to have alternative sources of income, such as Social Security benefits, rental income, cash from a life insurance policy, and dividends from stocks. These additional sources of income can assist you in maintaining a more stable financial condition and avoid depleting your savings too quickly.
What happens to seniors who run out of money in retirement?
Seniors often face substantial difficulties when they run out of money during retirement. Without enough money, they can find it difficult to pay for basic necessities like food, shelter, and medical care. To receive healthcare treatments and find inexpensive living choices in such circumstances, elders may need to rely on government assistance programmes, such Medicaid or subsidised housing.
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning company based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last ten years has turned his focus to self-directed ira accounts and alternative investments. If you need help and guidance with traditional or alternative investments, call him today (866) 639-0066.
