Early this year, my siblings and I came to the conclusion that our parents had a problem. They were completely unprepared for retirement. And, we made this collective decision to step in and help them resolve this concerning problem.
During my preparation, I found some solace in the fact that my parents weren’t alone. According to data from Northwestern Mutual, 78% of Americans are “extremely” or “somewhat” concerned about affording a comfortable retirement. What’s more, two-thirds believe that it’s likely that they’ll outlive their retirement savings.
But, it gets even more problematic when looking at retirement. The survey also found:
- 21% of Americans have NO retirement savings at all.
- 33% of Baby Boomers only have between $0-$25,000 in retirement savings.
- 24% of Americans believe it is “not at all likely” or 51% “somewhat likely” that Social Security will be available when they retire.
- 46% of adults have made no attempt to prepare for the possibility that they may outlive their savings.
Is there a retirement crisis? And, if so, what’s behind the retirement crisis?
“Cost of living was the top reason why people don’t save more for retirement in all demographic groups,” stated Ramsey Solutions. “Kids’ activities and needs ranked second or third for Millennials, Gen Xers, all income levels, married and single people, and parents.” For Baby Boomers, medical expenses are the top financial hurdle.
“Fewer debt-free savers identified any obstacles to retirement saving than savers who are in debt,” their research found. “Only 19% of debt-free savers said their top hurdle was their kids’ activities/needs — the most common choice. The next most common choice was vacations/going out to dinner/impulse buying, with only 17% of debt-free savers identifying this as an obstacle to retirement saving.”
“On the other hand, almost one-third of savers who are in debt ranked credit card debt (31%) and their primary mortgage (31%) as the top reasons they don’t save more for retirement. Medical expenses ranked third (27%).”
What about non-savers? Just like savers, the cost of living was the culprit. Other obstacles include “medical expenses for Baby Boomers (33%) and lower-income earners (29%); credit card debt for middle-income earners (27%), men (29%) and married couples (28%).”
Additionally, people are living longer. In fact, between 2015 and 2050, the proportion of the world’s population over 60 years will nearly double from 12% to 22%.
Many believe that Social Security will most likely be depleted by 2035; you can see that we’re headed for a collision course.
Does this mean all retirement talk and planning is doom and gloom? Not exactly. The good news is that there ways that you can help your parents retire so that they can actually enjoy their golden years.
1. It’s time for the talk.
Remember when your parents sat you down to talk about the birds and the bees? It was cringy and uncomfortable. But, despite this, it was kind of an important talk.
The same is true when talking about retirement with your folks. It’s going to be awkward and difficult. They may even, understandably, get defensive.
Take a moment and empathize with them. They probably want to keep their finances a secret. And, they might even feel embarrassed — after all, they still want you to look up to them.
Taking that into consideration, approach this subject gently and respectfully. Don’t judge or belittle them. Instead, listen to them and let them know that you’re concerned about their financial future.
It may even help to get your siblings or other immediate family members on-board. Please don’t gang-up on them. Just ask for their feedback.
If they still resist, bring in a third-party backup. You could either take them to or invite a retirement/financial expert to their home. They can then speak with this expert to hopefully help them change their mind.
2. Ask for the numbers.
Are your parents more at ease now? If so, it’s time for you and them to analyze their finances and savings. Specifically, you want to look at:
- Their income
- How much they spend each month
- What they own
- How much they owe
- Do they have 401(k) or IRA savings accounts
- Have they drafted or updated a will
When we sat down with our parents, we had them fill out something that was similar to this family love letter. You can either create your own or find another one to download. The idea was twofold; it gives our parents a sense of control while also providing us with essential financial information.
Having access to their financial information will give you an accurate idea of their overall financial picture and what’s in store down the road. More importantly, you’ll need this to assist them in maximizing their income and strategizing for retirement.
3. Address unnecessary expenses.
Another reason why you should review your parent’s finances? It can be used to create a budget. And, even better, address debt and unnecessary expenses.
For example, my siblings and I found out that our parents were spending over $100 per month on cable. They had all the movie channels and never questioned when there was an increase. My sister convinced them to cancel all but one primary channel and negotiated a more favorable rate.
One of my best friends actually introduced his parents to streaming services. They then completely canceled cable. And, their family now shares subscriptions logins — my friend pays for Netflix, while his parents have Disney Plus. It’s actually a win-win for everyone.
What if they’re buried in debt? You may want to share with them hacks like the snowball method. Other suggestions for helping them get out of debt fast would be looking into debt consolidation plans or settlement programs.
With that extra money that they’re saving, they can put towards a retirement fund.
4. Suggest lifestyle changes.
Please don’t bully your parents into doing something that they’re not comfortable with. However, if they’re receptive to it — suggest that they downsize their home or vehicle to something smaller. They may be able to turn a profit while also saving money on maintenance and utilities each month.
If they are open to selling their home, recommend a location that has a lower cost of living. In particular, a location with lower property taxes. In our case, my parents are looking to move closer to my sister because they would save thousands of dollars in taxes alone each year.
5. Brainstorm new revenue streams for them.
In my opinion, everyone should have multiple streams of income.
For starters, it reduces risk. Let’s say that you lose your job, pension, or Social Security funds. With having more than one way to make money, this isn’t as dire.
Secondly, you can use this supplemental income to pay off debt or bulk-up your savings even if an extra $100 a month can add up to $1,200 per year.
Some suggestions would be:
- Helping them sell unused items online
- Asking if they would babysit or petsit for you
- Renting out a spare room or property on Airbnb
- Turning their hobbies, like baking or woodworking, into a side business
- Earning a passive income by investing in a real estate
- Purchase an annuity
6. See what benefits they qualify for.
Your parents may qualify for a wide range of local, state, and federal assistance. For some, this may be embarrassing. But, this type of assistance is here to help those who need it.
Here are some benefits that you may want to look into with your parents:
- HUD public housing if you’re over 50 and have either a disability and/or limited income.
- Housing Choice Vouchers (Section 8) for those aged 62 or older, have a disability, and/or limited income.
- Mortgage and reverse mortgage assistance for anyone with a limited income.
- Home energy and weatherization assistance grants to lower utility bills.
- Utility bill assistance is available for low-income seniors.
- Phone bill assistance could provide discounts on wireless plans.
- USDA Housing Repair Program may be an option for those aged 62 or older.
- Tax Credit for the Elderly and Disabled is a federal income tax credit to those 65 and older with limited income.
- Property tax assistance varies by location but could lower property tax bills.
- Medicaid can provide discounted healthcare and prescription drugs.
- Food assistance like Meals on Wheels or prefunded debit cards to purchase groceries.
7. Get their insurance policies up-to-date.
Is this always on the top of your mind? Of course not. But, insurance protects you from any potential risk.
When you sit down with your parents to discuss retirement, make sure that all of their insurance policies are current. These include automobile, homeowner’s, health, life, and long-term disability.
If you’re financially assisting your parents, you may want to take a whole or universal life insurance policy for your parents. The reason? It will replenish any funds that you provided to your parents after their passing.
8. Make sure that they don’t fall for scams.
It’s been found that “Americans age 60 and older were five times more likely to fall victim to tech-support scams last year than younger adults.”
“Other fraud schemes also hit the 60-plus demographic hard,” writes Katherine Skiba for the AARP. “They were three times more likely than adults ages 20 to 59 to be conned by impostors posing as friends or relatives. And older folks were more than twice as likely to fall for a prize, sweepstakes or lottery scam.”
The median loss for those 60 to 80 plus is between $600 to $1,700. It also robs them of their peace of mind. And these losses can definitely impact their retirement plans.
As a general rule, advise your parents never to share personal and financial information over the phone. They could also block mail or phone solicitations and have their bank place daily spending limits on their accounts.
Also, advise them to review their bank and credit card accounts regularly. If that’s too much, you could do this for them. Make sure that you stress to them that there is no such thing as a get-rich scheme.
9. Take control of their finances.
There came the point when it was too much for my grandmother to keep up with things like paying bills and balancing the checkbook. While she was still cognitive enough to do it, it was an overwhelming task that gave her anxiety. So, her son took on this responsibility for her.
Again, you don’t want to force your parents to do something they don’t want to. But, if they cannot manage their money, then offer to do this for them. Or, to keep the peace among other family members, hire an outside party like a CPA.
If you do this yourself, make sure that you document everything so that you aren’t accused of financial abuse. And you may also want to speak with an attorney to address any legal concerns.
10. Don’t derail your own retirement plans.
Finally, just because you’re lending your parents a hand with their retirement doesn’t mean that you should neglect your own. Make sure that you’re sticking to your budget and continuing to contribute to your retirement funds.
Furthermore, make sure that you know the limits when helping your parents. It’s one thing to help out with their groceries occasionally, but it’s another to become a consigner or a loan guarantor, or their medical bills payor — or have your name placed on their deed.
Remember, if you’re not financially healthy, how can you help your parents get their finances in order?