When you think about your future, what do you see? A happy family? A fulfilling career? Spending time traveling and pursuing your favorite hobbies?
You probably think about a lot of exciting things. But what you probably don’t envision is needing to financially support your parents as they get older and enter retirement age. What if I told you that 1 in 4 Americans in their 50s are expecting to need financial support and housing assistance from their children? This responsibility could very well be a part of your future reality.
If your parents are behind on saving for retirement, figuring out how to support them financially can be difficult to navigate. That’s why we’ve compiled our best advice on the subject. This will help you support the ones you love without hurting your own financial goals.
1. Start conversations early
Perhaps the most important part to support your parents financially is having open and honest communication. I know, it can be really hard because money is likely a taboo topic in many traditional households.
But financial transparency with your parents is key. And it goes both ways. The longer money issues are hidden, the worse it usually gets. Having money conversations before they need support can save you from surprises and headaches in the future.
The best time to start talking about money
Having open and honest financial conversations with your parents in the years before a need becomes dire can give you a head start in planning for your future. If your parents are still healthy and working, now is a great time to have these kinds of difficult money talks with them.
You might even be able to use these ongoing conversations as a catalyst to help them be better prepared. Think of it like keeping an emergency kit in your home. It’s much more helpful to have made this kit before disaster strikes!
How to begin money conversations with your parents
Some households are more comfortable talking about money than others. While some parents may openly have money discussions with their kids, others may be more resistant. If your parents are in good health and lean towards the more hesitant side, consider trying to have smaller money chats with them first. Ease them into it!
A great way to begin small money conversations with your parents is asking them for their advice. Even in times you might not need it! When you get your first real job out of college, ask them for help understanding your benefits package. Or, if you’re looking to buy a home in the next few years, ask them for some help understanding mortgages. Making money part of regular conversations gets you on the same page over time. And asking for advice can help them realize that you respect their knowledge, and can get the ball rolling for other conversations to come later on.
When it’s time to have more serious money talks about supporting them in the future, it can be stressful figuring out how to bring them up. But don’t worry too much- most of the time these conversations go better than we imagine they will. Here are a few tips for having a successful money talk about the path to support your parents financially…
Put them in control
Needing to rely on your children for financial help can leave parents feeling vulnerable, and maybe even a little bit embarrassed. Even if a large percentage of the population is in the same boat!
Be sure to not bombard them with a plan you’ve already laid out for the future without their consideration. Instead, ask them about how they would like to receive support in the future. And, what they would like their life to look like. This can help your parents to maintain a sense of control throughout the conversation.
Make them feel loved
If your parents need your support financially, make sure they understand that you’re willing to give it to them because you love them, not because you feel obligated to. Even though they may have made some financial mistakes in the past, it’s important not to dwell on them. Instead, have a more productive discussion about how you’re going to move forward in a financially responsible way. Remind them that you’re grateful for how they’ve taken care of you, and now you’d like to return the favor.
Use one of these lead-ins
If you haven’t already had the big money talk, here are a few easy ways to bring up the topic without coming on too strong.
I recently read this article online about the ways in which many children help financially support their parents in retirement, and it got me wondering. How would you like me to support you in the future?
My friend just put together an emergency binder with their parents with all of their financial information and passwords to hold on to in case of an emergency. Can we both set up something like that in case anything ever happens to any of us?
I’ve been wondering now that I’m getting older… should I make a will?
What are you looking forward to when you retire?
Pro Tip- Navigating difficult conversations like this can be scary, especially if you aren’t prepared. We highly recommend listening to our chat with Cameron Huddleston about having essential money conversations with your parents. It’s a must-listen for anyone who wants to avoid any unpleasant money surprises!
2. Encourage them to course correct
Once you sit down with your parents, you may be surprised when you take a look at their finances. If they’re in financial trouble, it’s easy to start stressing out and expect the worst. But, if your parents are still healthy and are in sound mind, there is always time to improve their situation!
Your parents might be thinking “it’s too late to make changes or build wealth”. But that’s absolutely not true. You can encourage them to course correct and mitigate financial damage from past mistakes. We’re not saying they can magically save millions within a few years. But they can certainly stop making bad money decisions and start making better ones. It’s never too late to start saving more for retirement, especially if they are still working.
Help them to come up with a plan to save more money every month. There are likely some great money-saving techniques they aren’t even aware of yet! Then, talk to them about the importance of investing. Make sure they take advantage of catch up contributions. This allows workers over the age of 50 to invest an extra $1,000 into their traditional or Roth IRAs. And for 401k and 403b retirement accounts, it’s an additional $7,500 annually.
Helping them max out their retirement contributions can allow them to retire with more, reducing the amount of support they will need for the future. But, maxing out retirement accounts means finding big sums of money. And not everyone has the means to maximize their contributions like that. But encourage them that every little bit counts. Even just a minor increase in 401k or IRA contributions can add up over the years.
Encourage them to pay off bad debt
If your parents are saddled with bad debt, sit with them and help to create a debt payoff plan. Entering retirement with a lot of high interest debt can put a serious strain on your finances, because that debt will likely grow at a rate higher than any of your investments. When it comes to high interest debt, compound interest works against you, causing the amount you owe to grow over time.
If your parents are way behind financially, don’t give up on them. Personal finance skills can be learned at any age! It can even be helpful to point them to helpful resources like your favorite money podcasts (*cough, cough*) and books!
3. Be clear about how you can help financially
In your conversations, you might uncover specific ways you can help support your parents financially. Not everyone is going to be able to provide support for every aspect of their lives. So it’s important to identify and talk through the specific ways you are able, and unable to help them out.
Maybe you can’t help them pay all of their bills, but you’re able to offer them a place to live rent free in your home. Or maybe you can pay to take them on family vacations with you because they can’t afford to travel!
Whatever the case, be specific about your role in helping them. Miscommunication is the enemy because it can cause strain on an otherwise healthy relationship. For example, if they expect that they will be able to live with you in retirement, but you just don’t have the room, they might be hurt or caught off guard in the future when the idea gets brought up. Talk it all out ahead of time so that they know what to expect.
And don’t forget to get any siblings involved in this conversation too. Supporting your parents is much easier when you have a team, and you can all cater to your specific strengths. For example, one sibling might be nearby and can provide them free transportation and help them with groceries. Another sibling may live farther away but be more equipped to help them financially by supplementing their retirement income.
4. Help your parents find work they love
While many working folks are counting down the days to retirement, the truth is that the happiest retirees still work to some degree. In fact, around 20% of retirees return to work either part-time or full time. Why? While working in retirement may sound like a complete contradiction, many retirees find it a helpful way to bring in extra cash and find new purpose.
Now, I’m not instructing your parents to go back to a soul sucking career they hated, or even just a career they tolerated for years. Quite the contrary actually. Now is the time for your parents to follow their passions! Help them to find part time work that gets them excited to get out of bed in the morning. For example, if your mom has always loved gardening, why not encourage her to work part time at a local plant nursery. Or if your dad is obsessed with cars, maybe he could work the front desk at an auto repair shop.
Helping your parents to find work they are passionate about can help to reduce the amount of financial support they will need in retirement, all while helping them to grow new relationships and increase their physical activity!
5. Explore government incentives and take advantage of eligible programs
If their social security just isn’t going to cut it, don’t panic. There are plenty of government assistance programs to help low income seniors. Help your parents explore government programs and see if there is any aid they might qualify for.
For example, parents needing help with healthcare costs can apply for Medicare to help them cover necessary doctor’s visits and other medical costs. Social Security Medicare Savings Programs can help them to afford their Medicare premiums, copayments, deductibles and coinsurance.
If your parents need more income in addition to social security, they can apply for Supplemental Security Income, or SSI. When enrolled in this program, you receive monthly government payments to help cover your monthly costs. And lastly, Supplemental Nutrition Assistance Program, or SNAP can help low income households with their grocery costs.
Enrolling your parents in some of these government programs can help them to stretch the money they do have, reducing the amount of support you’ll need to provide.
6. Help them avoid financial fraud
Older folks are some of the biggest targets when it comes to scammers and thieves. Because they typically have more money saved up and may not be as tech savvy, hackers often try to steal their investments and benefits. It’s important to teach them to look out for these red flags so that they can avoid sneaky financial scams…
- The IRS will never call or email you- IRS scams tend to pop up around tax season. Remember that the IRS will always contact you by mail, and never by phone or email.
- Dating App Scams- If someone you meet on a dating app and they ask to move the conversation to WhatsApp, ask you for money, or offer to invest your money, it’s most certainly a scam!
- Fake social media accounts- some tricksters impersonate companies or public figures. Help your parents vet profiles and make sure they are not sold stuff from fake social media accounts.
- Beware of urgency- If a “company” reaches out to you with a bill or tells you that you’ve overpaid and it seems like they are rushing you to remedy it, it could be a scam. Scammers try to create a sense of urgency so that you might overlook key details that give their scam away.
When in doubt, encourage your parents to call you and ask you to take a look. Having a second opinion can almost always help to avoid losing money to scammers.
7. Consider power of attorney
If your parents have serious health issues or are no longer able to handle their own finances, you may want to pursue power of attorney. Power of attorney allows them to name you (or someone they trust) to make financial and medical decisions for them if they are not fit to do so.
Even if your parents are still healthy, it could be a good idea to set this up ahead of time. Anyone signing over power of attorney needs to be of sound mind in order to set it up legally. It can be a great precaution to protect your parents should they experience medical complications, or end up with impaired memory or cognition as they age.
If you establish power of attorney with your parents, be sure to have conversations with them about their wishes and goals. Should you take the reins in the future you can execute strategies and make decisions with their best interest in mind.
8. Maintain your boundaries
When you’re financially supporting your parents, it’s easy to get swept up in their needs and to forget about your own. However, this will only lead to resentment and pain in the future. While you’re taking care of your parents, you need to continue living your life, as well as prioritizing your own financial wellbeing. Believe me – they want you to live a happy and healthy life!
Make sure to set clear boundaries with your parents about what you can and cannot help with. If you cannot accommodate one of their requests, it’s okay to say no. You can always help them find the help they need through other avenues. For example, if you want to travel with your spouse across Australia for 4 weeks and don’t have the money (or patience) to schlep your elderly parent across the desert with you, it’s OK to leave them at home and enjoy your adventure. Even small things like if your parents need a ride somewhere and it’s extremely inconvenient for you, it’s OK to help them schedule a car service or an Uber!
Helping your parents is a noble thing to do. Especially if they cared well for you while you were growing up. However, giving too much of yourself up will only hurt you all in the long run. Remember, it’s okay to take a break, and to reach out to your friends and loved ones for help when you need it too.
9. Lead by example
Lastly, one of the best ways to support your parents financially is to lead by example. If you’re blowing money left and right, they might think it’s OK to do the same. It might accidently help them develop a false sense of security and to think that money is no serious issue.
If you shop smart and savvy, they are more likely to take a cue from you. If you make good decisions about budgeting, they will watch and copy. When you invest wisely and practice stealth wealth, they will see with their own eyes what true wealth building looks like.
Plus, working to achieve financial goals is always more fun when you have an accountability buddy! In fact, a recent study found that you have a 95% chance of accomplishing a goal if you have specific check-ins with your accountability partner. Try taking on money challenges alongside your parents, and adopt healthy money habits that your parents will slowly pick up on over time.
The bottom line:
Whether you’re ready or not, your parents might rely on you for support financially later in life. Things will go a lot smoother if you start having money conversations early, be clear in advance about the type of help you can offer, and set boundaries so that you can still live your own life.
Remember, it’s never too late to start making positive money choices and improve financial situations. Don’t give up on your parents, and encourage them to think realistically about the future. Together you can come up with a great plan to enjoy a comfortable retirement while also managing your own responsibilities and finances.
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