While my parents were always able to make ends meet, there wasn’t much leftover. That meant that there wasn’t much wiggle room for unnecessary spending. However, I didn’t realize that that also meant that my parents weren’t prepared for retirement.
While they do get Social Security and a small pension, money is tight for them. It’s not uncommon for them to embarrassingly ask for a couple of bucks for groceries from me and my siblings. While we never hesitate, it hasn’t been easy.
My brother gets annoyed because he feels that our parents were irresponsible, while my sister is a little more empathetic and has hired our mom part-time for household chores—oddly enough this has brought them closer. And, for me, it’s been a rude awakening that I also am not prepared for retirement.
1. Your Parents Will Retire Broke
Don’t take this personally. But, there’s a very good probability that your parents will retire broke.According to a GOBankingRates survey, a whopping 64 percent of Americans are expected to retire with less than $10,000 in their retirement savings accounts. More troubling is that 45 percent admitted that they had no money saved for retirement.
And, even if your parents have been saving, they probably aren’t setting aside enough. Experts recommend that when it comes to retirement savings, you should earmark 10 to 20 percent of your salary—15 percent is often the magic number though. Unfortunately, Bankrate found that only 16 percent of Americans are setting aside 15 percent or more of their salary towards retirement. For a majority of people, they’re saving less than 10 percent of their income.
The short of this? You’re probably going to have to assist your parents by helping them develop a retirement plan or financially after they retire.
2. Social Security and Pensions Are Dwindling
But, wait a minute? Don’t your parents have Social Security and a pension plan coming their way? Well, since nine in 10 retirees rely on Social Security as a source of income in retirement, you can’t blame them. Furthermore, via the Employee Benefit Research Institute, “68 percent of retirees (and 48 percent of workers) feel confident that Social Security will continue to provide benefits of equal value to those received today.”3. They Probably Don’t Have a Financial Advisor
You would think that with the above, your folks would have been working with a financial advisor. However, a CNBC Invest in You survey found that shockingly that 99 percent of Americans don’t use a financial advisor.What’s holding people back? There a variety of reasons. But, mainly it’s because there’s a misconception that financial advisors are too pricey or will influence key financial decisions.
4. They’re Going to Need Long-Term Healthcare
Growing up, you probably viewed your parents as invincible, super-powered human beings. Even if they are incredible people, aging will eventually catch-up to them. And, when it does, they’re going to need some sort of assistance—usually in the form of long-term care.- In-home care: $4,481 for homemaker services and$4,576 for home health aide.
- Community and assisted living: $1,603 for adult health care, $4,300 for an assisted living facility.
- Nursing home facility: $7,756 for a semi-private room and $8,821 for a private room.
5. You’re Going to Have to Have ’the Talk' with Them
Just because the stats aren’t in your parent’s favor, don’t assume that they aren’t prepared for retirement. The only way you’ll truly know is by having “the retirement talk” with them.- Schedule to have the “money talk” sooner than later, preferably during a quiet time. That means discussing this over Thanksgiving dinner isn’t the most opportune.
- Reduce distractions, such as pets and smartphone notifications to keep the conversation on-track.
- Do not be demanding. Instead, ask what their retirement plan is because you have concerns. Examples would be where they’re going to live or how their lack of funds will impact you financially.
- Invite your siblings or a third party like a financial advisor.
- Monitor their mood. If they become too frustrated or tired, reschedule the meeting.
- Be empathetic, but also prepared to hear excuses. Your parents may not have been able to save properly for retirement because they didn’t make enough money. That’s understandable. But, if they didn’t save because they wanted to take luxurious vacations were careless about their spending, then you need to reel them back in and help them create a budget.
- This will not be a one-time event. Revisit this conversation frequently to make sure that they’re making progress towards their retirement goals.
6. You’re Going to Have to Make Sacrifices
A lot of us are struggling financially. But, we also believe that helping our parents is just the right thing to do. As a consequence, some of us may forego relationships, owning a home, traveling the world, or saving for our own retirement.7. You Might Be Putting Your Financial Future in Jeopardy
A survey from the research arm of AARP found that a third of adults in their 40s, 50s, and early 60s have given money to their parents within the last year. However, “four in ten midlife adults (42 percent) expect to be doing so in the future.”Obviously, if you’re trying to pay off your own debt or living paycheck-to-paycheck, this can be a financial burden. And, if you’re a parent you have the additional pressure of supporting your children. “Financial support to adult children was equally striking, with 56 percent of midlife adults having provided $1,000 or more in the last year and 25 percent have contributed $5,000 or more,” adds Skufca.
If you aren’t careful, this could ruin you financially. It may even put a strain on your relationship with your family. To avoid this, first, make sure that you’re able to help them financially without derailing your own financial health. If so, meaning you can avoid debt and contribute to your own retirement, set limits on how much you’re willing to give.
If you can not help them financially, turn to resources like the National Council on Aging. The NCOA offers guidance on how seniors can manage their money and what financial aid programs are available to them. You could also do things like driving them to doctor’s appointments or helping them with household chores.
8. Mutigenerational Homes Can Be Beneficial
Let’s say that your parent(s) do not have the resources to have their own place. But, you don’t want or can’t help them financially. You could have them move in with you. In fact, since 2007, there’s been a 10 percent increase in multigenerational homes consisting of 51.4 million Americans.- Sharing financial expenses. Even if on a limited income, maybe your parents could help with utilities or groceries.
- Distributing chores, as well as age-appropriate responsibilities, to family members. For example, my mom stays with my sister and helps with cooking and laundry so that my sister has more time to grow her business.
- Reducing loneliness for the elderly and keeping them engaged. For children, this gives them role models and creates a loving atmosphere.
- Ensuring family safety since the home is frequently occupied and you can keep a closer eye on your parent(s).
9. They Can Still Catch-up
So, your parents haven’t been the best at saving for their retirement. All hope isn’t lost yet. They still have time to catch-up.10. It’s Not just about Money
Research shows a happy retirement is more than just having enough money to pay your expenses. And, when you think about it, that makes sense.For starters, following the “honeymoon phase,” retirees have a difficult time adjusting. They no longer have a routine, sense of purpose, mental stimulation, or social interaction.
Furthermore, it’s been found that verbal memory declines 38 percent faster after retirement than it does before. “The brain’s an organ. You can’t just park it and expect it to stay sharp and lucid,” Anthony said.
So, even if your parents are set financially, make sure that they’re also addressed the non-financial aspects that will get them healthy, happy, and fulfilled. Some suggestions would be volunteering, working part-time, regular exercise, and making time to socialize with friends, family, or other members of a social club.
