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By timestaff
July 24, 2008

Saving for your own retirement is tough enough. You don’t want to be taking care of mom and dad too. Help them plan their finances before they reach their golden years.

Question: My parents are in their 50’s and have meager retirement savings of $20,000 in CDs and stocks, plus home equity of approximately $40,000. They’ve said more than once that they view their children as their retirement. What can I do to help them take charge of their retirement – or am I doomed to finance it for them? —Steve, Wichita Falls, Texas

Answer: Back when we were an agrarian society, having children was a legitimate, common form of retirement planning. You raised your kids, they worked with you on the old homestead and it was understood that eventually your children would take care of you when you were no longer able to provide for yourself. It was part of the social contract.

But this model doesn’t work very well in today’s society, where kids are less likely to stay at home (although it may take them a while to leave) and parents and adult children alike put a higher premium on privacy and independence.

That’s not to say that people shouldn’t be willing to help their parents, if the situation demands. When I was growing up, my grandmother lived with our family in a small three-bedroom Philly rowhouse for many years, an arrangement that, despite being cramped, I remember quite fondly, although I know it also caused occasional strain between the adults in the house.

But the fact is that relying on one’s children for retirement just isn’t a very good way to plan – for the parents or the kids.

All of which is to say that I think you need to broach the subject of retirement planning with your parents – and do it as soon as possible so that both you and they have plenty of time to take action.

Of course, finances can be a touchy subject within families, and mom and dad might take offense at what they may see as meddling in their financial affairs.

But you’ve got an “in” here. Your parents have talked about how they see their children as retirement. So it seems to me it’s perfectly reasonable for you to draw them out about just what they mean by this. Do they see themselves living with your family after they retire? Do they think of you as someone they can go to for help now and then if they’re running low on cash or unexpected expenses pop up? Do they intend to give it a go on their own until their resources run dry and then come to you for support?

Once you’ve gotten them to be more specific about this vague notion of seeing their children as retirement, you could then talk about why this concept is really more of a last resort than a bona fide plan. You might start by explaining to your parents that it’s challenge enough today to save for your own retirement without simultaneously trying to put away enough money for someone else’s. The message you want to get across is that no matter how much you might like to help them later on, the reality is that you may not have the resources to do so.

Ultimately, your goal should be to try to get them to take responsibility for their own retirement – or at least more responsibility than you feel is the case now.

If you think your parents would be receptive, you might sit down at a computer with them and, armed with more details of their assets, liabilities and expenses, check out an online retirement calculator like our Retirement Planner or Fidelity’s Retirement Income Planner, to see where they stand.

Maybe if they see the consequences of their lack of planning – that is, just how little income they’ll be able to count on after retiring if they continue on their present course – they might be more receptive to planning more realistically. By running a couple of different scenarios on these calculators – ramping up their savings, postponing retirement, working part-time after they retire etc. – you can then show them how they can improve their prospects. You might also point them to an earlier column of mine that outlines specific strategies for people who are getting a late start on their retirement planning.

It wouldn’t surprise me, though, if going over your parents finances in detail would be uncomfortable for them and you. So you might be better off referring your parents to a financial planner willing to work on an hourly or flat-fee basis who can assess their situation and come up with a plan that makes sense given the number of years they have left before retiring. You might even consider paying all or a portion of the planner’s fee to make this option more palatable to them.

One more thing: If I take literally your comment that your parents see “their children” as their retirement plan, then that would mean you have one or more siblings. If that’s the case, you’ll probably want to get them in on this process as well, although you’ll have to make a judgment call as to how many of the kids should be directly involved in any discussions with your parents. You don’t want your parents to get the feeling that the kids are ganging up on them and, besides, the last thing you need is a bunch of people jabbering away with overlapping or conflicting advice.

How much you’ll actually be able to motivate your parents to better plan for retirement is hard to say. They may simply be unwilling or unable to change.

But the more you can get them to prepare now and over the next 10 years, the better off you’ll all be when they eventually retire.

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