You Need to Talk to Your Parents About Their Retirement Plan

You Need to Talk to Your Parents About Their Retirement Plan

I don’t give a flying nun about inheriting money when my parents eventually buy the farm. As far as I’m concerned, it’s their hard-earned dough. They should use every blessed penny to enjoy their retirement and live comfortably until the day they die.

In fact, I truly hope they do!

They can give me a much greater gift instead of an inheritance: the knowledge that their retirement and passing won’t be a financial burden on me.

Knowing that my parents have a solid retirement plan will grant me enormous peace of mind. I can’t imagine a more generous gift than the ability to enjoy our last years together without worrying about how to pay for their care. I want to compete with my mom at nightly Jeopardy! when she’s shrunken and toothless, not take a second job to keep her TV on! (Note: There would be no competition. My mother is a ruthless, cutthroat home Jeopardy! contender. Fools and kings have fallen before her. She’s banned from pub trivia in three states.)

A solid retirement plan for my parents will also allow me to focus on growing my own wealth. That way, when I get to the age where I’m allowed to be embarrassingly blunt in public, I won’t be dragging down the finances of my younger relatives.

You don’t want to find yourself financially preparing for your own retirement years only to find without warning that you suddenly have two aging dependents to account for in your annual budget. So take steps now to make sure it doesn’t happen.

The failure rate of retirement funds

Old age is one of those mostly universal experiences (barring, y’know, freak accidents and unforeseen tragedies). Just as your aging parents will experience a time during which they can no longer work to support themselves financially, so will you!

Ideally, we’d all be responsible for building and maintaining our own retirement funds to a sufficient level. But we don’t live in Ideally. If we did, pie would grow on trees and dogs would never die.

In reality, according to the American Society on Aging, almost one quarter of adult children say their elderly parents rely on them or another family member for financial support. These are people whose aging parents either didn’t save for retirement, or didn’t save enough.

And that’s no shade on dependent retirees—a big part of the problem has to do with growing income inequality, lack of access to tax-advantaged and employer-sponsored retirement funds, an unexpected drop in the value invested in bonds, the rising costs of healthcare, and other factors outside of retirees’ control. A person might work and save faithfully for forty years, only to spend their dotage bunking with their grand-nephews in order to afford blood-thinners and prunes.

The solution is, as always, to tear down the ivory towers of capitalism and seize the means of production. Employers who don’t offer pensions shall be the first against the wall!

Or, failing that, you can familiarize yourself with the odds stacked against you and take proactive measures to protect your retirement and that of your Olds.

You need to know right now

If you currently know jack shit about retirement funds, take a break from this article to read these ones:

We have a friend who found out her parents were losing her childhood home only when she found the house listed online as a foreclosure. Another friend has a parent who so badly mismanages her own finances that during his college years she regularly stole money from his bank account to pay her own debts. And yet another friend recently cashed out her 401(k) to buy a house for her family when she learned her own parents had lost theirs, had no retirement savings to speak of, and were literally living out of their car.

The only thing worse than having to take financial responsibility for relatives because they mishandled their own finances? The whole situation coming as a massive surprise.

So schedule some time this week to talk to your parents—or grandparents, aunts, uncles, or siblings. Anyone who might find themselves financially dependent on you in their old age should get “The Talk” about their retirement plan. Far from being offended at this abrupt reminder of their approaching decrepitude, they’ll be grateful that you’re thinking of them and that you care enough to be concerned for their future.

Having The Talk

I had The Talk with my parents a while back, and it was a massive relief for all of us. Far from being cagey or defensive, my dad was actually quite willing to lay out the numbers for me.

He’s a disabled veteran with a healthy pension in addition to his retirement plan and savings. And while my mother gave up her career to raise us hellions as a stay-at-home-mom, she has always been militant in keeping track of the family finances. I got visual proof that my parents have enough money and assets to retire comfortably without my financial contribution.

More recently, I’ve been watching them take over the finances of my three remaining grandparents. All three were well prepared for retirement, with plenty of savings and assets.

Even so, my parents and their siblings faced unexpected expenses. My 92-year-old grandmother moved in with my parents during the pandemic. And while the sale of her home left her a tidy lump sum, my parents still had to put their own money towards installing a stair chair and handicap-accessible bathroom. These are the sorts of unexpected costs they didn’t plan for when approaching their own retirement.

When to call in reinforcements

You’re here because I am a semiprofessional money nerd. I mark my portfolio reallocation dates on the calendar with hearts and smiley faces. I keep track of HYSA interest rates the same way some people keep track of baseball stats (let’s go Cambridge Pussy Willows).

Yet as hard as it is for me to believe, some people aren’t nearly as knowledgeable and enthusiastic about retirement planning. Wild!

If this is you, and having The Talk with your beloved Olds seems wildly intimidating… call in reinforcements.

My husband’s parents just retired and moved across the country to live closer to us. It’s been great to eat my mother-in-law’s cooking on a regular basis spend more time with them. But it also means my husband has become a little more involved in their retirement. As he’s not an expert, he introduced them to a financial advisor.

Which has been a huge win for all of us! Not only has the financial advisor helped my in-laws maximize their retirement investments, but she’s advised them on ways to prepare us for when they’re much older. She’s put plans in motion that will make it significantly easier for them to transition to a time when they’re no longer independent. That way we won’t have to scramble to figure legal and financial things out at a time when emotions are running high.

The outcome of The Talk

By the end of The Talk you should be assured of a few things at minimum:

  1. That your Olds have a retirement plan. And that plan needs to be something more than “we’ll just move in with you, honey!”
  2. That they’ve taken advantage of every kind of retirement fund available to them. For most people, this means having some kind of independent, tax-advantaged account like an IRA (individual retirement account). Others will have employer-sponsored accounts like a 401(k) or a pension fund.
  3. That they know how and when to apply for Social Security.
  4. That they have a plan for health insurance after retirement.
  5. That you, as their beloved Young Person, have all the information you need about their plans and wishes.

Where there’s a will, there’s a way

Great, you got through the retirement plan conversation with your old folks! Now move on to an equally pressing but possibly more uncomfortable topic: their will. Most of us don’t realize that a will is not simply a list of who gets what when we shuffle off this mortal coil.

Let’s hope your will reading doesn’t go quite so dramatically.

A will contains very important legal information. Like who gets to make decisions about your medical care and financial affairs in the event that you’re incapacitated due to injury or illness. And while that’s a more likely contingency in your twilight years, it’s never too early to make these arrangements.

Lauren and I have a friend who, in his mid-twenties, found himself legally powerless to make decisions for his unconscious fiancée while she fought for her life in the ICU. (Get your fucking flu shot, people.)

Your aging relatives need to update their wills now, today, to arrange for such drastic emergencies while they’re still hale and hearty. Because by the time they’re hospitalized with pneumonia, it’ll be too late. And then you, their next of kin, will be dealing with a legal nightmare on top of worrying about your loved one.

Here’s our how-to on the paperwork:

Starting the conversation

If you’re worried about the mortifying prospect of such a heavy conversation, here’s a short script to help. Just say:

“Hey Auntie. I’ve been reading a lot about personal finance recently, and it’s got me thinking about our family’s future. I want to make sure you guys have everything you need to enjoy a long and comfortable retirement. Let’s schedule a time this week when the three of us can talk about your retirement plan and go over some details. This way when the time comes I’ll be prepared and none of us will need to stress out about it.”

They’ll be touched by your thoughtfulness and impressed by your adultiness. Plus, they’ll be ecstatic you want to spend time with them. And if they’re not all of those things, then you’ll know you have every reason to dig deeper.

An earlier version of this article came out in June, 2016.

5 thoughts to “You Need to Talk to Your Parents About Their Retirement Plan”

  1. I discussed plans with my parents and they are set. I brought it up, because they help my siblings out, a but of money here or there, groceries etc. I wanted to know that things were set so it wouldn’t become my responsibility. I mean would you really refuse to buy your brother or sister a $0.50 thing of pasta or a $1.00 jar of spaghetti sauce? Turns out we’re good. 🙂

    1. What a relief! And I hear you on the siblings thing. I barely touched on that in this article, but it can be super awkward to feel responsible for people who are supposed to be your peers when your parents pass on.
      Thanks for reading! <3

  2. I definitely agree with the part where you mentioned that knowing my parents can peacefully retire can give me a never-ending peace of mind. We don’t really talk about our finances in the family except when one is in need of help, and these matters are considered serious to us. Still, it might be better to discuss things as early as now since none of my siblings will be living with my parents and I’ll surely ask them what they think about moving to a retirement home.

  3. Thankfully being in the personal finance industry, I had this conversation about 8 years ago. It’s very true that many if not most are completely in the dark about their parents readiness for retirement, or even their current financial affairs. Some peers have approached their parents to help buy a home in this era, only to find out the parents had a second mortgage on their own home just to pay off debts, get by, or help that person graduate debt free! A silver lining though is the younger generation is much more comfortable asking and being transparent about money.

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