When Eileen Crehan thinks about her parents’ retirement plans, she worries.
The 27-year-old PhD candidate, like many young adults, knows that her parents’ future finances aren’t only a source of concern for them—they directly impact her life as well.
“They are careful spenders and savers, but they hit some bad luck when the mortgage broker industry tanked and some medical issues came up suddenly and they have been recovering since,” Crehan says. “This is a major source of stress but it’s also a motivator. Part of my goal in going to grad school is to be able to get a job where I will have some financial wiggle room to help them out.”
Crehan, who knows her parents aren’t in a place financially where they’ll be able to retire on their own, has been thinking about this issue for a few years, and says that “part of me is just really sad … because they most likely will not get to retire when they thought they would.”
For many of us with aging parents, their retirement may not even be on our radar. Who can think about someone else’s retirement plans when we’re busy enough trying to keep our own heads above water?
But as time rolls on and we start to get our own finances in order, we might start to worry about our parents’ financial future. After they’ve done so much for us, how, exactly, can we help?
Start a Conversation
Crehan is lucky that her parents have been willing to talk about their situation fairly freely, and they “do talk specific numbers about some things, like mortgage and salary,” she says. But for many families, money is emotional and off-limits.
Scott Word, a lawyer from Virginia who specializes in estate planning, suggests using a third party to introduce the subject of retirement and planning with your parents—it can be easier, he says, to tell them about a friend who had to go through a lot of trouble to get his finances in order because his parents hadn’t made sure everything was accurate and up-to-date. “Often,” Word says, “parents do want to share and tell the children what they’ve set up.”
Review Beneficiary Information
Also essential is making sure that your parents have all of their paperwork in order, and that their children either have copies of that paperwork or know someone who does. Word says that one of the things he often sees mistakes with are beneficiary designations—that is, making sure you’ve told your retirement account holder or life insurance company who will get your money after your death.
It can be easy to fill this information out when setting up an account and forget about updating it as time passes. This information should be reviewed yearly, and ideally, your parents should be reviewing it with a lawyer. Check with your parents to find out if you’re their beneficiary, and if so, make sure you have the account information you need, or know the contact information of the lawyer who does.
While it might be tempting to put aside money for your parents as they age, she explains, “there’s no way that you can save $250 a month and say, ‘That’s for Mom and Dad.’ It’s not feasible.”
When it comes to selecting a beneficiary and managing accounts, Word is quick to point out that all families are different. While not many clients meet with their children, he has noticed that some children bring their parents in to review beneficiary and asset allocation as their parents get older.
There are key questions anyone should ask when deciding whom to make a beneficiary or whom to put in charge of financial choices (should a parent be unable to make them for themselves). These include:
- Does she or he have the necessary financial experience and judgment?
- If there are two or more children, will feelings be hurt by selecting just one?
- Can the responsibility be shared among children (all or some)?