No matter how much we have prepared for retirement, it often seems that we could be doing more. As people live longer and need more money, there’s increased pressure to step up saving. But what if, in addition to funding your own retirement, you also had to provide financial support to your parents?
According to TD Ameritrade, 25% of baby boomers already support another adult. Around 8% of those adults are aging parents. What’s more, 20% of Gen Xers also support other adults, with 13% being their parents.
Most of this support went to general living expenses and medical bills, with financial supporters paying an average of $12,000 per year to help loved ones.
So, what if your parents don’t have enough money for their retirement needs? It’s more than likely you will help them with care and support, but this could inhibit your own retirement plans in the process.
Tips to a More Comfortable Retirement for Everyone
Here are some tips to follow so you can help your parents live comfortably while you stay on track with your retirement future:
Have an Open Conversation About Your Parents’ Situation
Many older Americans find it hard to discuss money matters with their families. This can be the case especially when money troubles are involved, or, as a grown child, you are in your 50s or 60s. But it’s hard to correct financial mishaps if you only know of your parents’ situation when money issues arise.
Proactive planning goes a long way. However, to come up with a plan, you need to know the details of your folks’ financial picture: income, savings, investments, other assets, insurance policies, and outstanding debts. So, be honest and loving in your conversations with your parents.
Assure them that you want to help them enjoy peace of mind over their money matters. Knowing what you have to plan for is part of this process. In some cases, though, you might have to involve a third-party advocate – such as a retirement financial professional – if your conversations don’t make headway.
Buy or Update Insurance Policies to Cover Retirement Expenses
Ideally, your parents will have sufficient insurance for retirement expenses – especially healthcare and long-term care. If not, you may want to see what can be done to get them coverage.
You may ask why this is important. Well, just the costs of healthcare and long-term care can be staggering, and if families are caught unprepared, these and other retirement costs can quickly add up to drain savings.
Insurance serves as a financial protection against these expenses, as they help take high-cost pressures off the table. To give an idea, Genworth Financial reports that, in 2017, the median annual cost of housing someone in an assisted living facility is $45,000. And the cost of a private room in a nursing home care facility can run up to $97,452 per year.
Apart from long-term care insurance, there are new generations of life insurance that could help you pay for personal care needs. Some life insurance comes with living benefit riders, or benefits that let you accelerate the death benefit toward certain care expenses.
If your parents do have insurance, it’s important to confirm their policies are fully up-to-date. Do they have enough coverage? What do their policies cover? Will they and/or you be able to afford them in the future? These are critical questions for your and their financial peace of mind, now and in the future.
Seek Guidance from a Retirement-Focused Financial Professional
Not everyone has a financial plan in place, or for that matter, keeps their plan up-to-date. But as people age, a well-thought-out plan helps to maintain financial security, manage risk, and generally keep things on track.
If you want your parents to enjoy peace of mind, connect them with an experienced retirement professional. Expert advice will help your folks navigate their retirement plans, tax burden, debt, anticipated expenses and income, insurance, and other areas of financial planning.
Our article on qualified retirement planning firms can help you find the right guide.
Don’t Forget About Your Retirement Future
TD Ameritrade says that when giving financial support, 40% of baby boomers delayed their retirement. Among Gen Xers, 31% would delay their retirement as they financially supported their loved ones.
As your parents advance in age, you no doubt will want them to be comfortable and financially confident. But you should also be mindful of your own future. Keep up with your own retirement savings. Maximize contributions to your tax-advantaged retirement accounts. And if you have a 401(k) plan with an employer match, it’s smart to take advantage of the ‘free’ additional money.
Just like your parents, it’s also good to make sure you have suitable insurance coverage. When you do financially support your parents, try to tap other sources besides your retirement savings if at all possible. Otherwise you could wind up depending on your children for support.
Figuring out everything alone can be taxing. Look for ways that siblings can pitch in and help with the workload. Your personal well-being is also important. Set and communicate boundaries on your support so you don’t get burned out.
Creating a Plan for Peace of Mind
Whether it’s for your parents or your future, financial planning helps with achieving peace of mind. If you are ready to start building a plan toward financial stability, financial professionals at SafeMoney.com are ready to help you.
Use our “Find a Financial Professional” section to connect with someone directly. Should you need a personal referral, call us at 877.476.9723.