Many people may be surprised to find out that their parents are unprepared for retirement. According to a study by Northwestern Mutual, over 78 percent of Americans are concerned about not having enough money for retirement. Yet, a FinanceBuzz survey shows that 35 percent of people do not have any savings or money set aside for retirement.
The main reason why people are not prepared for retirement is because they are unable to save money due to today’s cost of living. Additionally, experts predict that Social Security may run out by 2035. Combine all that with bills and low income earning and what you have is an older generation who may not have any money for retirement.
Many people also believe that it is simply too late to start saving now, but that is not the case. The following tips can help you encourage your parents to plan for their retirement.
Communicate With Them
There are some uncomfortable conversations to have with your parents when considering their future. However, this is the first and perhaps most important step in helping them get ready for retirement. This is a tough conversation for parents and children, so take your time.
Some questions to ask include:
- Have you thought about retirement?
- I am concerned about your future. What are your plans?
- Do you have any debt?
- Have you thought about maintaining a house alone?
- Have you worked with an investment planner?
- Do you have a will or an estate plan?
Maybe they do not want to talk about finances, but it is vital to get the point across that it is not too late to start saving or having a plan in place. Furthermore, stress how important preparing for retirement is, as it benefits everyone in the family.
Crunch Some Numbers
This may be tough for your parents, but knowing their financial details is extremely important should they want to retire comfortably. You need to find out:
- Their current income.
- Their assets.
- What loans they have, such as mortgage or car loans.
- What bills they have each month.
- Health care and medical costs.
- If they have a will.
Do not forget about inquiring about their smaller expenses, such as gas costs, groceries, or subscriptions, as they could add up quickly.
Get Support From Family
If you have siblings or close family, have them involved if you think it will make your parents more open and comfortable. That way, you do not have to feel alone in shouldering this responsibility, and you all can bounce ideas off one another as well.
After going through your parents’ bills and income, try to find unnecessary expenses that need to be either adjusted or eliminated, like a newspaper subscription. You may find bills your parents have been paying out of pure habit, like a cable bill with channels they do not necessarily need. Help them adjust to streaming services instead of cable and they could save a lot of money.
This may be a difficult conversation, but downsizing their car and to a smaller home are great ways to reduce costs. If they are open to moving, find a location with lower property taxes, which could help save thousands of dollars.
Consider Phase Retirement
A good option for those who are not ready to completely stop working is to consider phase retirement. This is an agreement where you could still work while progressively working less until you are completely retired.
New Income Sources
Many people have supplemental incomes these days, and retired people are no exception. Some easy suggestions could be selling items online or turning their hobbies into a side business. They could also be a delivery driver or work for a rideshare service or even pet-sit. If money allows, you could even suggest to them that they invest in a real estate property to rent out to others.
Find out about your parents’ insurance policies, and make sure these policies are current and up-to-date. This includes life insurance, auto insurance, homeowners, health, and long-term disability. It is easy to forget about an insurance policy you have had for years, so double-check with your parents’ insurance plans to ensure they are current and still needed.
Take Over the Finances
Ask your parents for access to their bank and credit card accounts. If they are open to this, it is a good idea to help keep track of their bills for them and balance their checkbook. If they are not open to the idea, stress to them that you do not have to do it and you just want to help them.
Offer to help manage their money, or hire an outside party like an accountant to help. If you are able to help them, be sure to document everything you do and be open with them.
Take Care of Your Own Retirement First
It is a great idea to not only get your parents on the right track for retirement, but to get you on the right path as well. You can lend them money should they need it, but you should not neglect your own finances first. Stick to a budget where you and your parents can both benefit from.
It is also wise to speak with a lawyer about creating an estate plan for yourself and for your parents. A lawyer will make sure you and your family are on the right path and that assets are protected.
Plainfield Wills, Trusts, and Estates Lawyer at Herold Law, P.A. Can Help You and Your Loved Ones With an Estate Plan
It is tough to prepare for the future, but it is important to do so sooner rather than later. Our Plainfield wills, trusts, and estates lawyers at Herold Law, P.A. can help you if you have questions about an estate plan and how that plays into retirement. Call us at 908-679-5011 or fill out our online form for an initial consultation. Located in Warren, New Jersey, we proudly serve clients throughout the surrounding areas, including Plainfield.