Saving for retirement can have its challenges, and there’s one you might not be expecting. You may find yourself helping to plan your parents’ retirement if they’ve fallen short of their savings goals.
Learning that your parents have no, or very little, retirement savings may be disheartening, especially if you’re expected to help fill the gaps in their financial plan. Figuring out how to retire your parents while still keeping your own financial goals in sight can be tricky, but it’s not impossible.
Key Points
• Encourage your parents to discuss retirement openly and build a support system to address financial concerns.
• Your family or a financial advisor can help analyze parents’ financial situation, including savings, debts, and monthly expenses, to plan effectively.
• Help parents find ways to save for retirement by reducing expenses and increasing income.
• If your parents have earned income, ask them to consider opening a retirement investment account, like an IRA, to boost savings.
• Utilize available resources and federal programs to support parents’ retirement planning and saving.
What to Do If Your Parents Didn’t Save for Retirement
When your parents can’t afford to retire your first instinct might be to get angry or place blame. However, it’s important to remember that you’re not alone and there are others like you in the same situation.
Consider this: More than half of retirees and pre-retirees aged 50 to 74 report feeling financially fragile. And the median retirement savings among them, per recent data, was just $128,000. Among pre-retirees, too, almost one-third said they had no plans for when to retire.
Statistically, women are less likely to have retirement savings than men. About 50% of women aged 55 to 66 have nothing saved for retirement, compared to 47% of men according to Census Bureau data. Being married more than once decreases women’s likelihood of having something saved for retirement.
The numbers aren’t encouraging, but it’s not too late to help your parents get back on track to retire. Assuming one or both of your parents are still working there are some things you can do to help them make the most of their current income in order to save for retirement.
How to Help Your Parents Retire
Retiring your parents may not be an easy task but it’s important to stay focused on the bigger goal. Also, remember that while it’s fine to want to help your parents retire, sidelining your own finances to do that could put your own retirement at risk.
1. Talk to Them About the Situation
Talking about money with your parents may be uncomfortable if they’ve never been forthcoming about their finances. However, it’s important to have an honest discussion about where they are with regard to retirement planning.
Doing so can help you both set realistic expectations. Some of the possible topics to discuss include:
• Living arrangements: Will they continue to live in their current home? If so, is that home paid for? And if they don’t plan to stay in the home, will they expect to live with you or move somewhere else?
• Financial support: If they lack retirement savings of any kind, will they expect you to help out financially? If the answer is yes, what does that translate to in hard numbers?
• Long-term planning: Should one or both of your parents require nursing care, what will that look like? Will you be their caregiver or will they need to move to an assisted living or long-term care facility? How much will that cost and where will the money come from to pay for it?
Those are just some of the issues that might come as you dig into the retirement planning conversation. Keep in mind that it shouldn’t be a one-time chat, either. If you’re planning to help retire your parents, then you’ll all need to be comfortable with discussing it on an ongoing basis.
2. Get Support
Trying to help your parents retire can be overwhelming and it’s a good idea to look for outside support if possible. If you have siblings, for example, you can ask them to join in the discussions about money and retirement planning. You might enlist the help of your parents’ siblings if you’re an only child.
It may also be beneficial to get an expert’s opinion. If your parents are receptive, you might want to consult with an advisor who specializes in financial planning or starting a retirement plan for families, whether that entails opening an IRA online or managing debt. They may be able to offer outside perspectives on the biggest issues that need to be addressed right away to get their retirement plan in shape.
3. Break Down the Numbers
Figuring out how to help your parents retire means taking a close look at their finances. Depending on your family situation, there might be some pushback here but it’s important for you and your parents to sit down and do the math.
Specifically, it’s helpful to understand:
• How much they have saved for retirement, if anything
• What retirement benefits they have through their employer (i.e., a 401(k), pension, etc.)
• How much debt they’re carrying and what types of debt they have
• What their spending looks like in a typical month and how that might change once they retire
• What type of assets they might have, such as a home, investments, or a life insurance policy
Having the numbers in front of you can help figure out what’s realistic, with regard to how much income they’ll need to fund their lifestyle in retirement and how much financial support you might need to provide.
4. Help Them Find Money to Save
If your parents have money coming in from working, then you’re already one step ahead of the game in helping them prepare for retirement. The challenge now is to help them find the money they need to set aside something for the future.
There are several ways to do that:
• Reduce expenses
• Increase income
• Look for “free” money
If you’ve already gone over the details of their monthly spending, the next step is walking through their budget with them to find expenses they can cut out. The more drastically your parents can cut their expenses, the more money they may be able to free up for retirement savings.
When there’s debt in the picture, whether it’s credit cards, car loans, or a mortgage, consider how they could get rid of those expenses. Taking a personal loan to consolidate credit cards, for example, could help them save on interest while paying off what they owe faster. The same goes for refinancing their mortgage.
Increasing income may be trickier, but you could suggest things like getting a part-time job or second job, or starting a small side hustle. Even something like selling things around the house they don’t need can bring in extra income they could use to save for retirement.
Finally, consider what free money they might be passing up. If they have a 401(k) at work, for example, but aren’t contributing enough to get the full company match then a simple adjustment to their annual contribution rate could fix that. That’s a smart way to encourage them to start investing or at least reviewing stock market basics in retirement with the income they already have.
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5. Open a Retirement Investment Account
If your parents don’t have a 401(k) or similar plan at work, it’s never too late to think about starting a retirement plan. And even if they do have a workplace plan, they could still benefit from opening a secondary account for retirement savings.
Among the different types of retirement plans, an Individual Retirement Account (IRA) is the most accessible for savers who have earned income. You could encourage your parents to open a traditional or Roth IRA, depending on their current tax situation and where they expect to be tax-wise once they retire.
With traditional IRAs, contributions are typically tax-deductible and anyone can contribute. A Roth IRA, on the other hand, allows for tax-free qualified withdrawals in retirement. Eligibility to contribute is based on income and filing status. Understanding the differences can help with choosing a retirement plan for your parents, or yourself if you have yet to start saving.
6. Take Advantage of Available Resources
There are numerous federal programs that are designed to help retirees manage their financial lives. Researching what’s available can help you figure out what benefits your parents might qualify for once they retire.
For example, it’s important to consider when parents should take Social Security benefits if they don’t have retirement savings. The earliest age for claiming benefits is 62, but taking benefits early can reduce the amount retirees receive. Delaying benefits to age 70 can increase their monthly payments, but that may not be realistic.
Other options for getting financial help include:
• Medicare, which provides health insurance coverage for seniors 65 and older
• Medicaid, which provides healthcare services for low-income families and individuals
• HUD public housing (for seniors with disabilities or limited income)
• Assistance programs that help with utility bills, heating bills, or phone bills
• Food assistance programs, including Supplemental Nutrition Assistance Program (SNAP) Benefits, and Meals on Wheels
• Assistance programs for military veterans if either of your parents served in the armed forces
• Property tax or homestead exemptions for seniors
• Programs that help with home repairs for eligible seniors
Your parents may not need all of these programs, but it’s still a good idea to know what’s out there. If you’re not sure how to find resources for retirees, you can contact your local departments of health, social services, or adult services to ask for guidance. You can also try your local council on aging, if one exists in your area.
7. Address Long-Term Financial Planning
One of the most staggering costs in retirement for many seniors is healthcare. At the low end, the cost may average almost $25,000 per year for adult assisted living or community care. At the high end, you might pay almost $117,000 on average annually for a private room in a nursing phone.
Purchasing long-term care insurance can help to pick up the tab but policies can be expensive. Medicaid could pay for coverage but your parents would need to meet the income and resource guidelines set by their state to qualify for help.
A hybrid life insurance policy could kill two birds with one stone, so to speak. These policies can pay out benefits toward long-term care during your parents’ lifetime should they need them. They can also pay out a death benefit when they pass away, which could help you to cover things like final expenses or any remaining debts they leave behind.
Again, it may be in everyone’s best interest to sit down and talk these things through with a financial advisor, which may help them think about starting a retirement plan.
Investing for Retirement With SoFi
Discussing their financial plan and sharing tips for investing can help your parents to feel more comfortable about the idea of retirement. At the same time, it’s important to consider where you are on your financial journey. It’s generally a good idea to start saving for retirement as early as possible, but if your parents did not, there are still options.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
Can I open a retirement account for my parents?
No, but you can help them open a retirement account of their own. For example, you could walk them through opening a traditional or Roth IRA at a brokerage. You can also help them to review their retirement account options at work to make sure they’re getting the most benefit possible.
What do you do when your parents haven’t saved for retirement?
When parents have no retirement savings, it’s important to take a deep breath and not panic. It’s possible to help your parents get on track with retirement savings if they’re committed to setting realistic expectations and taking action to set aside as much money as possible in the remaining years before they retire. You may also encourage them to talk to a financial advisor about how to get their finances in shape.
How much does the average family need to retire?
The amount of money one family needs to retire may be very different from another’s, depending on the number of family members and their desired retirement lifestyle. Saving at least $1 million for retirement is a commonly-accepted target, though it may be possible for one person to retire with just $500,000 while someone else might need $2 million to live comfortably.
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