Planning for retirement is no easy feat. But if you discover your parents haven't been planning or preparing financially for the same, things become even more complicated. It can be tough taking care of aging parents who have no retirement savings. The reality is that many parents haven't planned or thought through their retirement at all.
According to a study by the Government Accounting Office, close to 30% of Americans aged above 55 admitted they have no retirement savings or pension plans. So if you just found out your parents have no plans or savings for retirement, here is what to do:
Start the Conversation
Regardless of how close your parents are to retirement or how old they are, start talking about retirement immediately. Now that you know they have no plan, suggest ways for them to create one.
While at it, keep in mind that money can be an uncomfortable subject. So approach it gently and respectfully. Many parents still want their children to look up to them.
If they want to keep some information private, don't push. The last thing you want is to come across as judgmental. Instead, offer to help them plan and set up a budget. Remember, it's never too late to plan for the future.
Collect Important Information
While initiating a money conversation, there are important details you'll want to gather about your parents. For example, it's important to find out if their home is paid off, if they are in debt, if they have a will, and if they have 401(k) or IRA savings accounts.
These details will help you get a clear picture of their overall financial situation. It'll also be an eye-opener for what's in store for them in the future.
Set Expectations Now for Parents' Retirement
It's wise to consider what you're willing to do for your aging parents' retirement and what you can't. This will help you navigate the rough waters and maintain boundaries.
You may be able to take them in to live with you when the time comes, or you may not be able to offer any financial assistance. Whatever situation you're in, be honest and open about it now. You don't want to wait until they retire to start setting expectations.
Recommend Downsizing
Many elderly parents are opting to downsize their homes and cars in retirement. It results in more freedom since it can raise some cash to clear debts, and reduce maintenance and insurance costs. If your parents are open to downsizing, advise them to go for it. If they aren't, help them see the benefits of downsizing. For example, explain to them a smaller place that's fully paid for offers more security than a bigger house with a mortgage.Suggest New Streams Of Income
Many retirees are not fully dependent on social security. They may find part-time jobs or start side-hustles to supplement their income or little retirement savings.
A study by Prudential shows that most successful side hustlers in America are aged above 55. They're earning an average of $43,600 annually. Your parents can borrow a leaf from them.
Talk about other ways to make money in retirement. They could coach businesses using their experiences or turn their love for gardening into a business.
Help them see that even if they may not enjoy a work-free retirement lifestyle, they can still create income, be self-reliant, and protect their lifestyles.
Learn — Save For Your Retirement
Use your parents' retirement and financial situation as a lesson and stepping stone to a more secure retirement. Keep in mind that if you don't continue saving and planning for your retirement, you will only keep the same cycle going. Good luck!