Key takeaways

  • Aging in place requires conversations about your parents’ finances, health and general expectations.

  • It’s never too late to begin saving for retirement.

  • This is an entire family effort: It’s important to have a game plan involving all siblings.

You might be wondering how you can help your parents retire and age in place. However, like many Americans of retirement age, your parents might not have saved enough in their 401(k)s or other retirement savings plans. This can put a burden on the children of such adults.

Planning can help alleviate this challenge. Discussing retirement is one of the most difficult – but important – conversations to have with a parent. Parents may feel uncomfortable with the role reversal between parent and child that occurs with aging, but it’s imperative to implement a realistic retirement plan with parents.

4 steps when planning for your parents’ retirement

Broaching the topic of your parents’ retirement is delicate. You want to remain respectful and avoid a condescending tone, while conveying concern for their financial health. This can be difficult when you discuss sensitive matters such as your parents’ current and expected lifestyle. The good news is that your parents are lucky to have a child willing to contribute to their financial well-being.

To help your parents retire, have a planned conversation about their finances and expectations.

Many children contribute to their parents’ finances. A recent study found that as many as one-third of adults currently contribute financial support, and that 40% expect to do so in the future.

The steps below will prepare you for the “retirement conversation” with your folks.

1. Plan the conversation

Entering this conversation with a plan will help you stay on track, obtain the necessary information and avoid a negative emotional reaction. Topics to discuss include:

  • Current retirement savings

  • Overall financial health

  • Lifestyle expectations

If you have siblings, you may wish to work together to present a united front intended to achieve your parents’ best interests. While this topic can also cause strife among siblings, working together before you approach your parents will help.

2. Determine parents’ retirement savings situation

The pillar of most retirement savings is the 401(k) or 403(b) account. Each is a type of employer-sponsored retirement savings plan intended to accrue interest and returns on investments throughout an employee’s career. Other types of retirement savings accounts include the individual retirement account (IRA) and Roth IRA. Specific plans for self-employed individuals also are available.

Given these options, however, the study referenced above also found that 25% of working adults have no retirement savings. If your parents are in this situation – even if they are in their 50s – it’s not too late to begin making contributions.

The IRS sets rules for these retirement accounts. For the IRA, you may contribute up to $6,000 per year (or $7,000 if over age 50) of post-tax earnings. These contributions then accrue interest and may be withdrawn untaxed at retirement age. If your parents are age 50 and plan to retire at age 65, for example, that’s 15 years of contributions and interest accrual.
You may also want to consider the extent to which your parents will receive benefits from the Social Security Administration. They may begin claiming benefits at age 62, but those benefits will be reduced until they reach full retirement age. You can run calculations to determine how much money your parents will receive from these multiple sources.

3. Determine their general financial health

In addition to retirement savings, you also need a picture of your parents’ overall financial health. Determine their:

  • Current income

  • Outstanding debts

  • Total assets

  • Current and anticipated spending habits

  • Healthcare costs and expectations

  • Mortgage and home expenses

Depending on your relationship with your parents, this may be challenging. Nonetheless, the answers to these questions will inform the degree to which your parents may need your help.

WATCH: Aging in Place

4. Explore their lifestyle expectations

Finally, you also need to know how your parents expect to spend their retirement. The state of their financial affairs will dictate the degree to which they can maintain their current lifestyle.

Important questions to ask include:

  • Do they need to downsize from their current home?

  • Do they plan to live with you or a sibling?

  • How will they pay for healthcare before Medicare applies?

  • How do they manage their current assets?

  • Do they expect you to help physically, financially or both?

Furthermore, you may want to consider long-term care insurance. This can help cover some high-cost expenses, like skilled nursing and assisted living.

Updating the home: How to help your parents retire

If your parents can age in place at their own home – or are considering moving in with you – you will likely need to adapt the home for an older resident.

Helping your parents age in place works best with a plan.

Common concerns for those aging in place include mobility, safety and household maintenance. While a parent’s future health costs may change, planning will help them prepare. If the home has stairs, for example, you may consider installing a mobility chair or creating a main-floor bedroom and bath. Other associated costs for retirees living alone may include an in-home caregiver, housekeeper or gardener.

Next, determine how you can help. This may be by providing direct financial support, performing caregiving services or paying utility bills. But remember to plan for your parents’ retirement within the confines of your own budget. Discuss with your siblings and partner the degree to which you can help while still prioritizing your own debt payoff and retirement savings.

Unlock Technologies can help

If you a homeowner with equity accrued in your home, Unlock Technologies may be able to help with the capital you need to renovate your or your parents’ home, hire a caregiver or housekeeper, or otherwise provide for your parents.

With an Unlock Technologies home equity agreement, you can receive cash now in exchange for a percentage of your home’s equity. It is not a loan, and there is never any installment payment or interest. You pay off the money provided from us when you sell the house, or make arrangements to buy out Unlock earlier.

If you are ready to learn how Unlock can help you, contact us today.

The blog articles published by Unlock Technologies are available for informational purposes only and not considered legal or financial advice on any subject matter. The blogs should not be used as a substitute for legal or financial advice from a licensed attorney or financial professional. Links in our blog posts to third-party websites are provided as a convenience and are for informational purposes only; they do not constitute an endorsement of any products, services or opinions of the corporation, organization or individual. Unlock Technologies bears no responsibility for the accuracy, legality, or content of external sites or that of subsequent links.