When it comes to planning for retirement, setting yourself up for a healthy financial future should be top of mind. Unfortunately, this is not always the case and many Americans are not saving enough money to live comfortably in their golden years.
According to a study published by the United States Government Accountability Office, “about 29% [of people approaching retirement age] have neither retirement savings nor a defined benefits plan” while USA Today reports that “the median account balance for Americans nearing retirement sits at a paltry $12,000.”
Over the past decade, there has been a drastic change in the way Americans view retirement, with nearly 59% of people aged 55-64 planning to take on part-time work, start their own business or not retire at all.
This lack of financial preparation not only affects people nearing retirement, it takes a toll on their children as well.
According to a study conducted by TD Bank, one in five Millennials helps to financially support their aging parents, to the tune of $18,250 per year on average, and “nearly three-quarters of the financial aid goes towards general living expenses like food and housing.”
The study, published by money under 30, continues: on average, “the young adults who find themselves taking care of dad and mom carry $63,000 of their own personal debt” and are delayed from experiencing their own financial successes, including:
With this information in mind, what can you do to help your parents if they have not saved for retirement without sacrificing your own financial well being?
Nerdwallet suggests gathering specific information from your parents to get a clear picture of their finances:
Forbes also suggests contacting an experienced financial planner to develop a strategy to tackle debt and save for the future: “an expert’s advice about debt repayment, insurance plans, projected expenses, retirement plans or other financial vehicles can be invaluable.”
If you are not in a position to assist your parents financially, you can offer what USA Today refers to as “non-financial support.” This support can include assistance with budgeting, help around the house, meal preparation and picking up groceries. As your parents age, accompanying them to medical appointments and taking an active role in their health and well being are often more helpful than offering money. Your time, after all, is priceless.
Before having a conversation with your parents about their financial circumstances, consider what you are able to do for them. Whether it is covering the cost of specific bills or inviting them to live with you, deciding what you are able and willing to do to help will allow you to navigate the conversation and maintain boundaries. Money under 30 suggests defining clear expectations that both you and your parents understand and agree with: “before any money is loaned, there should be clear expectations about the frequency and amount of the contribution. That could be a time to also talk about how the money is going to be spent. As long as the money is going towards needs, you have to accept that you loaned the money and it is now in your parents’ hands. If you see that irresponsible purchases are being made, you can clarify your expectations for lending the money.”
To avoid falling onto your own hard times, prioritize your financial needs and continue to plan and save for your own retirement. It may be difficult to place your needs above those of your parents, however, if you do not plan for the future, you will wind up in the same situation as them. Forbes suggests being clear about the limits of your support and seeking out additional assistance for your parents, such as help from siblings or community organizations.
Discussing finances with your parents may not be the most comfortable conversation to initiate, however, it is important, especially if you know that they have no financial plan for the future and are struggling. According to Money Under 30, approximately 50% of the people supporting their parents have not actually had a conversation with them about the true state of their finances. Why are they avoiding the conversation?
Being honest and open will help to set a positive tone for the conversation and will let your parents know that your concern stems from a place of caring.
Have you helped your parents financially? If so, how have you balanced your financial needs with theirs? We’d like to hear your stories in the comments below.