By: Nicholas Licouris
Have you ever wondered: How well-prepared are my parents for retirement? Will they ever stop working? Will they have enough money to live when they stop working?
The reality is, a lot of times, you are so busy worrying about building your own career, saving for your goals and focusing on starting a family that this conversation waits too long or not at all with your parents.
A report on retirement security for adults 55 years or older by the U.S. Government Accountability Office found some very scary statics. It found 52% of seniors age 55 and older have no retirement savings in an IRA or a workplace retirement plan like a 401(k) and less than a quarter of seniors in that age group have a pension that will provide some income at retirement.* The scariest fact is that nearly 30% have neither retirement savings or a pension plan.
It also stated that nearly 60% of pre-retirees plan to keep working past retirement age. That includes 29% who say they will never retire. As adult children, we may need to know at what point our parents may need help, either financially or with their health, as people are living longer these days. This is an exceedingly important conversation all adult children should have with their parents. Here are some steps to help you with this conversation:
1. Start the Conversation
This will be the hardest part of the entire process. We have looked up to our parents our whole lives growing up, and for many, they are our role models. Start by making your motivations clear to them that you are here to understand and help. The goal is to understand their situation and not take control.
2. Ask Broad Questions
Since this is sometimes a touchy topic, asking the right questions and gathering information instead of telling them what they need to do is very important. Here are a few examples of some broad questions:
1. What are your plans for retirement?
2. What are your sources of income?
3. Do you have any sources of debt?
4. Are you working with a financial planning professional? If so, what have they
been doing to prepare you and will they be there throughout your retirement?
5. What does your insurance coverage look like?
3. Organized and Up to Date
If your parents become ill, do they have all their important documents organized and up to date for you to help them? The next step of this process is to make sure all important documents are accounted for. These include: Bank accounts, will, insurance, investments, power of attorney and social security. This is a great time to double check all beneficiaries have been updated as well.
4. Seek Professional Help
Preparing for retirement is no easy task to do alone. The first 3 steps are great to get an understanding of where your parents are at currently but how long will their assets last? What if they live longer than expected or if they have to retire before they thought? This is a great opportunity to seek professional help of a financial planner that will assist your parents in running projections, analyzing how on track they really are and suggesting steps they can take to improve their situation. Ultimately, if your parents are not set up financially for their golden years, this financial burden may fall on you.
5. Revisit the Conversation
With the first conversation about their retirement plans over, the hard part is done—but it shouldn’t stop there. Take this opportunity to revisit this conversation regularly with your parents. The conversation will become more comfortable with all parties involved. As they get older, their lives will continue to change every year and so will their planning needs.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor and separate entity from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss.
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