Retirement is one of the biggest career and life transitions that people ever go through, and 71% of baby boomers say they feel behind on saving for it, according to a 2022 survey.
If you’re an adult child of someone nearing retirement, you may also be wondering and worried about how they are going to manage it.
Time is of the essence. “These conversations need to happen sooner rather than later. It gives you and your parents more time to plan,” said Cameron Huddleston, the author of Mom and Dad, We Need To Talk: How To Have Essential Conversations With Your Parents About Their Finances and the director of education at Carefull, a financial service for aging adults.
“It gives them more options when it comes to saving for retirement, planning for long-term care. You don’t want to wait for emergencies, because then you have fewer options — sometimes no options at all.”
But it’s also a sensitive topic that should be handled without judgment or blame.
These talks can only work if adult children are collaborators with their parents instead of bossy, said Nancy K. Schlossberg, a retired professor of counseling psychology and the author of Retire Smart, Retire Happy: Finding Your True Path in Life.
“Older people don’t want their sovereignty taken away,” Schlossberg said. “You have to be able to not take such a strong position — that ‘this is the way to do it, this isn’t.’ What you want as an adult child is to be helpful and find out what would be helpful.”
Here are the best conversation starters you can ask and the most important resources to share with your parents:
1. Ask about their plans and dreams for retirement without judgment.
When you ask your parents whether they have thought about retiring, you want to listen more than speak. Schlossberg suggested questions like “Do you want to talk about your expectations as you retire?” and “As you look ahead, what are you thinking about?”
The role of a collaborator is to help your parents uncover options. That means withholding judgment about what your parents decide to share with you.
Instead of making a negative accusation like “You are not going to be able to take care of this house. This house is too big for you,” Huddleston said to focus on highlighting the benefits within different options.“Make it all about your parents and looking out for their best interest,” she said, suggesting questions like “Oh, you want to get care at home? Is your home set up for you to age in place?”
If your parents are at a loss over how they want to spend their time, ask if there is a field that interested them but that they never had a chance to explore, Schlossberg said. If they state “I’ve always wanted to be X, but there are no possibilities,” then you can respond with “Well, let’s look at some options. Let’s see if we can uncover some together,” she said.
This is also a time to exchange realistic expectations for how involved your parents want to be in your day-to-day life. For example, you might be expecting your parents to help out with caregiving for your children, and they may have totally different plans.
Schlossberg recalled one woman guiltily telling her: “My daughter who lives in another state expects me to come up and babysit as much as I can. I’m not retiring to be a babysitter.”
2. Ask if they have been saving for retirement, and share expert-backed options for improvement.
If your parents tell you that they have not been saving at all, it can be helpful for you to note that they still can.
“It’s never too late,” said David John, a senior strategic policy adviser who works on retirement savings issues at the AARP Public Policy Institute. “But leaving it to the last moment can cost you in ways both financially and emotionally to discover that you had expected something and that you found that you really don’t have the resources to meet that goal.”
The right amount of how much to save varies from person to person. “The important level is, are you saving somewhere in the neighbourhood of, say, 8-10% of your income into a retirement plan?” John said. If that’s a huge adjustment, he suggested that people ease their way into it by starting with 3% to 4% and increasing that figure — for example, as a contribution to an employer-sponsored plan like a 401(k) or to an individual retirement account — by a percentage point each year. The IRS also offers catch-up contribution incentives that allow people ages 50 and up to contribute more to 401(k)s and IRAs.
Some near-retirees may not want to talk about their finances at all, Huddleston said, but others “might be incredibly receptive and have wanted to have these conversations with you, [but] they just didn’t know how to start the conversations themselves.”
And if your parents say they have it all figured out and do not need any insight, you can see for yourself by asking them for retirement-saving strategies, suggested Huddleston. “It avoids that role reversal, and parents like to offer advice,” she said. “Then you come back later [and say] ‘Oh hey, thanks for sharing that advice with me. I did a little bit more research and I found this article that said you need to have this much in savings.’”
Education in money management can make a big difference in a person’s retirement. Swarn Chatterjee, a University of Georgia professor who studies retirement planning behaviour, found in his research that individuals with higher financial literacy were more likely to plan for retirement, even when they lived in “financial advice deserts” with few advisers.
If your parents are open to your collaboration on a budget, “help [them] map out what resources they have, from their current wealth to their savings and their debt,” Chatterjee said. “Make an estimation of how much they will be able to spend down from that savings and for how long in retirement,” he said, as well as what their current expenditures are and what those will be when they retire.
The bottom line is that financial education makes a big difference for how people retire. And if you can be a helpful resource for your parents, they could be better prepared for the road ahead.
3. Ask if they’ve thought about using a financial planner, and share alternatives if an adviser is not affordable.
Hiring a financial adviser is one way for your parents to get professional help on preparing for retirement. But even if an adviser is not an option for them, there are other ways to get assistance. Some financial advisers charge by the hour, Huddleston noted, so your parents could potentially get a meeting or two to come up with a plan and create a budget. The national Garrett Planning Network can help you search for financial advisers in your area who charge by the hour.
You can also contact a local office of the Financial Planning Association, which has chapters in different states, Huddleston said. “Ask if they have any members who will do pro bono work or provide really discounted services to low-income families,” she suggested.
The lack of financial advisers in underserved communities is a societal challenge, Chatterjee said. But you can still help your parents by getting them connected to online services instead, he added.
4. Ask if they need you to provide financial assistance, and determine what help you can offer.
Questions about the economics of retirement are not idle queries born of simple curiosity. Almost half of midlife adults expect to provide financial support to their parents in the future and are concerned about their ability to do so, according to a 2020 AARP survey. Getting clarity now on the assistance your parents need can help prevent headaches later on.
They might need help paying for utilities, medical costs or housing, Chatterjee said. “Maybe they do not help with all of it. But with some of it, it will help defray their financial stress,” he noted, recommending that adult children determine what assistance they can realistically provide.
Huddleston said that adult children could pool money for a general emergency fund or instead choose to address one expense, like monthly premium payments on a long-term care insurance policy.
If your parents need financial assistance that you cannot give them, it’s OK to say: “This is the help I can provide. I can point you to these resources, but I’m not going to help chip in for medical costs or stop working if you need hands-on care,” according to Huddleston. “By doing this in advance, when those emergencies arise ... you are not going to be responding emotionally.“
5. Ask if they are familiar with the Social Security benefit they expect to get.
“Most people don’t really have a good idea about what kind of Social Security benefit they might qualify for and what else they are going to need,” John said.
In a 2022 survey of nearly 1,900 adults across generations, almost half incorrectly thought that if they filed early for Social Security, their benefit would automatically increase upon reaching full retirement age.
To give parents a better idea of what to expect, encourage them to create an online Social Security account. They can then compare the monthly retirement benefits they would receive by applying at different times between the ages of 62 and 70.
“You can say: ‘Hey, Social Security has this great resource. If you set up a ‘My Social Security’ account, it’s going to show you what your projected monthly benefits are,’” Huddleston said.
6. Ask if they’ve thought about long-term care, and find out if they qualify for any options now.
Nearly 7 in 10 adults who are 50-plus believe that they will need assistance with daily activities as they get older, yet fewer than 3 in 10 have thought “a lot” about how they will then continue to live on their own, according to a 2022 AARP survey of 1,000 people.
Many adults incorrectly believe that Medicare covers all the costs of nursing homes or in-home care, Huddleston said. It does not — and long-term care can be pricey. In 2021, the national median monthly cost for a private nursing home room was $9,034.
Medicaid, however, does cover long-term care for those who meet state eligibility requirements. Going to an elder care lawyer who specialises in Medicaid can help your parents navigate the system, Huddleston said.
Veterans, meanwhile, may qualify for long-term care services provided by the Department of Veterans Affairs. And life insurance policies can have riders that let people use some of their monetary death benefits to cover care expenses while they are still alive.
When talking to your parents, mention articles about the subject or use examples from people you know who got involved with caring for aging parents, Huddleston suggested.
Ultimately, topics like these should serve as conversation starters to an ongoing discussion, so your goal should be to serve as a consistent resource of information on your parents’ journey.
”One of the best things a kid can do for their parents is to help them see options,” Schlossberg said. “The more options you see, the more you feel in control.”