We all know having no retirement savings is a bad situation. But what if it’s not you, but your parents, who have no retirement savings – what’s your responsibility?
On first thought, it might be tempting to dismiss the entire scenario. You can simply assume that your parents have some kind of retirement savings set aside. Or, you can rationalize that if they don’t, it’s not your responsibility anyway.
But your parents are the people who raised you, who used their financial resources to provide for you in your childhood and early adult life when you couldn’t do so for yourself. Some states even have filial laws on the books, requiring children to help provide financial assistance for impoverished parents. While it’s true that most states do not have filial responsibility laws, there is still some form of responsibility on your part, if only a moral one.
The reality today is that many people who are approaching their retirement years don’t have much in the way of retirement savings. True, in many cases it’s because they didn’t have any plan or motivation to make it happen. But other times, it’s because a job loss occurred at a bad time in life, or a rash of significant expenses, such as medical bills, providing for elderly parents, or college education for their kids, that left them with an empty bank account.
Whatever the reason, if your parents have no retirement savings, what can you do to help?
Encourage Them to Save as Much as They Are Able
Your first best strategy in dealing with your parents is to encourage them to save as much is possible. Even if they’ve never saved before, you can stress that the absence of dependent children should free up more of their income to direct into savings. You might even consider creating a budget for them, particularly if this has never been one of their motivations.
Many times people don’t save for retirement because they fear that they would be doing so too late in the game to make a difference. Maybe they won’t be able to save up enough money to have a comfortable retirement, but any money that they can save will have a positive effect on their later years.
For example, if they can save $50,000 over the next 10 years, it may not enable them to retire, but it will certainly give them a generous emergency fund to fall back on.
Encourage Them to Make Frugal Living Choices
For a lot of people who have no retirement savings, it’s a matter of making the wrong spending choices. You might be able to help them with this. For example, if they’re still living in the same four-bedroom, 2 ½ bath, two car garage house that they raised you and your siblings in, recommend that they downsize. Sell the house, and move to smaller, less expensive living quarters.
Not only would such a move help them to accumulate money for retirement, but it will also result in lower living expenses, which will enable them to live better during their retirement years.
Encourage Them to Get Out of Debt
Some people live their entire lives in debt, and unfortunately, our culture tends to encourage that behavior. But when you’re approaching your retirement years, that kind of financial lifestyle has to change. It’s even more important if you have no retirement savings.
Paying off debt is generally the single best way to lower your living expenses. If your parents have car loans and credit card debt, encourage them to pay these off as soon as possible. Not only will they lower their living expenses, but once the debts are paid they’ll have more money to put into savings.
Encourage Them to Explore Additional Income Ideas
People who don’t have sufficient retirement savings have to get serious about how they will earn income during their golden years. It’s not always possible to continue working a full-time job in your lifetime career much past age 65. They may have to consider creating entirely new and different post-retirement careers.
Fortunately, there a lot of options here, especially with the Internet. Encourage them to explore business opportunities, particularly those that can easily be marketed over the web. They may also want to consider downshifting from full-time, career type positions, into part-time work in a more enjoyable field or atmosphere.
It’s generally not possible for people to survive on Social Security alone. But if a couple is each receiving Social Security, and each supplementing that income with a part-time job or business, they may do just fine. That’s the arrangement you may need to prepare them for, and since it may take advanced planning, now is the time.
Encourage Them to Delay Retirement, if Even for a Few Years
While most people don’t want to delay retirement, it may be in your parents’ best interest to do so, even if it is only by a few years. Delaying retirement gives them a fighting chance to implement all of the above ideas – saving more, learning to live on less, getting out of debt, and even transitioning to part-time employment. Another important thing this allows them to do is delay taking Social Security Benefits. You can earn between 20 and 30% more in Social Security Benefits by delaying your benefits start date. (See Social Security Age Reduction Chart for more info).
Worst Case: Prepare Yourself for Your Parents Retirement
It may well be that all of the late stage efforts by your parents will be insufficient to enable them to comfortably survive in retirement. If that’s the case, you may need to be prepared to step in with some direct help. That doesn’t mean providing your parents with a monthly income or enabling them to live outside of their means. But there are ways that you can help in a less direct manner.
For example, if you have your own business, you can consider hiring one or both of your parents on a part-time basis. You might also consider bringing them on to work on a contract basis, where they handle a specific part of your business.
Alternatively, you might help them start a business in a more direct way. You can, for example, connect them with other people who can help them start the business. Or you might have contacts with businesses who may be able to employ them on a part-time basis.
In a more direct way, you might offer to take over one or more of their debts when they turn 65. This will lower their living expenses and give them a fighting chance of surviving on a reduced income. If you go this route, you will, of course, need to get a solid assurance that they won’t take on additional debt to replace the one you’re covering. (more about lending money to family members).
As an extreme measure – and particularly if your parents are completely unprepared for retirement – you might consider taking them in to live with you. This could mean creating an extra living space somewhere in your home so that they can live with you peaceably. By removing housing expense from their budget, you’ll be taking away what is probably be the biggest single expense they have.
It’s tough enough to provide for your own retirement, let alone someone else’s. But if you have to step in and help your parents in any way, it’s best to begin working on it as soon as possible. That will give you time to prepare and to position yourself to be able to help them with the least amount of disruption in your own life.
While you’re working to plan and prepare for your own retirement, are you ever concerned at how your parents will survive in retirement?