Your retirement plans can give you a lot to think about, but your parents may be much closer to retirement than you are. They have less time before they leave the workforce and will rely on the wealth and savings they built over many decades.
Therefore, it is vital to check in with your parents and help them transition to retirement. Doing so can help ease financial anxiety in all parties.
This article will explore four ways to help your parents with their retirement planning.
1. Discuss Their Retirement Goals and Expectations
Do your parents want to travel the world and enjoy luxury experiences? Do they prefer a simpler life at home, spending time with friends and family? Are there any hobbies or interests they have always wanted to pursue? Do either of them want to continue working part-time?
These are a few questions that can help start the conversation about their retirement goals and current financial situation. You can then review their retirement savings and other potential income sources, such as Social Security, pensions, cash value life insurance, or investment accounts.
After discussing these matters, you can form a better picture of the retirement lifestyle your parents could afford and find ways to put that lifestyle within reach.
2. Help Create a Budget For Essential Expenses in Retirement
Now that you have established a realistic retirement picture, help your parents create a budget for retirement. Include all essential expenses, such as:
Each item may require further discussion. For example, you may have to remind your parents that their healthcare costs could increase in retirement.
This is also a good time to help them find ways to cut costs. For instance, you could help them cut unnecessary expenses, such as unused streaming services or monthly memberships.
3. Set Up an Emergency Fund for Unexpected Costs
Retirees generally rely on a fixed income from their assets for planned expenses. Unexpected costs could jeopardize that income, cause financial strain, and force them to take on debt.
Encourage your parents to save three to six months of living expenses in an emergency fund using the budget outlined above. Your parents can tap into this fund instead of their retirement savings in case of a car repair, unexpected medical bill, or another surprise.
4. Encourage Them to Pay Off Debt
Debt can eat into your parents' retirement savings and make it harder for them to live the lifestyle they want.
Encourage them to attack their debts while working. Have them focus on high-interest consumer debt, such as credit card balances and personal loans. Afterward, they could pay down large debts, such as auto loans and mortgages. Paying these off before retirement creates immense peace of mind because your parents will own their residence and vehicles outright.
An excellent way to pay these off could be to downsize. With you and your siblings out of the house and no job to commute to, your parents could move to a smaller home or an area with lower living costs. Depending on their living situation, they could also sell one or both vehicles.
This would reduce upkeep expenses and help pay off existing home and auto loans to make retirement more affordable. Your parents could pocket excess sale proceeds if they had more equity in these assets than the associated outstanding debts.
The Bottom Line
Planning for your parents' retirement can seem daunting, especially since it may not be far away. However, taking action now can create peace of mind for them and you later.
Talk with them about their retirement goals and current financial situation, then help them create a budget for essential expenses and find ways to cut unnecessary spending. After that, encourage them to save in an emergency fund and pay off as much debt as possible.
Remember that you and your parents should revisit the plan regularly if goals and circumstances change. By working together with your parents and approaching the conversation with empathy, you can ensure they live their retirement dreams.
See Campaign: https://iquanti.com
Name: Keyonda GoosbyEmail: email@example.comJob Title: PR Specialist
, Go Media
, Google News
, Extended Distribution
, iCN Internal Distribution