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Sunday, April 23, 2017

Parents and Retirement Planning

Posted by Dave on September 7, 2010

I have never factored in any expenses to my retirement plan that may occur for family members needing my monetary assistance once they retire.  My wife and I have assumed that our parents will have reasonable savings to retire on.  Right now they are all about 5-10 years from retirement age (we have three sets – my parents are divorced).  My wife and I have tried to explained our plans to them, that we may be at a point to stop working at approximately the same time that they do.  So far this plan seems to have been met with a level of either: a) indifference or b) skepticism – they think it’s impossible, no matter how we try to explain our plan to them.

Our concern is that we might have assist our parents financially or otherwise as they get older.  This would obviously not be their plan A, but perhaps a plan C where they would move in with us or depend on us to support them financially.  Although this outcome wouldn’t be ideal, I can see the mindset – it’s the same one I had until I was 23 (when I graduated from University) which was that I could “always go home”.

It’s obvious that at some point my wife and I will have to have a frank discussion with our parents regarding their finances and expectation of us as they age and might require more significant amounts of care.  As with most things money-related this is probably a good idea to discuss, but never a comfortable discussion.  This is similar to the discussion I had with my wife, when I learned she was carrying $20,000 in credit card debt.  It was not a comfortable thing to talk about for either of us, but led to a galvanized effort of getting rid of the debt and a more “team-oriented” goal of early retirement when the debt was gone.  In a similar fashion an uncomfortable talk with our parents will hopefully lead to  a better understanding about what they expect from us over the next 30 to 40 years as they age, especially when health problems become more of an issue.

If we find out that our parents are expecting us to support them financially, that would mean we would probably have to work longer for us.  If, for example we find out that one of the sets of our parents have minimal (or no) retirement savings I’m not sure what impact there will be on our own retirement goals.  I would like to say none, but the alternative is to watch our parents live in potential poverty?  I’m not sure I could do that, no matter what my personal retirement goals are.

This sort of planning would be less of an issue if I were planning to retire more conventionally, with for example, a full pension at work and some investments in an RRSP.  That extra money would provide more than enough money to support our household and cover some unplanned expenses.  Retiring at 45 means having more stringent spending plan that requires more discussion around these kind of “other” expenses.

I’m wondering if you have had a discussion with your parents about money, such as this, or alternatively have to dealt with parents who had saved inadequately for retirement?  Do you include some  kind of support payments for your parents in your retirement plan?

Comments

8 Responses to “Parents and Retirement Planning”
  1. Canadian Dream says:

    An interesting issue that I haven’t worried that much about myself. I already know some details what two sets of our parents plan to do so I’m not worried about them (I’m in a similar boat to Dave with three sets – my wife’s parents divorced). I only have one set that I would perhaps worry a little over because I don’t really know what their plans are.

    Good post. I need to have a talk with them at some point.

    Tim

  2. Robert says:

    Both my and my wife’s parents have been very open with us about their retirement plans. I know that they won’t need financial assistance. But that’s not all I worry about. Health issues, as Dave mentioned, could cause them to not be able to care for themselves. I’ve never discussed it with them, but my wife and I have talked about our willingness to have them move in with us. We’ve decided that they cared for us for over 20 years each and that we are all family. For those reasons, we expect to provide whatever care our parents need. This would, of course, be at least another 15 or more years in future.

    The other thing we worry about is our siblings. Our parents worry about them, but once our parents are gone, it’ll be up to us to try to ensure our siblings and their families stay on track financially. There’s more potential for trouble, but there’s also less responsibility. We don’t owe them anything, but they’re still family. And how do we explain our lifestyle of freedom when they have money troubles? Is that just how life goes?

  3. ldk says:

    My parent’s lack of financial resources heading into retirement age is my primary source of stress–they have been self-employed for 30 years (ergo, no pensions) and have no significant savings. (In fact, I fear they may be carrying some mortgage/consumer debt.) All our attempts to discuss this with them have failed. The only response we get is “we’ll never retire.” (They are 64 and 66.)

    Any advice from anyone who has dealt with this issue would be much appreciated! I am growing increasingly resentful that all our hard work towards financial independence(about 5 years away) may be for naught if we have to figure out a way to support a second household.

  4. George says:

    In our case, the parents are doing fine for now. Wife’s parents seem to have adequate retirement income and there is significant equity in their farm. My mother will be turning 91 next year and the only concern is that she’ll outlive her money, but that’s still 5+ years in the future… as a consequence, that’s the one reason I may not be able to exit the workforce.

    It’s worth noting that mom’s level of care requires about $55,000 US per year. This is a fairly normal expense for the final few years, so make sure you have planned for that level of care. For my wife & I, we anticipate our home equity will pay for it.

  5. Jaycee says:

    This is exactly my situation. Since my early 20s I have dreamt of early retirement. I have worked hard, saved hard, and resist buying big ticket items on a whim – I make sure I live within my means. I am now in my early 30s and married to a wonderful man but I guess all good things come with at catch. Before I married, it never crossed my mind that someone else’s saving or spending habits could affect my dream of retiring early. It never crossed my mind that saving hard and budgeting might not be enough. Unfortunately my in-laws have only a very small retirement nest egg and they come from a country where their dollar is much weaker than our CAD. Culturally, they were hoping/expecting their son to support them and they plan on immigrating in the next few years so we would be on the hook if they couldn’t make ends meet (ie. they would not be eligible for financial assistance for many years if they ran out of money). Not only that, my husband’s sister and her family have spiralled themselves into debt with 4 children to support on one income and a “keeping up with the Jones'” mentality towards spending. As a result, she is pressuring her parents to give her some of their retirement nest egg as her “early inheritance”. My in-laws are alive and well so the thought of something believing they are entitled to an early inheritance makes me sick. We have advised my in-laws to hang onto all their money but who knows if they will succumb to the pressure or not. This is one curve ball I did not anticipate in my quest for early retirement.

  6. Canadian Dream says:

    Jaycee,

    WOW! That is so unfair I’m not sure where to even begin. I would keep up the pressure on the parents not to give the ‘early inheritance’ to the sister-in-law. It’s time for that family to sink or swim by itself.

    Best of luck,
    Tim

  7. Dave says:

    Robert:

    I worry about my siblings to a certain extent, but I find it much easier to talk about money with them than my parents, which I think is the case with most people. I am taking the appraoch that I discuss their problems and tell them what I’m doing, hoping I can preempt any issues down the road if they are having money problems and I (hopefully) am not.

    ldk:

    The response that they’ll “never retire” is one that irks me as well, as I have heard that in the past. I don’t think that people realize health problems can lead to being forced into retirement, rather than having the abiliity to keep working in perpetuity.

    George:

    I think that’s the problem with not discussing outright with parents – I’m hoping they have anticipated the $55,000 cost, but as with most things most people do not think about these kind of costs.

    Jaycee:

    That is a terrible situation to be in, one that I may find myself in as well, which is why I think my wife and I need to talk to our parents. I would rather plan for this situation than have it thrust on me. I don’t think that any of our parents are expecting us to look after them, but I also don’t think they have alternative plans if their health wanes.

    I second Tim’s comments on the unfairness of the situation.

    Dave

  8. dilbert says:

    I also have three sets of parents, (wife’s parents divorced). My parents have planned well and my father-in-law has a great pension. However my mother-in-law is nearing retirement, still has a large mortgage, a small amount of savings(I’m 27 and have almost the same), a car loan and spends like it’s going out of style. I feel that someday we’re going to have to have a house with a Granny flat to help support her. At the same time I feel like this is a kick to the other parents as we wouldn’t be giving them financial support also…

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