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?