IF PARENTS CAN’T AFFORD TO RETIRE, A HANDOUT WON’T HELP
Part 1 of 2: This column is the first of a two-part series addressing the financial support of retirementage parents. Next week: I’ll address the problem from the perspective of the person who needs financial support.
The retirement crisis in America isn’t just on paper. There are casualties. Our country is filled with Americans who worked their whole lives, raised families and now can’t support themselves. Sometimes the causes are self-inflicted, while other times circumstance leaves a nasty wake.
Finding out your parents don’t have the means to support themselves is as surreal as it is sleep deprivating.
The median account balance for Americans nearing retirement sits at a paltry $12,000, according to a 2016 Personal Capital survey. Virtually no one can retire with $12,000 to their name, yet 60somethings try to every day.
THE PRESSURE IS ON It’s not a question of whether they’re going to fail. They will fail. It’s just a matter of time. The real question is, what happens next?
If you believe the statistics, your parents’ financial life may be a house of cards. What are you going to do? Are you going to jump in and help? Because if you don’t, there is no other safety net. If a Plan B exists, you are it — and unfortunately, time is not on your side.
You’re not alone if you think financially assisting an adult family member has always seemed like a homogenous process in which a parent supports an adult child. But sometimes the student becomes the teacher.
When you try to launch an adult child out of your house, you enjoy the prospect of sending them out on their own to discover the joys, thrills and tribulations of adult life. You know they will fail, and they will pick themselves back up. It’s the prelude to every American success story. The world is their oyster. The longer you wait to kick them out, the more the oyster closes.
The sad reality of someone struggling financially at retire- ment age is that their oyster has closed. There is no pearl.
The primary difference between a retirement-age parent struggling and an adult child struggling is that with a young adult, the possibilities for solutions are endless. With a retirement-age adult, the potential number of permanent solutions is slim to none. With the cost of health care, inflation and the absence of a paycheck, aging without money is hell.
Thus, you cannot take the decision to jump in and help lightly. Due to the fixed nature of retirement income, if you start supplementing their income on a monthly basis, you’re more or less on the hook in perpetuity.
EARLY WARNING SIGNS If you sense your parents might run out of money, get involved now. The problem only gets worse. Your goal is to help your parents reduce their monthly obligations, not to supplement their income.
It doesn’t matter whether they have a ton of retirement assets or not. If they have a spending problem, they’re in trouble.
If you’ve ever thought to yourself, “Man, they spend a lot of money,” get involved. Yes, it will be heinously uncomfortable. But yes, it is your business.
Getting involved in another adult’s financial life is complicated. But the way I look at is you can either sacrifice feelings or money.
This approach isn’t nearly as callous as it might sound. A Kumbaya relationship is great — until both parties are out of money without a plan for solvency.
Enter non-financial support.
GET NOSY RIGHT NOW Years ago I heard a wonderful idea for financially supporting a family member with confidence. Ask to see their bank statements. While it may sound like a shocking violation of trust, it’s not.
If a person is struggling to fund their lifestyle, I want to know their lifestyle. I want to make sure I’m not forgoing a family vacation to send them on a vacation. I want to make sure I’m not cooking at home six nights per week so they can dine out three nights per week.
I’ve seen more families destroyed by money issues than I care to admit. It’s possibly one of the saddest realities of the developed world. Money, more specifically its mismanagement, can destroy relationships.
Running out of money at retirement age isn’t limited to lowincome earners. Retirement insolvency is a product of decades of financial mismanagement, no matter the income level. I recently spoke with a woman who was concerned about how much financial support her husband was giving his parents. Despite the numbers pointing to imminent failure, the in-laws were still holding onto their lifestyle of club memberships and luxury cars.
Can you really teach an old dog new tricks? As much as I want to say yes, what I’ve seen doesn’t support that rose-tinted view. If a person doesn’t budget for 50 years, it’s hard to argue that they didn’t know they needed to budget. So your first step of intervention is non-financial support. Do not give them a dime until you’ve scoured their habits.
If you’re going to help, it can’t be out of sheer martyrdom. Give them a real solution, not just dependency-creating supplemental income.
If you’ve ever thought to yourself, “Man, my parents spend a lot of money,” get involved. The sooner the better.