Everyone has made mistakes, and our parents are no exception to this. Some mistakes can be corrected, others just need to be tread through and just deal with them. But what about retirement? Specifically, what if your parents have no retirement savings or plan in place?
Retirement savings is something that is pushed on a person the very second that they turn into an adult. It’s a big deal and you have to prepare yourself for it. Not just to live comfortably from your 70s onwards, but to also prepare in case you’re too sick to take care of yourself.
There are a lot of beliefs and opinions when it comes to saving for retirement such as “what’s the point if the cost of living is already too high?” or “I might not make it to retirement so why bother saving” and while that may be true, you just don’t know how your health will be in the future or how long you’ll live for. So, it’s vital to have a retirement plan in place to cover all outcomes.
So, what about your parents? What if they’re not prepared financially for retirement? How can you help them without putting yourself at any risk?
Firstly, have a discussion with your parents to see if they actually have no retirement savings
Do you know for sure that your parents don’t have any financial plan for retirement? Unless they have openly told you this, then perhaps they do actually have a plan in place and you are just presuming the worst? It’s very normal for Brits to not discuss finances openly, so maybe they’ve just never discussed it with you. It’s an important topic though, and if they are nearing retirement age or discussing it, then perhaps it’s time to openly ask and have a retirement conversation. Talking to parents about savings and retirement can be a tough conversation. But it is important to have that conversation, because if they don’t have any retirement savings, you may need to step in and help them financially which impacts you and your future.
Here are some ways to talk to them about their retirement:
Ask them how they feel about retirement and if they plan on working in the future.
Talk to them about what they want to do after they retire and what life would be like without work.
Ask them how much money would be enough for a comfortable retirement, where it should come from, and how much of it is already saved up.
The most important thing about talking to your parents about retirement is to not make them feel bad. It might not be their fault that they have no savings. Stay open minded and don’t play the blame game. It's important to save as a parent, but sometimes life gets in the way.
Focus on providing them with the right information, so they can start saving for their future. It might not be too late for them to start saving!
Don’t rely on the state pension alone as it might not be enough, especially if they plan on having a comfortable retirement without penny watching.
Early retirement is not a rite of passage
While the traditional retirement age is 65, it's no longer set in stone. A number of factors have come together to change the concept of retirement in recent years: the 2008 recession, increased life expectancy, and the rise of technology-based careers.
Some people may find that they can stay in the workforce for longer because they enjoy their job so much, while others may find that they are able to retire early because they have saved up enough money over time or because their company offers them an early retirement package.
Early retirement may sound like a dream come true, but many people seem to think that early retirement is a rite of passage. They think that they should be able to retire in their 50s or 60s and enjoy all the benefits of a life without work after grinding for 30-40 years. But this is not always the best decision and it’s certainly not something we are all automatically entitled to.
If your parents are discussing early retirement, but you’re not confident they have a sufficient retirement plan in place, then it could cause serious issues. Early retirement is not always a good idea and it can have some serious consequences for health, finances, and relationships. If your parents run out of money then you may have to financially support them for years or even decades. This is why it’s important to discuss their retirement plans as it could affect your own financial future.
The main concern is whether someone can afford to retire early or not. If your parents wish to retire at 50 or even 60, then they have to accept they may live to 90 or even 100. Can their retirement savings last 40 or 50 years? They may feel fit and well now, but what if their health declines in 20 or 30 years and they can’t support their own care needs?
Unfortunately there seems to be some people who retire in their 50s or 60s, who could carry on working, but believe they have the right to retire even if they don’t have the finances to back up their decision. This can land people in serious financial difficulty if a proper retirement plan is not in place or result in family members picking up the bill in their later years.
If your parents are hoping for an early retirement, but don’t have a sufficient financial plan in place then they may need a reality check. If they are able to continue working and saving then they may well just have to.
Help your parents to create a retirement plan
A lot of people are facing the same dilemma, they want to help their parents if they have no retirement savings, but can't afford to. The solution is to convince your parents about retirement savings and give them the opportunity to save for the future by coming up with a retirement plan. A retirement plan is a financial plan for an individual or family that specifies how much money will be needed at what time, and what kind of investments are needed to provide that money.
So what needs to be put into consideration while building a retirement plan? In order to help your parents create a retirement plan, you should first figure out their goals and then start figuring out how much money they will need in order to reach those goals. Some questions to include could be:
What type of assets do you have?
How much money do you have saved up?
Do you have a pension?
What is your current combined income?
Can you continue working?
How long can you continue working?
How much can you realistically save from your current disposable income?
How much money do you need to maintain your current lifestyle in retirement?
What can you give up?
How much money will you need to cover any foreseeable emergencies that may arise in the future?
What are your options for saving money for retirement and maximizing the return?
It’s stressful but these should be addressed while working towards creating a solid plan that can work out for them, you, and the rest of the family.
Ask your parents how they see their life within the next decade and even the decade after that. It’s best to have a general idea of their current health too. If they have poor health then you may need to consider live in carers for the elderly in their elder years if their health looks set to only deteriorate and they might not be able to look after themselves in 10 or 20 years time. How will this be funded? Through their savings or through the sale of a family home?
While you can get the conversation started, the best thing you can do is to get your parents to talk to a financial advisor. They will be able to help them figure out the best way to start their retirement savings and make sure that they are on the right track.
Bring up other methods to make income
Some elders will opt into partial retirement, so they still work part-time while still maintaining the retired lifestyle. So this could be something to bring up with your parents. If they currently have a job, you can discuss with them to push off retirement and to save as much as possible. Some businesses will push employees into retirement, so if this is the case then it’s best to take some other things into consideration. They could apply for a part time job elsewhere, for a start. The gig economy is huge right now so you could bring this up with your parents. Perhaps there is a way they can make money from a side hustle or a passion of theirs. Side hustles aren’t just for the young! Maybe you can help them out or get them started?
While there are gigs that could be too difficult to do based on their health, there are plenty of small home-based business setups they could try. This could even include using their previous skills for their old job and turning them around to create their business. There are plenty of possibilities.
If they need some inspiration then I share loads of ways to make extra cash from home and online right here on this website. To start, here are 60 ways to make money at home that I’ve tried and tested. Follow these steps to make £1000 in one month at home. And, if they’re ever short on time, try these methods for how to make money in one hour.
Save money on everyday spending with money saving apps and websites
It’s also about maximizing the cash you and your parents have to ensure you get the most out of it. Check out my massive money-saving tips section and find some great deals on my voucher codes and free money pages!
It’s easy to save more money at the supermarket and online shopping nowadays. Your parents can even turn their receipts into cash if they have smartphones! If not, you can do it on your smartphone to help generate extra money. Check out my list of apps that turn receipts into cash and also this list of cashback sites to maximize your free cash back and savings.
Families should have open conversations about retirement savings, and parents should be encouraged to save for their future. If they don't, the children may need to step in and help them with the process.