How Children Can Help Parents With Retirement

By Mark P. Cussen, CFP®, CMFC, AFC | February 13, 2013 AAA
How Children Can Help Parents With Retirement

At times, it can seem to both children and their parents that children will never grow up. But as the years go by, children do become adults and the role of caregiver inevitably shifts from parent to child. One of the issues grown children must often face is helping their parents be financially prepared for retirement. The recent turbulence in the markets has caused many retirees and older workers to suffer significant financial setbacks, and in many cases their children must step in and help them to pick up the pieces.

The Legacy Factor
In his book "How to Say It to Seniors: Closing the Communications Gap with Elders," author David Solie states, "Every day, whether they are millionaire moguls or retired postal clerks, former CEOs or homemakers par excellence, our elders are engaged in an elaborate process of reviewing their lives to find something of meaning that will last long after they depart."
Although leaving a legacy obviously encompasses more than money, most parents will feel a great deal better if they are able to pass on something of financial value to their children or other heirs, and children may need to communicate to their parents what they would or would not like to inherit. Unspoken assumptions in this area have led to numerous unnecessary family spats and legal disputes.

Mental Capacity
Children need to understand that their parents may not have the same level of emotional resiliency and coping skills that they possessed when they were younger. They also do not have the same time horizon in which to make up for market losses. Parents who have lost any material portion of their assets in the recent market downturns may become susceptible to making significant mistakes with their money, such as taking excessive risks with their remaining funds or turning to credit card spending or other bad financial habits in order to cope. They may also fall prey to unscrupulous hucksters or con artists who make a living fleecing emotionally vulnerable elderly people out of their savings.

Children may need to tactfully intervene and gently take the reins of their parents' finances. In some cases, they may need to enlist the help of a lawyer or family counselor in order to properly deal with these matters. It may also be a wise idea for kids to pay to send their parents to see a fee-based financial planner who can give them unbiased advice.

Practical Considerations
Even the children of parents who welcome their kids' help can face a considerable task when it comes to helping them prepare for their later years. Parents with substantial nest eggs may need help making investment decisions, drawing up estate planning documents and performing other financial tasks that are necessary for them to have a comfortable retirement. Children can help by having their parents draw up a letter of instruction that clearly outlines where all of their assets are located; that lists the contact information for their legal, medical and financial service providers; and that provides passwords for online accounts. If one or both parents seem likely to need professional long-term care at some point, it may be wise for children to spring for an insurance policy to cover this expense if the parents are financially unable to do so themselves.

The Bottom Line
Both practical and emotional considerations play a role in how grown children can help their parents prepare for retirement, but having these measures in place can give parents peace of mind and the comfort of knowing that their children care about them. For more information on how you can help your parents prepare for retirement, consult your financial advisor.

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