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.

Related Articles
  1. Retirement

    6 Ways to Give Back After Retirement

    Discover the various ways that retired individuals can give back, donating their time, skills and money while still maintaining a comfortable retirement.
  2. Retirement

    Top Retirement Community Developers

    Learn which companies are the top developers of communities for active adults and the history behind each of these popular and well-known companies.
  3. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  4. Professionals

    Going Back to School as a Retiree? Here's a Guide

    The options for becoming a student after your working life ends are easier and less expensive than you might think.
  5. Professionals

    Do Robo-Advisors and Retirees Mix?

    Robo-advisors have democratized investing for many, but can they help retirees? Here are some things to consider before choosing one as a retiree.
  6. Retirement

    The 5 Best Retirement Communities in Fort Myers, Florida

    Discover why Fort Myers, Florida has become a popular retirement destination, and learn about five of the best retirement communities located in the city.
  7. Retirement

    Using Your 401(k) to Pay Off a Mortgage: The Pros and Cons

    Learn the advantages and drawbacks of using assets accumulated within a 401(k) retirement savings plan to pay down a mortgage balance.
  8. Retirement

    When Annuities Are the Wrong Investment

    Understand how annuities provide several unique benefits, but many drawbacks as well, and identify the situations where they are not the best investment.
  9. Personal Finance

    Elder Financial Abuse: Ways to Protect Yourself

    Learn behaviors and actions that will help you avoid becoming a victim of financial abuse.
  10. Retirement

    Should Retirees Still Have Mortgages?

    Identify the pros and cons of keeping a mortgage into retirement, and understand in which situations it is beneficial not to pay off a mortgage.
  1. How safe are variable annuities?

    Life insurance companies are facing a challenging environment. Those that sell variable annuities have been able to mitigate ... Read Full Answer >>
  2. Are estate distributions taxable?

    In general, most estate distributions are not subject to income tax. In some cases, however, a distribution from an estate ... Read Full Answer >>
  3. What is the annual contribution limit for a 529A account?

    Contributions to a 529A plan are limited up to the annual gift tax exclusion limit, currently $14,000 a year in after-tax ... Read Full Answer >>
  4. What happens to a 529A account when the beneficiary dies?

    According to the Achieving a Better Life Experience Act of 2014 (ABLE Act), when the designated beneficiary of a 529A account ... Read Full Answer >>
  5. Can you have more than one 529A account?

    According to the Achieving a Better Life Experience Act of 2014 (ABLE Act), a disabled person can generally set up only one ... Read Full Answer >>
  6. What is the size of the average retirement nest egg?

    According to a 2015 Government Accountability Office (GAO) study, people between the ages of 55 and 64 with any retirement ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!