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. Term

    What are Pension Funds?

    A pension fund is a company-sponsored fund that provides income for employees in retirement.
  2. Retirement

    Overhaul Social Security to Fix Retirement Shortfall

    There are several theories and ideas about how we can make up for the $6.6 trillion retirement savings shortfall in America. Adjustments to Social Security and our retirement savings plans are ...
  3. Investing News

    How Does US Social Security Measure Up Abroad?

    Social Security is a hotly debated topic. After examining the retirement plans of three different countries, the U.S.'s does not come out the winner.
  4. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  5. Retirement

    The World's Most Luxurious Retirement Destinations

    If money is no object (or if you would just like to dream), these five spots are the crème de la crème.
  6. Professionals

    How to Protect Elderly Clients from Predators

    Advisors dealing with older clients face a specific set of difficulties. Here's how to help protect them.
  7. Professionals

    Social Security 'Start, Stop, Start' Explained

    The start, stop, start Social Security strategy is complicated. Here's what retirees considering it need to consider.
  8. Retirement

    Strategies for a Worry-Free Retirement

    Worried about retirement? Here are several strategies to greatly reduce the chance your nest egg will end up depleted.
  9. Professionals

    Your 401(k): How to Handle Market Volatility

    An in-depth look at how manage to 401(k) assets during times of market volatility.
  10. Professionals

    How to Build a Financial Plan for Gen X, Y Clients

    Retirement is creeping closer for clients in their 30s and 40s. It's a great segment for financial advisors to tap to build long-term client relationships.
  1. Dynamic Updating

    A method of determining how much to withdraw from retirement ...
  2. Possibility Of Failure (POF) Rates

    The likelihood that a retiree will run out of money prematurely ...
  3. Safe Withdrawal Rate (SWR) Method

    A method to determine how much retirees can withdraw from their ...
  4. Qualified Longevity Annuity Contract

    A Qualified Longevity Annuity Contract (QLAC) is a deferred annuity ...
  5. Mandatory Distribution

    The amount an individual must withdraw from certain types of ...
  6. Auto Enrollment Plan

    An employer’s decision to sign employees up to have a percentage ...
  1. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  2. Are spousal Social Security benefits retroactive?

    Spousal Social Security benefits are retroactive. These benefits are quite complicated, and anyone in this type of situation ... Read Full Answer >>
  3. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>
  4. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
  5. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  6. What are Social Security spousal benefits?

    Social Security spousal benefits are partial retirement or disability benefits granted to the spouses of qualifying taxpayers.  Qualifying ... Read Full Answer >>

You May Also Like

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!