You always worked to achieve financial security, but your parents struggled to cover the essentials. Sound familiar? According to the most recent Federal Reserve data, approximately 40% of Americans saving for retirement are projected to have less than $50,000 by the time they retire. The reality is that there are thousands upon thousands of adult children dealing with the not-uncommon but difficult task of helping baby boomers who seemingly didn’t plan at all for retirement.
It’s overwhelming to face this challenge. According to a recent survey from the Transamerica Center for Retirement Studies, 90 percent of baby boomers are not confident that they will have enough money to live as they have become accustomed to. Here are 16 tactical ways to make a difference, from expert to low-tech levels.
Start with an Honest Financial Conversation
Openly discussing finances is difficult, whether due to fears of losing freedom for parents or general concerns for their offspring. It’s yet a crucial first step. They also discuss their income, debts, health concerns, and living expenses.
An AARP survey revealed that only 22 percent of adults can confidently discuss their finances with their parents. To reduce anxiety, initiate the conversation as a collaborative effort rather than a confrontation. Agree on clear goals regarding income, housing, and health care. With this foundation, you can solve the problem as a group, adopting a realistic approach.
Assess All Available Income Sources
Examine whether your parents are optimized for social security, pensions, possible part-time work, or annuities. Regarding covering the basics, the Social Security Administration stated that the average monthly benefit 2024 will be $1,900.
Assess their eligibility for other benefits, including those already discussed, such as Supplemental Security Income (SSI) or local senior assistance programs. An online benefit check, such as BenefitsCheckUp.org, can help you find overlooked resources and streams of support to improve your monthly income.
Explore Downsizing to Reduce Costs
The Bureau of Labor Statistics reports that housing can account for 30–50% of retirees’ monthly expenses. If your parents are “house poor,” selling a larger home for a smaller, more affordable one can free up equity and significantly lower utility, maintenance, and tax burdens.
Senior-friendly apartments, independent living communities, or even shared housing are okay with a responsible tenant. Downsizing cuts costs and takes much of the labor-intensive aspect of homemaking off your parents.
Investigate Public and Private Benefits
Many federal, state, and local programs are designed to assist older people, of which many boomers are unaware. Also, look into the Supplemental Nutrition Assistance Program (SNAP), Medicare Savings Program, Low Income Home Energy Assistance Program (LIHEAP), and other programs to see if you qualify.
According to a report by the National Council on Aging, unclaimed public benefits for older Americans total over $30 billion annually. Applications can be completed with your parents, and meeting the deadlines can help them access lifesaving support they may not have known existed.
Encourage Part-Time or Flexible Work
Quitting work entirely does not necessarily imply retirement. According to the Bureau of Labor Statistics, as of January 2023, as many as 28.2 percent of 65–74-year-olds in America were still working in today’s workforce, primarily in flexible or part-time roles.
Advise your parents to consider consulting, gig work, or jobs with employers who are senior-friendly. Indeed, these roles can complement Social Security and keep individuals active in the social environment, contributing to their overall mental health.
Set and Stick to a Budget
Many seniors have not closely tracked their spending. Now is the time. A realistic budget should be created, considering fixed income levels and disposable income after accounting for essential expenses, such as housing, food, and healthcare.
Seniors have access to free budgeting tools, such as AARP’s Money Map, which easily breaks down spending and helps eliminate unnecessary expenditures. Review and update the budget monthly, making adjustments as needed and as prices change.
Negotiate Bills and Cut Subscriptions
In retirement, it’s possible to negotiate reduced rates with service providers. Ask for senior discounts on utilities, cellphone plans, and insurance. According to a 2023 LendingTree study, 76 percent of those who have requested lower bills succeeded at least once.
Tell your parents to unsubscribe from services they are no longer using. You can also cut a few ‘pretty cheap’ monthly streaming, magazine, or box subscriptions, saving you a few hundred dollars a year.
Consider Multi-Generational Living
According to the Pew Research Center, nearly 20 percent of Americans now live in multi-generational households. Moving closer to your parents or having your parents move in with you can lower everyone’s living expenses while increasing the chances of character.
Make clear ground rules for respecting each other’s independence and privacy. If you are a caregiver or dependent, you may be eligible to split food costs, rent, utilities, and tax benefits.
Research Reverse Mortgages
Reverse mortgages are helpful if your parents are over 62 and own their home. These products convert part of a person’s home equity into tax-free cash without requiring them to relinquish ownership of the house. Still, fees and risk are high, according to experts.
This is an option for which you should consult a HUD-approved housing counselor to determine and avoid predatory lending. Reverse mortgages may be a bridge, used wisely, to cover gaps in retirement income.
Guide Them to Professional Financial Advice
Depending on the situation, you may want to seek the help of a Certified Financial Planner (CFP) or an eldercare attorney if you become overwhelmed. Seniors with limited savings can seek help from professionals to suggest practical ways to utilize these funds through tax strategies, investment reallocation, and estate planning techniques.
Seek out advisors who are Retirement Income Certified Professionals (RICP) designers. Many of them offer free or sliding-scale consultations to families facing rough situations.
Health Insurance and Prescription
Savings should be at the top of the priority list. Healthcare costs can quickly spiral. According to the Fidelity 2023 Retiree Health Care Cost Estimate, after tax, the average 65-year-old couple will need approximately $315,000 to cover healthcare costs throughout retirement.
Ensure an optimal plan or Medigap insurance for your parents with Medicare. Encourage them to find pharmacies with the most affordable prices through resources like GoodRx and take advantage of prescription savings cards.
Help Them to Claim Tax Credits and Deductions
There are many tax breaks that retirees often overlook. The IRS offers credits, including the Credit for the Elderly or Disabled, to individuals aged 65 and older, allowing them to claim higher standard deductions. Have your parents hire a tax preparer with knowledge of senior issues.
However, using all the available deductions allows for much-needed money to be returned to the pocket.
Plan for Long-Term Care
Home health aides or assisted living are often necessary for long-term care. Medicaid and VA benefits may cover the cost of senior living, or at least a portion of it, depending on the individual’s income and assets, according to a spokesperson for the nonprofit advocacy group Genworth, which conducted the study.
Discover the eligibility requirements for Medicaid and state-funded waiver programs that help offset these high costs. Consider purchasing long-term care insurance and consult with local Area Agencies on Aging for information about available resources.
Set up Advance Directives and Power of Attorney
Give your parents the power to prepare you for any unexpected event legally. Among other things, this involves appointing a power of attorney for finances and healthcare to ensure their wishes are respected if they are unable to make decisions at any point. This documentation lowered the risk of financial abuse and allowed you to work with their care and service providers.
Collaborate with Siblings and Family
Having shoulders to lean on shouldn’t disconsolate aging parents. Have a family meeting to discuss who will help, who is responsible for what, how it will be paid for, and other relevant details. Tasks should be divided based on people’s skills.
A good example of this is a sibling who excels at paperwork and can complete insurance forms, and another sibling who can drive to medical appointments. It helps decrease the financial and emotional burden on others.
Set Boundaries to Protect Your Future
Future First, you want to help, but not at the expense of your financial well-being. Establish clear limits to what you can contribute and communicate those early. According to U.S. Bank research, another 53 percent of adult children provide financial assistance to parents at the expense of their retirement savings.
The Family Caregiver Alliance provides support groups and resources on self-care. You need not leave your parents high and dry while supporting them; your needs must also be met.
Disclaimer – The Finance Key does not provide and does not intend to provide financial, investment, tax, or legal advice. Information contained in this article is for informational and educational purposes only. This list is solely the author’s opinion based on research and publicly available information. Including links to third-party content is not an endorsement by The Finance Key of such content or services. Please do your due diligence and use your discretion.
Read More:
