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A number of families have found themselves saddled with debt after paying for medical or other unexpected expenses. Consequently, difficult questions have arisen surrounding how older generations will live without burdening their children with their cost of living. It’s essential to know how to help your parents manage the cost of their care if they haven’t made retirement savings a priority or have lost it through no fault of their own. Here are some things that you can do.
Create A Plan For Getting Them Out Of Debt Now
The sooner your parents get out of debt, the sooner they can begin putting that money towards building their retirement savings. Getting out of debt permanently requires creating an actionable plan, so use this debt avalanche calculator to assess how much debt your parents have and what they’ll need to do to get rid of it as quickly as possible.
Research The Best Retirement Savings Plan For Them
If your parents don’t yet have any retirement accounts set up, now is the time to research their best options. In the United States, the most common accounts are IRAs, Roth IRAs, 401(k)s, and pension plans (though these are becoming rare for non-union workers). Each type has its pros and cons, so you and your parents should sit down to evaluate which has the best tax advantages for their current financial situation.
Have Them Start An Investment Portfolio
Once their debt is paid off, setting up an investment portfolio can go a long way toward helping your parents catch up on their retirement savings. Ideally, there should be a mix of cash, stocks, and bonds in their portfolio so that they’ll receive the benefit of both investing in the stock market and having stable compound interest accrual through savings. Their portfolio should be rebalanced during significant life events such as marriage, divorce, or job changes and at the beginning of each birthday decade.
Set Up A Time To Talk With A Professional
Lastly, do not try to do this all on your own. With your parents being so close to retirement, you should hire a financial planner or advisor who has experience with situations like this to create a plan for how they’ll retire as close to their deadline as possible. Financial advisors can also assist with picking the right retirement accounts, setting up a debt pay-off plan, rebalancing portfolios, and giving advice on how to reduce their tax liabilities while they’re still earning an income.
The Bottom Line
The only way to guarantee you and your parents can continue your standard of living in old age is to make sure they save enough money and that you start planning for their retirement as soon as possible. Use this guide as a way to get the conversation started and make an actionable plan that gets implemented as quickly as possible to ensure your parents (and you) aren’t having to struggle financially ever again.