How I Plan to Save for My Parents’ Retirement – A Balancing Act of Family Responsibility

For many Millennials with parents approaching their late 60s and 70s, it’s time to start talking retirement planning. Undoubtedly, individuals are under no obligation to help finance their parents’ retirement. But for those who have more than enough (and are perhaps already retired themselves), it can make sense to give them a bit of a boost or step in as a sort of caregiver.

In this piece, we’ll check in on a specific Reddit case involving a Millennial couple who’s pulling in a respectable combined income of $160,000. With no kids in the equation, they’re effectively in the DINK (dual income, no kids) camp, with potentially enough financial flexibility to help the parents make up for lost time since they’re nearing the retirement finish line and coming up well short of an amount that’d be enough to fund a comfortable retirement.

Though things can get tricky when balancing one’s own priorities with those of the parents, striving for balance can be a good thing. And in this piece, we’ll go over the Reddit user’s plan as well as pitfalls they should avoid as they attempt the ultimate balancing act of middle age.

Taking the role of a retirement planner

First up, our Reddit user is putting on their retirement planner hat by getting a better sense of their parents’ broader financial situation. Indeed, crunching all the numbers (assets versus liabilities as well as cash inflows and outflows) and listening to wants, concerns, and expectations are all a must before lending a helping hand.

After all, it’s hard to tell where one can improve their financial circumstances without carefully analyzing the balance sheet and cash flows. And though being 100% financially transparent with a child can seem like a stretch, it’s a necessary step. Otherwise, one would effectively be flying blind, and that’s never a good idea if one’s playing catch-up on retirement.

Even if our Reddit user is financially literate, I think it still makes sense to bring on board a financial advisor. They can help in areas where our Reddit user can’t. Perhaps health insurance plans and investment asset allocation are areas where an advisor could bring value to the table.

Trimming away at monthly expenses

Our Reddit user has had all the right conversations and has decided to give their parents a bit of a financial boost well before a disaster (think a health expense) can happen. Before plowing a big chunk of one’s paycheck into the parents’ retirement funds, though, I’d suggest exploring ways to trim away at monthly expenses.

For many folks, housing is the loftiest expense. And it may be the one to trim away at first. If the retirement situation really is getting tight, perhaps moving the parents in (a multi-generational household) is a great way to free up extra cash to be invested in an S&P 500 ETF or something of the sort for the retirement fund.

If there are more generations under one household, added savings can be had from sharing a vehicle and buying in bulk at the local grocery store (think Costco). All considered, I think such a move is more of a must if our Reddit user is serious about helping their parents make up for lost time.

Not compromising on one’s own retirement is vital.

It’s a noble thing to help out one’s parents financially, especially if they’re due to come up short come retirement, even after Social Security and pensions are considered.

That said, our Reddit user shouldn’t risk their own retirement, especially if they’re behind various milestones already. In any case, with a relatively high income and no kids to worry about, I do see the balance of saving for one’s own retirement and those of the parents as achievable, provided the right steps are taken to axe out unnecessary costs. In short, this Reddit user seems to be on the right track, but should ensure they’re not putting their parents above themselves or their partner.

The post How I Plan to Save for My Parents’ Retirement – A Balancing Act of Family Responsibility appeared first on 24/7 Wall St..